So here is the case for a November election. The budget will be just out, the economy will – most probably – still be on the up, and, crucially, the Government will hope it is in control of the “game”. The risk of holding on until 2016 is that “events” will intervene.
Look at what has happened so far this year. The Government had planned that the spring statement in April, promising more goodies to come, would be the start of a revival in its fortunes. In the event the endless Irish Water controversy and rows over IBRC dominated much of the news agenda and the poll numbers have not lifted, particularly for Labour.
So the question, come budget time, will be whether to go for it in what the Government hopes will be a post-budget “glow”. The alternative is to hold on and hope that the feeling of money in people’s pockets through budget tax cuts and public sector wage rises – and a continued improvement in the economy – will mean a spring election gives more chance of a return to office. This risks the unexpected – something emerging from the IBRC commission, for example, or more likely something now unforeseen – and also the entirely expected winter crisis in the health system and in housing accommodation.
The bookies now strongly favour a 2016 general election. But you do just wonder how long the country can remain in a pre-election build-up before the day is actually named. Because if you expect anything particularly strategic or long-term to come from the Government or the Opposition as the political season kicks off in the weeks ahead, you are going to be disappointed. For the Government, the game is to take hold of the ball and, above all, avoid any more train-wrecks like Irish Water. For the Opposition it will be a case of trying to continue landing blows on a Coalition that is showing all the signs of being unsettled by the lack of a political dividend from the recovering economy.
It will be risk-free government and opportunistic opposition. Nothing will be done to upset the people who Fine Gael and Labour perceive as their "faithful" – the core supporters that must not be alienated. The goal will be to get the momentum moving in the Government's direction when the Dáil comes back, reinforce it with the Budget, and somewhere along the way make the call on whether the general election is in November or the spring of next year.
Chess piece
The first chess piece was played this week with an attempt to park the Irish Water issue. After Irish Water failed the EU market corporation test, Ministers were out saying that it was all grand and it would probably pass it soon enough. Now reality is being faced and the briefings are that it might take a “decade” for this to happen. Getting Irish Water back off balance sheet would require much higher charges for the public. And that ain’t going to happen. So it is now presented as a long-term goal.
Meanwhile, the planned move to restrict the €100 so-called water conservation grant to those who paid their water bill is designed to stop annoying those who have paid up. Most of those who won’t pay will not vote for the Government parties anyway. The pill will be sweetened by promising to hold down water bills for a prolonged period. It won’t stop Irish Water being a key election flashpoint of course, as this is now just damage limitation.
All other possible household bill increases will also be off the table. The Coalition will promise that residential property tax bills will not go up, probably until 2019, meaning new houses built since 2013 will continue to be excluded. Plans for a new broadcasting charge are long dead. The post-crisis move to widen the tax base may yet be seriously damaged by all this, as we move back to an increasing amount of the tax take coming from middle-income taxpayers.
Then there will be the good news – all packaged up in a series of announcements designed to boost the “feelgood” factor and to try to keep the focus on “the economy”. There will be a capital spending plan promising increased investment and a big build-up to budget day, which will see cuts in income tax and the main 7 per cent USC rate, measures aimed at the self-employed, relief on inheritance tax and targeted spending rises.
EU rules
Just about everything is going right for the budget numbers – but the problem for Ministers
Michael Noonan
and
Brendan Howlin
is that they are hemmed in by EU rules that limit how much extra they can spend – unless they raise taxes, which isn’t an option at election time.
The EU rules mean the €1.5 billion in tax cuts and spending increases signalled in the spring statement is pretty much it. At most the figure will creep a bit higher. Windfalls, such as that likely from a payback to the State from AIB for special investment made as part of the bailout, will have to go to pay off debt.
Last year’s budget delivered about a tenner a week to a middle earner via income tax and USC cuts. This year’s might give the same person €15 more a week.
So is the Government better to go to the polls in the wake of a €1.5 billion budget “giveaway” or wait until the limited reality of what this means for people’s incomes hits home? If you believe the economy is going to continue storming ahead, then, yes, maybe the bookies are right and it will be 2016. Certainly Labour, right now, will want to wait. But the Taoiseach will see the risks in waiting, too. Don’t write off November.