Budget 2025 will provide a six-month sugar rush – a big, bold, headline-grabbing one designed to skewer the Opposition on the eve of an election – but what will it do in terms of the big issues pressing down on the State?
Will it alter our shaky trajectory on housing? Will it end emergency department overcrowding in hospitals? Will it address the shortfall in funding for third level? And what of the State’s looming pensions time bomb or the climate transition (the State will face billions in fines if it fails to curb its emissions by 2030)? These are more difficult questions to answer.
Channelling more money into these areas isn’t enough. We’ve learned this the hard way. Our housing problem hasn’t improved, you could argue it has got worse, as the country has got richer.
The main criticism of the current Government is that it is pursuing incremental change in the face of major challenges when something bigger and bolder is needed, analogous to TK Whitaker’s industrial policy revolution of the 1960s.
Budget 2025 main points: Energy credits, bonus welfare payments, higher minimum wage and tax changes
Budget 2025 calculator: How this year’s budget will affect your income
Households worse off over failure to peg tax and welfare changes to income growth - ESRI
If our finances go flat, how will Ireland pay its bills?
Budget 2025 sprays money in multiple directions: welfare payments are increasing by €12 per week; the minimum wage is being lifted 80 cent an hour to €13.50; the standard rate cut-off point for income tax is being increased by €2,000 to €44,000; there is a double child benefit payment, energy and rent credits and another sizeable increase in capital spending, including an additional €1.25 billion for the Land Development Agency.
In his budget speech, Minister for Finance Jack Chambers talked about “catalysing opportunity” but will we look back on this period of relative wealth (the Government is projecting a whopping €23.7 billion surplus this year) and say we lacked vision?
We’re told the €14 billion Apple tax money will be spent on longer-term water, energy, housing and transport projects with Mr Chambers saying: “There should be a clear strategic direction in how it can be used to deliver for the future of our country, improving the lives of people and communities and supporting our small and medium enterprises and multinational corporations.”
But why aren’t we getting that strategic direction first hand rather than been told of the need for it.
So many things in Ireland don’t seem to be a problem until they’re a crisis. And that’s because we fail to plan or even properly resource the agencies at the planning coalface.
State planning agency An Bord Pleanála operated for most of the last decade with just 70 inspectors and 15 board members in contrast to the Central Bank which had 1,100 staff to regulate the financial system.
When you’re awash with money, you need a vision or at very least an ability to deploy it wisely, something that has eluded successive Irish administrations, not just the current one.
The national children’s hospital, the Dáil’s “Burj Khalifa” bike shed and the modular homes fiasco illustrate not just an inability to control costs but an inability to direct resources where they are needed.
We seem to perform better in crises than when managing success, seem to fear making mistakes and the likely public backlash. The findings of the report by the Housing Commission, published earlier this year, highlighted “risk aversion” on the part of policymakers as a key problem.
And if the Government spends badly or uses its gigantic surpluses merely to bolster incomes, which are already rising, without building in more capacity (in terms of housing and other infrastructure) it runs the risk of fanning prices in an already high-priced economy.
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The Irish Fiscal Advisory Council’s claim that the Government is adding too much fuel to an already hot economy is perhaps lost when there is so much money washing about and when headline inflation has dropped to below 2 per cent.
But the latter reflects falling prices of imported goods like energy which have a greater weight in the overall calculation. According to the council, the “Low Import Intensity” inflation indicator for the domestic Irish economy points to an inflation rate for domestically produced goods and services of about 4 per cent which chairman Seamus Coffey says is on a par with the Celtic Tiger era.
When it comes to the things that Ireland does not import, “the pressures are now similar to what we would have seen in the 2000s”, he warns. Coffey claims the Government is adding to these price pressures by pumping billions into the economy at a time of near full employment.
He cites Central Bank research, which suggests that repeated breaches of the Government’s spending rule, which seeks to keep annual spending increases inside a 5 per cent ceiling, has probably added €1,000 to the average annual household bill. Ironically that is the same amount that average workers are expected to gain from Budget 2025.
