GAVAN REILLY: Few signs of logic in this ‘transfer deadline day’ budget

This, incredibly, is my sixth time filing a Budget Day column for the Chronicle. Much like the other five times, I’ll open with a note of caution: you’ll obviously be reading this piece after the speeches from Paschal Donohoe and Michael McGrath, and I’m obviously writing it before them. Apologies therefore for any facts that change between writing and reading.

Budgets are always a frantic time. There’s always a bit of last-minute wheeling and dealing, with ideas being fleshed out in real-time, and frenzied scrutinising between those proposing a measure and those funding it. There are huge sums of money going around, deployed to a thousand minor measures, none of which might grab headlines if they go right, any of which could be a PR disaster if there’s a loose thread for critics to pull at.

This year, as we all know, the pressures are more acute. There’s a war on the other end of the continent, with a material risk of escalation; there’s a pandemic which can still gut the workforce of an overburdened health service; the remnant threat of an economic war with the neighbouring jurisdiction; and a breakneck increase in the cost of fuel that cripples not only the households of the country, but also those who employ and feed them. Moreover, this isn’t just one budget, it’s two: it’s a budget for the whole of 2023, and also a mini-budget for the remainder of 2022. Some chaos, therefore, is understandable.

It probably shouldn’t be this chaotic, though – certainly on the Budget 2023 front. In the years following the bailout and the Troika, after all, Budget Day has become far less of a surprise. We now have various unsexy events like the mid-term expenditure review, the National Economic Dialogue, the summer economic statement… all of it intending to turn the budget into a matter of rolling review, not a rabbit-from-the-hat last-minute surprise. No more repeats of Charlie McCreevy walking into the Dáil and only then announcing how much money the Government could afford to give away. Indeed, the summer economic statement even includes projections for how the economy will fare four years into the future, so that money can be set aside on a sunny day to prepare for a rainier one. But for all the work that goes into making a government look prudent, the decision-making for the 2023 budget shows little sign of an overarching philosophy. Take for example the changes on the tax side: the marquee change in this budget is raising the entry point for the higher tax rate to €40,000, allowing the average full-time worker to retain €640 of their own wages each year. In doing that, the government will forego around €700 million in tax revenues – over half of all the money it had at its disposal on the tax side of the house. (All of that for a change which does not benefit the poorer half of all adults in the country, who don’t have enough income to trouble the higher tax rate anyway.)

Putting money into people’s pockets might be the goal of a cost-of-living budget, but not only is €640pa far in excess of what any ministers were openly contemplating – it’s bigger even than what Leo Varadkar hoped for with his new 30 per cent band – it undermines the very arguments the government used earlier this year. When dealing with rampant inflation, the argument went, simply giving people more money could only send prices even higher. There are a finite number of goods available; giving people more money only sends the prices higher. (Housing is a good example. Incidentally, that’s an area in which renters will now get a tax credit for 2022, something conspicuously left out of Budget 2022 in the first place!)

Yet on the welfare side, the banana skins are clearly visible. The one area in which the Government can directly control the cost of living, is by adjusting the incomes of those who depend on the State for their support. €12 per week therefore, when Budgets usually include €5 or €10 per week on many weekly payments, knowingly fails to keep up with the rate of inflation – consciously leaving a bigger gap between what they have and what they need. (I’m old enough to remember Leo Varadkar getting in trouble, when he proposed that all welfare payments would be linked to inflation…)

A government with a conscious philosophy of handling the cost of living would not have subsidised a higher cost of life; it would have done everything possible to make life cheaper in the first place. It would have used its resources for targeted cuts in consumption taxes; it could have trimmed

VAT or reformatted the structure of energy bills so that life and services could be cheaper for everyone. Making childcare and schoolbooks cheaper would be a good example. Instead, we get a firefight – €10 billion, this year and next, in what looks more like a conscious attempt to gain favour with voters instead of addressing the problems.

It’s all a bit like transfer deadline day. Frantic last-minute solutions always cost more, and rarely do the job intended.