Not another Covid budget, but not a normal budget either. Budget 2022 is a bridge between the economics and politics of Covid, and the post-pandemic world into which Irish society and the coalition that governs it are moving.
That era will see a bigger State, as many of the pandemic-era spending allocations are substantially retained by government departments such as health and education (the Department of Health, for example, retains almost all of the €4 billion extra it received last year).
But it is far from clear if this expanded State will be either big enough or generous enough to satisfy the demands of a public which is showing signs of tiring with the cautious incrementalism of Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath and their parties.
The budget was the embodiment of their steady-as-she-goes centrism, a reasonably generous package spread widely, and therefore thinly.
But across the Dáil chamber the alternative on offer from the Opposition is no longer a promise of a more efficient or just slightly different centrist government – it is something much more left-wing, more redistributionist, more radical. It is also, the opinion polls which show Sinn Féin powering ahead would suggest, more in tune with the current public mood.
By any standards, a budget that distributes nine times as much of its available resources to public spending increases as it does to tax reductions is a budget that most centre-left administrations would be happy with. But as opposition speeches made clear, their demands are for more radical change, not the moderate improvements in welfare and public services heralded by the Fine Gael-Fianna Fail ministerial combo.
Where economics meets politics is the defining edge of political identity, and the crucible of political choice. “Don’t tell me what you value,” Joe Biden once said. “Show me your budget and I’ll tell you what you value.”
Giveaway budget
It was a giveaway budget, to be sure. For now, the Government continues to borrow in order to spend, albeit at considerably less that the heroic rate of last year. Twelve months ago, as part of the “whatever it takes” approach enabled by the European Central Bank and followed by every country that could, the Government was borrowing €20 billion to prop up the economy and society battered by the Covid lockdowns (for context, the State will spend nearly €88 billion next year).
Where economics meets politics is the defining edge of political identity, and the crucible of political choice
Now, after a long lockdown that left a chunk of the economy in the deep freeze for much of the first half of the year but in the middle of a rocket-like recovery, the Government continues to borrow for a budget that adds €4.2 billion to “core expenditure” (ie, non-Covid expenditure), with the remaining half a billion or so in giveaways accounted for by the tax changes.
The fact that the package did not grow in recent weeks, when the improving state of the public finances due to a rapid economic rebound was becoming clear, means that Donohoe and McGrath won a few internal battles in that time. The fact that it did not grow in recent days, after the publication of the budget White Paper on Friday night showed tax revenues have taken off fast lately, is evidence of the growing power and importance of their axis to the Government. To put this in context, the improvement in the Government’s financial position is of the order of several billions – bigger than the entire budget day package. Still Donohoe and McGrath didn’t budge. That tells us something about the internal workings of the administration.
Welfare increases
The measures had been well-advertised in advance, to say the least; the days of great budget day revelations are gone. Hard to fathom that a minister was once forced to resign for mistakenly revealing details of the budget a few hours early (it was Phil Hogan, would you believe); nowadays Ministers and officials were apologising to journalists in the days before the budget because they had nothing left to leak them.
There were welfare increases and tax cuts; a package for childcare, a whopping Covid reserve and several green measures, including the carbon tax increases – mitigated by fuel allowance increases – and changes to VRT that will make gas guzzlers more expensive; there was money for more teachers and gardaí and doctors and nurses; for contraception (only for women, though: why?) and wigs and for young people to use public transport; and more, much more.
Sinn Féin was having none of it: the Coalition is “out of touch, out of ideas and out of time”, said Pearse Doherty. Other opposition critiques varied from the thoughtful to the hysterical. Many of them warned that the gains made by welfare recipients and taxpayers would be quickly overtaken by the rising costs of everyday life.
This fear was echoed by some government sources, and if there is a banana skin in this budget this might be it. For sure, €4.7 billion is a lump of money; but it is spread very widely indeed, perhaps to the point of imperceptibility for many people.
This budget, Doherty said, is a reflection of the Government that delivered it. He meant it as a criticism but it works just as well as a neutral description. Centrist, mildly socially democratic, incrementalist – and looking over its shoulder nervously at Sinn Féin.
Pat Leahy is Political Editor