The potpourri of €14bn measures may not be enough to shift the political dial

THINK back a year and to the reaction to a Budget with more than €11billion in extra Government spending (including a small personal tax reduction). Sinn Féin was stunned by the extent of the giveaway and politicians within Fine Gael, Fianna Fáil and the Greens were thrilled by the potential, as they saw it, for reward in the opinion polls and, just possibly, the start of an upward tick in their ratings.

They were disappointed very quickly. The giveaway hardly mattered a damn to anyone other than committed Government supporters. It did not change voting preferences much at all, at least as monitored by opinion polls. If anything, Sinn Féin has consolidated its gains since, to the extent that some are wondering if it might even be able to form a single-party government (albeit a minority one) after the next election.

Which brings us to yesterday’s Budget for 2024 and the potential for it to change the political fortunes of the Government parties. The potpourri of measures announced by the Government amounted to just under €14billion in total, but the sweet smell of success for the ministers Michael McGrath and Paschal Donohoe may be missing. The money involved is enormous and yet probably isn’t enough to move the political dial.

Discontent

‘It’s the economy, stupid’ is one of those clichés often spouted to explain voting decisions.

If people have enough money to live as they want – and if they feel the Government is assisting in that, or at least not making it harder than it should be – then they are more likely to vote for the administration in power that’s delivering for them more or less what they desire.

This Government is finding that this doesn’t really hold in modern politics, as an undercurrent of discontent rules.

In many respects governments since the economic crash of 2008-2010 have done a remarkable job in effecting an unlikely recovery, to the extent that we have more people employed in the country than ever before and the Government takes in more tax than it spends.

Some random examples: Ireland is ranked eighth in the world in the UN’s human development index and 13th in the social progress index, and performs strongly on many dimensions of the OECD’s wellbeing framework. Not that any of this apparently matters to voters.

Government budgets, more than anything else, are about improving the standard of living of as many voters as possible.

While they may be judged in many ways – how they help the economy in the short, medium and long term, what they do for the national finances, helping the job-creating business community and whatever other criteria you’re having yourself – the key thing for any government is making as many voters as possible feel better off as a result of its actions. But now it seems it is not enough.

In recent years, all sorts of things have happened that could have derailed our recovery and progress. Brexit created all sorts of threats but it was handled to Ireland’s advantage. All financial supports were provided to individuals and businesses during the Covid-19 pandemic. Another €12billion of supports are being provided as a result of the costof-living crisis provoked by soaring inflation due to the Russian invasion of Ukraine. That we had recovered to have the money was extraordinary.

Instead, the Government gets hammered for failure to deliver on things that every administration in the Western world is finding difficult or near impossible. Ireland is not the only country suffering from soaring housing prices and impossible rentals, although to listen to some people you’d think it was.

Ireland has done better than most in housing new arrivals, both immigrant workers and refugees, although this is likely to be among the big issues of next elections, starting with the local and European ones next June. Instead, much of the attention is our high cost of living, although many of those who complain most about it offer solutions that would be more likely to hinder than help.

A big question is how much longer the good times will continue, because if we don’t have a strong economy, there won’t be the tax revenues to build houses, tackle inequality, strengthen

workers’ rights, and combat climate change.

A valid criticism of the Government is that it hasn’t been ambitious enough in committing to infrastructural development – and that the money being provided in unappreciated personal supports could be better invested.

But just because we have come through the series of crises of the last decade well does not mean that we will continue to do so.

As recently as last April, we were regaled by the Department of Finance with the possibility of €65billion in surpluses between now and 2026, a pot of gold from which we could draw to make valuable investments.

Quietly, that optimism has dimmed and the forecast is now down to €46billion.

And that’s before taking events of the last week into account. The humanitarian crisis resulting from the terrorist attack on Israel last Saturday is the world’s main concern; however, the resulting war will have its economic consequences too.

These could badly impact one of the Government’s key assumptions underpinning the Budget: that incomes next year will rise.

Oil prices are something that we should worry about very much. Their level has a major impact on electricity and gas prices and on the price of a litre of petrol and diesel. Should things go wrong – such as a drop in supply that leads to higher prices – it could throw the Government’s inflation assumptions badly out of kilter.

Unlikely

And that would undermine the belief that people’s incomes will outstrip inflation next year, leaving most people better off.

For that reason, it is not surprising that, apparently at the last moment, the Government decided that it would have not one, not two, but three extra State payments towards your electricity bills. Last year, there were three €200 payments at different junctions; now it is to be €150 a pop. Still, the 25% reduction is better than had been expected; the talk had been of just one or possibly two payments of €200, a 33% overall cut.

As importantly, there is an extension of the 9% reduced VAT rate for gas and electricity for another 12 months. And when it comes to the planned increase in fuel excise charges at the end of this month, these have been deferred to two equal instalments on April 1 and August 1, 2024.

It could be, however, that we soon approach a price of €2 per litre for diesel or petrol. That would be largely the result of international events (although the Government does take about 44% of the price of a tank of fuel in taxes), and even if it was to restore the excise cuts it recently reversed, the public would be unlikely to be thankful.

That’s just the reality of modern Irish politics.