The election of the last Fine Gael /Labour government brought with it a decisive shift in budgetary policy. A progressive approach was replaced with one weighted to favour the very wealthiest. Five out of the five last budgets were regressive. Each year we heard speech after speech from ministers talking about fairness – but the reality was always one of budgets which made Ireland a more divided and unfair country.
In February we had an election campaign in which a self-satisfied government called on the people to “keep it going”. The core of this was a promise of US-levels of taxation and the single largest tax cut ever promised in an Irish election.
The people heard this and, in overwhelming numbers, they rejected it.
No one can doubt that the people voted for a significant change in policy. The core of this is defined by a demand for greater fairness and urgency in addressing a mounting series of crises which the last government allowed to develop.
This Budget marks one important move forward – the regressive and right-wing ideology of Fine Gael has been curbed. That party’s plans for massive tax cuts weighted to the wealthiest has been stopped – and Ireland is not heading down the road to US-levels of taxation and public services.
This budget is more progressive than any of the five which preceded it and it begins to undo some of the worst damage done by the last government. However it consists of a series of individual measures which rarely fit within any coherent strategy. In most areas the impact of specific proposals will be reduced because the government has no idea of what it is trying to achieve. And of course the policy of over-spinning and under-delivering continues unchanged.
This has nothing to do with the government’s minority status but everything to do with its drift and lack of either urgency or ambition.
This Budget is not a major move forward, but it is an important change of direction. It is, to quote Minister Varadkar yesterday, “the first fair and socially just budget in a very long time”. It is a stark but honest admission that he and his colleagues used their dominant majority to introduce unfair and socially unjust budgets.
The one and only reason for this change of direction is the confidence and supply arrangement with Fianna Fáil.
This is not our budget and it certainly does not fully reflect the policies on which we fought the election or included in our proposed alternative programme for government. But it is a budget we have influenced in important ways. Unlike others, we have not taken a destructive, all-or-nothing approach to working for the people we represent. We believe that every member of this House has an obligation to be constructive.
Such arrangements are common in Europe but have not been seen here before this year.
Fianna Fáil won a major mandate from the people in February based on a very clear set of promises. Alone of the TDs elected to this Dáil, Fianna Fáil Deputies voted three times to remove the last government and put in place the only possible alternative government. All of the speeches we are hearing from other parts of the opposition, and particularly the different shades of left, must be filtered through the fact that they did nothing to remove Fine Gael from government. So please, give us a break from your self-righteous posturing about us allowing the Budget to be passed. It is nothing but empty and cynical politics which is simply reinforcing the fact that you have no interest in using your mandates constructively.
As far as we can see, and obviously subject to implementation, this Budget meets the basic commitments contained within the confidence and supply agreement. There are items which we believe should have been addressed in this year’s Budget and the handling of the process has been unacceptable – but the core redirection away from Fine Gael’s ideology has been achieved. Therefore we will, of course, honour our agreement concerning the Budget.
However, let no one be in any doubt, the lack of strategic purpose, the non-transparent figures and shambolic process is not sustainable.
The basic economic background to this Budget is positive in comparison to many countries but contains very important causes for concern. Strategic investments of the past in relation to education, skills, research, infrastructure and a pro-enterprise tax regime remain the primary drivers of economic growth.
Completely absent from the speeches and documents issued yesterday was any engagement with the fact that we cannot stand still – we cannot take growth for granted.
Just as the global economy is rapidly changing and throwing up new threats and opportunities, Ireland has to keep innovating if it is to achieve and sustain high living standards.
This is a government which has a fiscal policy and a political objective but no general economic policy. It has no proposals concerning any new strategic direction or objectives for the economy. The basic plans produced in the decade and a half before the last government took office remain in place – often repackaged within the covers of shiny new documents but with no substantive change.
This is what is at the heart of the drift we see. For example, the two-tiered nature of the recovery – the split between high-skills employment and increasingly insecure employment – is the direct result of failing to engage with new problems.
The weak and directionless response to the Brexit vote is deeply serious. This budget should have included a number of specific scenarios for the impact of Brexit but instead it is full of repetition of small measures. The base scenario in this budget assumes an exchange rate for next year of 85 pence to a Euro. Yesterday the exchange rate was 91 pence to a Euro. Given the behaviour of the May government, assuming that Sterling will strengthen by over 6% is worse than foolish.
The negative impact of Brexit is not hypothetical, it is already hitting Irish exporters. The slow and partial response of the government is a direct threat to economic growth.
In infrastructure, research, transport, industrial priorities and many other critical areas there is no substance in this Budget or in the government’s ongoing work.
And this has nothing to do with the government’s lack of a majority.
I know there are those who wake up in the morning and have a fit of the vapours at the thought of weak government. They should remember that we have just had five years of a government with the largest majority in our history – yet it failed to do any serious strategic planning and allowed problem after problem to escalate to crisis level.
Ministers have major policy resources available to them. Only they are in the position to develop detailed plans for their areas. Their failure to do so is because of their lack of interest or commitment not their lack of a majority in Dáil Éireann.
There is no room for taking fiscal risks at this time. The international situation is far too uncertain. We have to be in a position to respond to any number of possible economic crises. The longer-term debt target announced yesterday is essentially irrelevant as it is too far out to be meaningful. What does matter is the immediate future, and here a prudent approach is absolutely essential.
It is a pity that the government has gone from being sceptical about the huge GDP revision for last year to embracing it as a vindication of its policies. The underlying position is nowhere near as positive and more restraint and less spin is in order.
The overall fiscal stance must help underpin domestic confidence and help address critical issues which are undoubtedly a drag. The proposed outturn is mildly expansionary and is sustainable.
The Rainy Day Fund which we proposed is prudent and should in time once implemented ensure that Ireland has one of the better outcomes of countries in the context of our Fiscal Treaty obligations.
It should be noted that in the pre-budget proposals produced by groups and parties there was no economically credible alternative to the proposed fiscal aggregates.
The €25 billion package announced by the AAA/PBP group is welcome because, for the first time it lays out in detail the incredible anti-worker policies of our hard-left. Massive new taxes on the private sector and other targeted hits designed to drive up private rents show a consistent ideology. While the Socialist Party and Socialist Workers’ Party which form the core of the two Alliances have still not been able to agree on everything, they have finally shown to every private sector worker what they stand for.
While Sinn Fein is obviously uncomfortable with the full scale of the policies it advocated in the Right to Change manifesto this year, its alternative budget still includes nearly €2 billion in new taxes. The claim that this would have no negative economic impact shows that the party remains obsessed with its left flank rather than offering a credible alternative.
I would like to congratulate Deputy Howlin for his article on Monday condemning the budget as not “fair, progressive or sensible”. Given that even his one-time colleague Minister Varadkar has said the last five budgets were not “fair and socially just”, Labour is clearly still living in denial.
Before dealing with the detailed areas covered by the budget it is important to address the budgetary process.
It is a shambles. It directly works against soundly-based policy and credible political debate. This must be the last budget produced in this manner.
If we assume that the government was not deliberately misleading people both in public and in private, the appearance of €300 million extra in the last week suggests at best a lack of control.
There has been no serious review of what this budget will deliver or the figures behind it. Ongoing activity is sold in the same way as new initiatives and the debate is reactive rather than strategic. The Spring Statement and announced spending envelopes are meaningless and never reflect the final outcomes.
The idea of an annual budget day should be ended. Let us have detailed scrutiny of ‘no-policy-change’ estimates and policy initiatives in advance. A single high-stakes political showpiece makes no sense and does not deliver good policy. Most countries have a more lengthy and iterative process which makes greater demands on government and opposition alike.
We will be insisting on the early establishment of the independent Oireachtas Budget Office and seeking early discussions on a deeper reform of the budget process.
As I have said before, the fact that the fiscal space is limited still allows for choices. The forced rebalancing of the budget towards essential services and supports has allowed for some improvements. The increases in pensions and other payments are a direct result of the rebalancing and specific provisions of the supply and confidence agreement. To brief otherwise is fooling no one.
In relation to pensions, Fianna Fáil makes no apology for the priority we have given to the elderly. In recent years cuts in a range of vital supports for the elderly have had a disproportionate impact on them. The pension increase and other changes such as on prescription thresholds will help.
As for the increases in other payments, these are possible only because of the rebalancing forced on Fine Gael due to the confidence and supply agreement. It is amusing to see those who took an unreconstructed rightwing approach in the election and in the negotiations afterwards trying to soften their image through partisan briefings.
We support the increase in all payments and, as we said repeatedly in discussions with ministers, their decision to delay starting dates is bad policy.
We regret that the government has chosen to delay implementation of certain commitments in relation to education. The emptiness of the so-called Action Plan on Education can be seen in the fact that the Budget does not fund any initiative contained within it.
The confidence and supply agreement requires a reduction in class sizes, and we will be insisting that this be addressed.
The ending of all ring-fenced provision for guidance and counselling was an incredibly damaging and regressive decision. The impact of this on disadvantaged communities in particular has been terrible. We expect the reversal of this to be fully implemented next year.
The ending of post-graduate grants was a targeted attack on the ability of many to gain critical qualifications. The restarting of these grants begins the unwinding of a callous and unnecessary cut.
We identified the crisis in third-level funding as approaching emergency levels and the €31 million will help stabilise the situation. What is now needed is a strategy for investment in a sector whose success is central to our economic and social future.
The failure of the Budget to even mention research in our higher education system is a further confirmation of a government which just doesn’t get it when it comes to shaping our future. The loss of hundreds of researchers and the exclusion of most basic research from funding is causing real damage and is set to continue.
While overall levels of employment will remain high, we are extremely concerned that there is no sign of any engagement with the casualization of employment and unfair contracts.
The Budget contained no provision to address this major problem.
No area sums up the failure of Fine Gael to develop and implement new strategies more than health. The inheritance of the Reilly/Varadkar years has been deeply destructive, including the attempt to influence a massively wasteful and failed new funding model.
In the last two years waiting lists have increased by 56% and pressures within the system are mounting by the day.
The scrapping of the National Treatment Purchase Scheme caused enormous harm. It reestablishment with €15 million is a first step, but nowhere near enough. The most important thing about the NTPF is the spirit it works in – where it helps use the full capacity of the national system.
As has been exposed by a number of journalists, the presentation of health budgets in recent years has been borderline fraudulent due to the behaviour of government. Service plans have been published without the relevant funding. The mental health budget has been deliberately over-stated and manipulated at budget time.
Before we can judge this budget we have to see the relevant service plans and check if the manipulations of the past have been repeated.
We have been pushing for urgent action on childcare for a number of years and welcome in principle the extension of a universal scheme. However the lack of operational details or a strategy to ensure adequate supply means we have to wait and see before going any further.
We are concerned at the steep cut-off in income limits which offers a significant trap for middle-income earners. While this appears to have been enough to satisfy some government backbenchers it has not addressed the core problem facing the squeezed – in fact it may in certain circumstances increase affordability problems for them.
We will be seeking an early committee review of the proposal and call on the Minister to immediately publish all background work carried out in deciding the levels and thresholds to be implemented.
The housing emergency developed in recent years because of a lack of delivery not because of a lack of funding. No matter what targets were set they were always missed. Even though Fine Gael and Labour put their most aggressive ministers in the Department, they presided over an emergency which now includes every type of housing from rental to ownership.
While the then minister was indulging in pushing propaganda he ensured that in 2015 the number of local authority new builds was the lowest ever recorded.
We believe that the package announced yesterday risks further unbalancing the sector.
Local authorities have not been given the staff or expertise required to deliver the 1,750 homes provided for. Some initiatives will simply drive prices higher. And the plight of thousands faced with extortionate variable rate mortgage interest rates is ignored.
The 35% cut in capital support for the Irish language and the Gaeltacht is a sad reflection on a government which seems intent on wasting the historic opportunity of the rising interest in our native language.
During the election we successfully argued that rural Ireland is being devastated by the loss of services and lack of any concrete plans for the future. The renaming of a department to include ‘rural’ in the title means nothing in the absence of a coherent strategy. Funding which amounts to no more than €1/2 million per county is no statement of intent.
There of course also remains no sign of any credible transport or infrastructure strategy.
The core issue with this government is its drift. It appears mainly concerned with internal manoeuvring with Fine Gael and seemingly no interest in trying to set a strategic direction for our economy or public services. The only thing stopping ministers is their own commitment. They do not need a majority in this House to tell us what they want to do and where they see the future of the areas they oversee.
The regressive damage of Fine Gael has been stopped – but many opportunities are being missed and threats unaddressed. This budget a partial departure from the damage of the last five years. It must be the last we see which is so devoid of urgency or ambition.