COMMENT: Budgets, breadcrumbs and circuses

Just like Christmas, speculation about the annual October budget seems to start ever earlier. This year it kicked off dramatically on May 22 in an Irish Independent article by three FG Ministers of State thinking aloud about the desirability of making large cuts in the higher rates of income tax in the next budget.

Pronouncements by Irish politicians seldom emanate directly from rightwing or leftwing ideological roots. They like to think of themselves as pragmatic centrists. However, this kite was clearly motivated both by political opportunism as well as by the misguided neo-liberal belief that growth can be stimulated by making the already well off even more well off, at the expense of the less well off.

Such tax cuts almost always create the need for future expenditure cuts when the expected growth fails to appear. Unbalanced budgets cause financial chaos. Consequential cuts in real public expenditure impact mainly on less well-off people who are more reliant on the availability and quality of public services in social welfare, health and education. A vicious circle.

I hazard a guess that if opinion polling had suggested that tax cuts for the well off were wildly popular among the voting public, we would have seen their implementation in the budget on October 10. However, no such dramatic action was taken, and Budget 2024 was a relatively constrained exercise in spreading a modest amount of fiscal hand-outs across the population at large.

A benefit of coalition government? Or perhaps just a measure of common sense indicating that our political parties and the population at large realise just how divisive such tax cuts would be at a time when many people on modest means are struggling to maintain their living standards in an era of high inflation and expensive housing.

Cycles and climaxes

The circus of budget speculation and delivery has always bothered me. For months beforehand media are filled with organisations pleading for special treatment. Broad hints are dropped by politicians of all parties (but few as clunky as the May tax-cutting article!). The process reaches a crescendo with the usual clichéd photograph of grinning Ministers for Finance and for Public Expenditure, clutching the budget report, proceeding to a tedious presentation to the Dáil, followed by an unhelpful and often ill-informed ritual debate.

The next day, media are full of budget-ready reckoners showing who won, who lost, and denunciations by the opposition spokespersons, followed by silence. Nobody seems much bothered about how the budget decisions play out over the following 12 months, until the next budget arrives. Or whether the budget actions actually addressed the problems identified. Budget 2024 is so yesterday! Onward to Budget 2025 and the cycle repeats itself.

Oversight and overruns

It is important to realise that the budget is not a complete accounting of how and to what effect our government taxes and spends. Rather it focuses only on changes to current tax rates and expenditure.

In the run up to the budget, all government departments send in details for the previous 12 months of their activity. You don’t have to be a fan of the TV comedy ‘Yes Minister’ to realise that departments guard their existing total allocations as they would their life and make a pitch for even more. It would be interesting to hear if there was ever a case of a department saying that they had enough to cover future needs, or could do so for less.

Four departments account for almost 70 percent of total public expenditure: Social Protection, Health, Education (excluding higher) and Children. These are core services and central to maintaining an equitable society. But they are also services where oversight of their activities has been lacking, efficiency has been questionable, and ever increasing expenditure overruns have not solved their problems.

Hollow promise

At the other end of the scale, people in the Northern and Western Region will be interested to note that the budget for the Department of Rural and Community Development comes in at 1.3 percent of total expenditure – the lowest share of all departments.

What this illustrates is that a vital department, the nearest we get to having a Regional Development ministry, has been hollowed out and responsibilities for regional development have been scattered ineffectually across other big-spending departments, never to be heard of again.

Meanwhile, the main opposition party, Sinn Féin, produced a fully articulated ‘alternative’ Budget 2024. You might expect that this would be more generous than the ‘official’ budget, but not so.

The government proposed a total expenditure increase budget package of €12.3 billion; the Sinn Féin equivalent was €6.8 billion. Given the ambition and close attention of the Sinn Féin budget to addressing known problems in our society (housing, poverty, hospital waiting lists, crime, etc), either the costs of doing so have been underestimated or there will need to be large gains in efficiency in social services that have been underperforming.

If the next election campaign focuses on these issues, life will be interesting.