The veteran Fianna Fáil TD for Limerick city Willie O’Dea went outside the main gates of Leinster House to meet “some of my pensioner friends” who were protesting last week, on the same day that a national newspaper splashed the prospect of a €12 bump in weekly welfare payments across its front page.
“None of them were happy with that; expectations are sky high, so naturally there’s going to be some disappointment,” he said.
There was a time, not so long ago, when O’Dea’s traditional summer call for a big increase in the old-age pension signalled the start of the pre-budget season of leaks and kite-flying. This year, he was gazumped. It was as long ago as May that a bunch of Fine Gael junior ministers wrote an article seeking tax cuts for middle Ireland. A few days later, Taoiseach Leo Varadkar promised the Dáil that there were pension increases on the way.
“There is one thing I can absolutely assure you: there will be an increase in the weekly pension and that will be in the budget. The exact amount has not been decided yet,” he said.
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The budget merry-go-round of demands, kite-flying, pledges and half-promises has scarcely let up since.
Now backbenchers such as O’Dea find themselves facing constituents who are holding seemingly contradictory pieces of information in their heads at the same time: the budget will see them benefit, but not as much as last year; the State’s coffers are full to bursting, but the economic backdrop is worsening.
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“I have fellas sending me emails saying there’s €60 billion in the funds,” he says, referring to projected surpluses out to the end of 2026 sketched out earlier this year. “But of course there isn’t, these are only projections”.
The prospect of spending a lot of money and still disappointing people is a real one for some Ministers.
“I fear we could easily run into a haymaker. Expectation is crazy – won’t be met,” said one Minister last week.
Pressure is mounting to get the mix right. But what is the right mix?
The question falls to the two budget Ministers: Michael McGrath in the Department of Finance and Paschal Donohoe in the Department of Public Expenditure. They are close – politically, temperamentally, economically, the strongest axis of the Government, its essential alliance.
The table
Despite all the kite-flying, the process in recent weeks has been tight – tighter than usual. Word within Government for some time is that progress has been slow, and agreed settlements between Donohoe and the spending Ministers have been hard to come by. Some Ministers have been holding out in the belief that problems will be solved by finding more money in the end.
Even towards the tail end of this week, senior sources in Government were insistent that the exact alchemy of the budget day package was still in flux.
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“All issues are still being discussed,” said one figure on Thursday, stonewalling. Everything from the increase in the minimum wage – “inflation is slowly coming down and €12.70 is making business nervous” – to the prospect of a higher bank levy – “it would be an income generator [but] would it be transferred on to the customer is the other question” – was a moving target.
Almost everything could fairly be described as still on the table, one source said. But then added: “The table is the size of Leitrim this minute.”
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The couch
For spending Ministers, holding out for a late settlement in the belief that money will be found at the last minute to solve political problems is a risky strategy. But they believe – not without cause, going on precedent – that the Ministers for Finance and Public Expenditure can always find a few million more to solve a political problem.
For years, the running joke in Government was that the finance mandarins and their Ministers would find money “down the back of the couch”. But last year, there was so much spare cash around that one Government source joked privately that the mythical item of furniture was “more money than couch at this stage”.
When The Irish Times reported this, senior officials were immediately perturbed. This would make their job worse, they reckoned. The only thing harder than having no money at all was having loads of it.
And there’s lots of money this year, there’s no hiding it. Figures published by the Government in its summer economic statement show it is on course for a €10 billion surplus this year: mad money. But the country has tried the “when I have it, I spend it” economics before. It didn’t end well.
So how to stop a runaway giveaway budget that stores up trouble for the future? McGrath will set up a savings and investment fund, and shovel – probably – some €10 billion of windfall corporation tax revenues into it. That will leave significant amounts for tax cuts, spending increases and once-off measures, to be announced for the second budget in a row.
But as has become very clear to Ministers in the past week, those juicy sums are not as big as they might seem. Inflation is pushing up the cost of everything; the cost of doing the same thing next year is significantly more than this year – in every department.
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Overhanging all of this was the budget overrun in health. Those involved on the health side on Thursday said that no offer “in any real sense” had been made on budget for 2024.
For 2023, the health budget was predicated on 4 per cent inflation increase and patient demand, but it is likely to be 10 per cent. The 6 per cent gap equated to about €1.2 billion, driven by patient demand and post-Covid trends in care.
On top of that, another €300 million, senior sources in the Department of Health say, is money that the acute hospital system should not be spending: poor controls, duplication, inefficiencies.
Even after weeks of wrangling, when one figure closely involved in negotiations was asked whether things were close to being tied down, they responded simply: “They are not.”
Officials in Government departments were being driven “mad”, said one Government source, by the parsimonious officials of the Department of Public Expenditure.
“I don’t think PER are showing their cards at all,” said one.
The expectation was that the process would become intensely political over this weekend, drawing in the Coalition’s leaders as decisions had to be made. This is as much about politics as economics, after all. Maybe more, really.
Some in Government have noticed a change in tone among senior Fianna Fáil figures. Micheál Martin and McGrath both spoke of the future – specifically, building for the future – at the party’s weekly meeting of TDs and Senators on Wednesday.
While this may seem like an unspectacular bit of political rhetoric, some are interpreting it as a conscious attempt to elevate “steady progress” and contrast with what one source described as the “kitchen sink” approach of Sinn Féin “or some of our colleagues in Government over-egging commitments”.
Building for the future. A lot done, more to do. Now, the next steps; any of this sound familiar?
It is not, to be sure, the most electrifying brand of politics, but it is true to the character of its two architects – cautious, realistic, unshowy, dogged. That will be the mood of the budget. Slow and steady wins the race. They hope, anyway.
