Budget’s political test will be when big winter bills arrive
It was, according to the Minister for Public Expenditure, Michael McGrath, a “budget for its times”.
The biggest ever giveaway, in pure monetary terms, was necessitated by the emergency period we are living through.
Just when things might have been expected to return to normal after a once in a lifetime pandemic, a new crisis has brought inflation rates not seen for 40 years, soaring fuel costs and energy uncertainty.
The Government “understands the worries” of “small business owners, farmers and those who work really hard to get by” the Finance Minister, Paschal Donohoe, reassured us, “this is why the Government will help”.
And, as McGrath told the Dáil: “At times such as this, people understandably look to their Government for direction, for reassurance and for meaningful help.”
As the energy crisis grew throughout the summer, it became clear that by the time the winter bills started to land, the public expectation would be such that anything less than the kind of “meaningful support” announced yesterday would not wash, politically.
That is an expectation that has not only been growing throughout the latest crisis, but one that became ingrained in the last crisis.
The move towards the “big State” was necessitated by, and took hold, during Covid. And it was confirmed in yesterday’s Budget.
During the pandemic, the State intervened in a way that it never had before.
Measures that were once thought radical became mainstream when steps were taken not just to protect the economy but, as the Taoiseach said at the time, because “it was the right thing to do”.
The relationship between the State and the individual changed during Covid, and yesterday’s Budget confirmed that it was more than just a temporary phenomenon.
The Budget was also a result of a shift that has been taking place in Irish politics for some time.
It’s just six years since Fianna Fáil insisted on a 2:1 ratio of spending to tax cuts as the price of its support for Fine Gael’s Budget under the confidence and supply deal.
The move towards funding services over reducing taxes was seen at the time as a significant shift to the left in budgetary policy.
Fast forward to this week – an “earthquake” general election and two crises later – and spending increases now completely dwarf tax cuts, which make up €1.1 billion out of a €6.7 billion package.
This has brought us to a situation where gaps that have existed for a long time in the welfare state are now being plugged.
People might be wondering why measures like free schoolbooks for primary school children or a bigger role for the State in contributing towards the cost childcare – supports that are already well established in other European countries – took so long to happen here?
They’re measures that will be hard to claw back in the future and are likely to be here to stay.
But that is all for the longer term.
The key political test of yesterday’s Budget will be whether the scale of spending, particularly on measures to ease the cost of living and energy costs, is enough to meet demand.
Will it be enough to soften the blow of the nerve-racking bills that will start arriving at homes and businesses in the coming weeks and months?
Enough to keep the lights on, the wolf from the door, and workers in employment?
On the face of it, the Budget achieves what it set out to do.
Cash will be distributed widely and delivered at speed in the coming weeks. That should be enough to ease the political pressure at least until early next year.
But just like the tea lights that people will be keeping on standby for the winter ahead, this Budget will be a slow burner.
It will be some time before it is known whether the €600 worth of energy credits paid to all households will be enough in the face of rising bills. If not, then the political backlash will not be held back.
Similarly, it now seems likely that inflation will be with us for some time.
As many in the opposition – as well as NGOs have pointed out – welfare increases for next year are unlikely to keep up with this inflation, something that could also present political problems into next year.
After all the political theatre, the speeches and the number crunching of yesterday, there was an eerie silence around the gates of Leinster House last night.
The coming months will tell whether that sense of political calm is a temporary or misleading phenomenon.