AS we enter the month of October, the thoughts of many will turn to Budget 2018, most especially those in the Houses of the Oireachtas who finally returned from their summer holidays just over a week ago. This will be the second one brought in by the Fine Gael-led minority government, involving the Independent Alliance and supported by Fianna Fáil under a ‘Confidence and Supply’ agreement, and the budget details are due to be announced next Tuesday week, October 10th.
It will be Paschal Donohue’s first budget as Minister for Finance, but will it be his last of this government’s term of office? The ‘Confidence and Supply’ agreement is meant to last for three Budgets and then it will become open season after that, but we may not get to next year’s if any of the parties involved pull the plug in the meantime for political expediency, which could be a risky strategy – not that politicians breaking promises would be anything new.
After an inconclusive general election outcome in 2016, the electorate craved political stability when it was clear that the economic recovery had not reached all areas and people – as the last government found out to their cost in the ballot boxes – and the threat of Brexit, since a disturbing reality, was looming. Furthermore, the two biggest parties, Fine Gael and Fianna Fáil, did not want to face the electorate too soon again, so the ‘Confidence and Supply’ agreement – made in spite of the opposition of hardliners in both camps – was agreed to buy time to get organised for the next general election, which will probably be in 2018, but how early or late in the year depends on which party triggers it and why.
The budgets, which are the milestones in this unprecedented political journey, are unspectacular so far because there has been so little extra money to work with and Budget 2018 will be no exception. With only about €500m extra available and an agreement to commit two-thirds of this to spending and the remaining third to tax cuts, there is only scope in the latter area to increase the threshold for going on to the higher rate of income tax by about €1,000pa.
If they are going to help Taoiseach Leo Varadkar’s beloved ‘squeezed middle’ sector more, they will have to find extra money somewhere else and there is very little scope for this, given all the demands, especially due to the crisis situations in the areas of housing and healthcare, and the over-arching increased public sector pay bill. The budget for next year will not put most people up or down financially and, from a political viewpoint, would hardly see the government rushing into an election to seek a fresh mandate for it and its new leader, unless they get a huge bounce in the opinion polls for some reason.
Looking ahead to Budget 2019, if it reaches that milestone, there will be much more extra money available for the government to bestow its largesse on the electorate, which is why it might wait until after that is announced to call an election, without having broken the ‘Confidence and Supply’ agreement. However, it’s 55 weeks away and, if you think a week is a long time in politics, that will seem like an eternity!