The budget is one of the great set-pieces of Irish parliamentary life. Over the decades there have been plenty of memorable occasions. They have included giveaway budgets such as 1977, 2002 and 2007. There have also been a fair share of austere hairshirt budgets that happened during the recessions of the 1970s, 1980s and the 2010s. And then there has been the occasional bizarre one, such as Charlie McCreevy’s unilateral decentralisation announcement in Budget 2004.
But arguably none will ever seem as strange as Budget 2021, in terms of content or tone. It has been the giveaway of giveaway budgets. For an hour and a half on Tuesday afternoon, Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath have reeled out an unending list of spending commitments across all sectors.
In terms of spending the word unprecedented does not fully do it justice. It’s an €18 billion Budget, almost eight times larger than the one from last year. It includes a record €10 billion in capital expenditure and a €3.4 billion stimulus fund. The deficit for next year will be €20.5 billion, unimaginable a year ago.
There has been little or no haggling or horse-trading by Ministers with the two politicians holding the purse-strings. It’s because most Departments have got most, if not all, of what they want.
And yet what distinguishes it from all other giveaway budgets over the year is the mood. It is downbeat, phlegmatic with little of the feel-good sector. Unlike giveaway budgets in election years, there are no changes in tax or no reduction in USC, or no real changes in pre-existing social welfare arrangements.
For this budget has been designed for survival from the twin perils of a once-in-a-century global pandemic, and a once-in-a-lifetime political schism, Brexit. And to that extent it is a silver-lining budget.
“Our essential task,” said McGrath is to give people hope – hope based on realism, hope based on a plan.”
Donohoe evoked a great line from Séamus Heaney to make the same point. “If we can winter this out, we can summer anywhere.”
On the face of it, the situation today is not as dismal as a decade ago when a dangerous property and banking bubble imploded. This time the factors are external and we are not alone – the same threat has descended on the whole of Europe, most of the globe. But there are imponderables. When will the pandemic begin to recede? Will it be mid 2021? Will it drag into 2022? And what of Brexit – what impact will it have to an economy already tottering under the weight of coronavirus.
Unemployment is worse than it was in the recession a decade ago, worse than it was in the dark and dismal days of the early to-mid- 1980s. But there was no talk of us living beyond our means or having to tighten our belts. That conversation will take place sometime in the future. There was no talk either or taxes being lowered, or USC being changed, or Leo Varadkar rewarding those who get up early in the morning.
Donohoe said that 322,000 jobs were lost in 2021 but the temporal nature of this crisis could mean that 155,000 will be recovered next year. That still leaves many without work. “It is clear that the pandemic has a disproportionate impact on the job prospects of the young,” said Donohoe. the Minister.
And so the Pandemic Unemployment Payment (PUP) has been extended (although the top rate of €350 is not being restored). Moreover, one of the last minute tweaks was to allow those who have been receiving it for over four months cumulatively to receive a Christmas Bonus.
Then there is the €3.4 billion recovery fund that will allow sectors floored by the restrictions to survive and recover. Those business with a 80 per cent reduction in turnover will be entitled to a weekly grant of up to 5,000. VAT in hospitality will be reduced to 9 per cent from 13. 5 per cent for the second time in a decade in an effort to breathe some life into this moribund sector.
The €10 billion investment in infrastructure will see national roads projects, new green intercity rail carriages as well as the start to provide 600 electric carriages for the Dart extension.
There will be more spending for development in schools, colleges, defence, ports, airports, as well as a €500 million fund to develop cross-border infrastructure such as the A5 to Derry as part of the Shared Island policy. Housing will get a budget of €5.2 billion with a promise of an additional 12,750 social homes, as well as new money for affordable housing and some solid money to alleviate homelessness. Health gets an additional €4 billion, which will see moves towards increasing the number of consultant staff, as well as increasing the number of ICU beds by 20 next year and 125 in 2022.
Has anything been clawed back. Yes, the duty on cigarettes went up by 20 cent a tax, diesel prices are going up at the pumps (because of the increase of €7.50 per tonne in carbon tax). Vehicle Registration Tax (VRT) is lowered for new electric cars, hybrid cars and low-emission petrol cars. But in a complicated realignment, motor tax and VRT will be increased for higher emission cars, which will favour efficient petrol cars over diesel. cars.
With the Green Party in government this is without doubt the greenest budget in the history of the State. A total of €100 million will be invested in energy efficiency, and there is €65 million being invested in the deep retrofitting of public housing. There is meaningful investment in rail, wind energy, public transport, home retrofitting, and the promotion of cycling and walking. Those investments mean more than just getting people to shift how they approach these things – each ‘green’ investment will generate work and unemployment and give a boost to the economy.
Politically, the sense of unity and ‘meitheal’ that characterised the first wave of coronavirus in March and April has long since been forgotten. Sinn Féin’s finance spokesman Pearse Doherty was at his sternest and loudest in a withering put-down of the initiatives. In a pointed and unrelenting attack, he renewed his party’s attack on the reduction in the PUP payments, again comparing them to the pay increases Ministers have got.
Housing was another focus of attack, this time going after Fianna Fáil Minister Darragh O’Brien’s emphasis on affordable housing. He claimed that this was another sop to developers. His colleague Mairéad Farrell seamlessly continued the attack where Doherty left off. The other Opposition speeches were expected to follow similar themes, again buttressing the perception the old dividing lines have returned.
It was a huge budget by any yardstick or measure. It was the third such fiscal response or stimulus since March and there is always the possibility that the Government may need to go back to the well. And that’s before Brexit is even factored in.
“We won’t always get it right,” said McGrath. “But our sole motivation at all times will be to act in the best interests of the people we serve.”
Donohoe also came out with sanguine sentiments. “We will prevail and come through this. From the ashes of the pandemic, we will build a better Ireland.”
It is stirring stuff but the reality is that at this moment in time, nobody really knows.