Jury is out for now on Budget 2020

BUDGET 2020 is a blind leap of faith, made in the hope that it will mitigate the potentially-worst fall-out from Britain’s impending departure from the European Union that may or may not occur at the end of this month and, perhaps, with or without a withdrawal agreement if it does go ahead. There are so many imponderables that it is impossible to pass a fully-informed, definitive judgement on its contents.

In what has been dubbed the ‘Brexit Budget,’ some €1.2bn has been allocated to try to buffer the effects of Brexit on the agri-food, tourism and other affected sectors in a no-deal scenario, but the tourism industry did not get the restoration of the reduced 9% VAT rate it sought. Also, €1.5bn is being transferred from the Ireland Strategic Investment Fund to the Rainy Day Fund to help mitigate such a big Brexit blow. 

The jury is out on whether what Minister Donohoe has done is enough to get to grips with the fall-out from Brexit, be it one with a withdrawal agreement or a no-deal scenario; only time will tell and, either way, we are moving from a 0.2% of GDP surplus this year to a likely deficit of 0.5 to 1.5% next year. Of the €2.8bn extra the Minister had in Budget 2020 for expenditure, €2.1bn was already spoken for, just €700bn was left to cater for routine budgetary measures. 

This emphasises the need for prudence in our expenditure, not just on big capital projects, but on day-to-day spending. Unexpected extra corporation tax receipts in recent years have been papering over ongoing uncontrolled spending over-runs across various sectors such as health, education and justice. 

It should be acknowledged that the total over-runs were reduced year-on-year from €1bn to €0.45bn, but it is vital that this trend continues as prudence has to be the priority along with achieving value for money – which has been lacking across several high-profile projects such as the escalating costs of the National Children’s Hospital and the national broadband roll-out.   

As regards day-to-day expenditure, the worst offender continues to be the health sector, which cannot ever seem to rein in its spending in spite of increasingly higher budgets which just get swallowed up and surely beg a serious independent cost-benefit analysis. A 6.3% increase in health funding to €17.4bn has been allocated, but we cannot keep throwing good money after bad indefinitely as there has been no sustained improvement in dealing with the trolley crisis at hospital emergency departments, while the numbers on waiting lists for medical consultations and treatment have hit the million mark. 

Similarly, on the housing front, there have been further increases in the number of homeless people, which was under 10,000 when the current government came into office and has well exceeded that figure since – with some claiming that the true figure could be nearer the 15,000 mark.

That is a shameful indictment of the government, whose ‘spin doctors’ – led by the most highly-qualified one of them all, Dr Leo Varadkar – would have us believe that the country is flying it after the last few years of economic prosperity, promising tax cuts for the less well-off, most notably his pledge to increase the threshold at which taxpayers start paying the 40% income tax rate to €50,000 by next year. This looks like it won’t be delivered on as promised, along with the phasing out of USC.

Whatever about the selective tax credit adjustments in Budget 2020, everybody is going to be hit by the €6 per tonne carbon tax increase, the scale of which will escalate further in future budgets as the country seeks to move away from its dependence on burning fossil fuels. However, some form of mitigation will have to be provided for those vulnerable to fuel poverty. 

Having allocated just €8m for grants to buy electric cars, the Minister should have done a lot more towards converting the Climate Action Plan from aspirations into tangible actions that are vital for its credibility. It is only a tiny fraction of what needs doing overall.

Come next year’s general election, members of the public will reflect on how much the economic recovery has benefitted them, as they also did in 2016 when they were irked by Fine Gael’s disingenuous and patronising ‘Keep the recovery going’ slogan, given that the said recovery had been mainly confined to Dublin and the eastern part of the country. Even now, rural Ireland is struggling in many places as the effects of the mere prospect of Brexit have already manifested themselves and will get even worse if it does go ahead.