Two weeks out from budget day there is no plan, only chaos – The Irish Times

Political kites now outnumber seagulls above Government Buildings. They are getting larger and more extravagant by the day. All pretence of political restraint is over, two weeks from budget day. There is a frenzy for spending as corporation tax receipts accumulate in the exchequer. Public money is burning a hole in political pockets. Outside, pressure is mounting. High inflation, rising interest rates and the threat of further rises in energy bills pile on political pressure against a backdrop of poor opinion polls for the parties in Government.

Demands from the Ministers for Finance and Public Expenditure for self-control from Cabinet colleagues have the same salutary effect as finger-wagging at seagulls. A speculated €2 billion in additional spending in this calendar year was immediately dismissed as inadequate by Sinn Féin. Many Ministers agree, such is the scale of their demands.

The Government is now putting about the possibility of three separate energy credits, to cushion the blow of coming bills. Sums as lavish as €200, or more, are bandied about. At €200, that’s €1.2 billion right there, which presumably won’t be enough either. In a country where a €260 multi-adult household water charge annually was an unbearable burden, three payments of €200 is pittance.

At some point our boom in corporation tax will subside. We don’t know when or by how much. What we do know is that regardless of the political fate we dispense to the Green Party, we must accelerate decarbonisation and dependence on imported fossil fuel

In Australia, they are called battlers. It’s the grittier end of the squeezed middle. They battle on against the odds. Nothing is ever certain or secure. But they work at something to keep going. Battlers are now the focal point for Government TDs, and are increasingly presenting themselves politically. They don’t have social welfare and need all their wages just to get by. To underline the difference between them and the rest, the average household savings rate of 19 per cent is nearly double the pre-Covid rate of 10.4 per cent. Lots of people have lots left over and some are simply rich. But everyone is set to get up to €200 untaxed, three times over, if the kites are right. But if you are a battler, someone else’s gin and tonic money is bread out of your mouth.

In a scenario where there may be a €6 billion surplus, restraint is too much to hope for. This is a tired Government, on the ropes. It is out of ideas and lacks the energy to either fight back or run ahead. Sinn Féin is about at the combined strength of the formerly two larger parties. Fianna Fáil’s share of its working-class vote has halved. Fine Gael, after 11 years in government, has lost a coherent narrative. It talks about the squeezed middle but performs the politics of scattergun spending and confused, conflicting signals. The universal application of public money, avoids the need for choices. Slyly it is hoped that the better off are more appreciative than the battlers.

But there is an alternative. There needs to be assessment of the impact of the total package. That would be possible if, as promised after the 2011 election, Ministers went to Oireachtas committees with detailed plans before the budget. This package is being made up as we go along.

On the issue of credits for household energy bills, the tax system can be used to claw back from the better off. Your tax-free allowance could be reduced on a graduated basis above a certain threshold, of say €50,000, or it could simply be taxed as benefit in kind. We have one of the most efficient government revenue services in Europe. It effectively rescued the property tax from collapse. It has the technical and IT capacity to deliver solutions to a government that has the political will to do so.

Two weeks from budget day, there is little by way of a plan, and much chaos besides. It was always thus. But the difference is that with every throw of the dice, the stakes increase, and so do the consequences

At some point our boom in corporation tax will subside. We don’t know when or by how much. What we do know is that regardless of the political fate we dispense to the Green Party, we must accelerate decarbonisation and dependence on imported fossil fuel. That requires enormous investment over years. We backed off raising the age of eligibility for the old age pension. Instead, we imposed a larger tax burden on younger people for all their working lives.

The report of a tax commission is being selectively leaked to undermine its findings. There is no appetite to widen the tax base, so best to thrash any ideas about doing so. Last Thursday, the Department of Finance published an analysis entitled De-Risking the Public Finances – Assessing Corporation Tax Receipts. It warned of “a situation not dis-similar to that in 2003-2008 when transitory property-related taxes artificially boosted government revenue”. It hasn’t been bed time reading for Ministers since and is now on the comedy shelf in the Government’s library. The space beside it is reserved for the report on the commission on taxation. Both will be reshelved as tragedy unless action is taken.

Two weeks from budget day, there is little by way of a plan, and much chaos besides. It was always thus. But the difference is that with every throw of the dice, the stakes increase, and so do the consequences. One of the scariest kites in the political sky promises a budget that sticks with a projected €6.7 billion tax and spending package for 2023, regardless. In other words it makes no plan to cope with a second winter of high energy prices, in a context where nothing is ever enough and no one will shout stop.

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