“This was the best budget I have ever heard a British chancellor deliver, by a massive margin. The tax cuts were so huge and bold, the language so extraordinary, that at times, I had to pinch myself to make sure I wasn’t dreaming... Kwasi Kwarteng’s Budget is a moment in history that will radically transform Britain.”
So wrote the Daily Telegraph, in its front page commentary, the day after last year’s British budget. Shortly thereafter, with sterling tanking and the markets in free fall at the prospect of vast, unfunded tax cuts derailing the public finances, Kwarteng was sacked by prime minister Liz Truss. That didn’t save her; she was gone soon afterwards too. And with her the remaining vestiges of Tory economic credibility, handing the next British general election to the Labour Party, whose leader Keir Starmer – as he demonstrated this week – will happily accept the gift.
It’s always wise, then, to consider how a budget lands with the markets and the public before assessing its impact.
It seems safe to say that Kwarteng’s only budget will not, in fact, be remembered as the best budget ever. Here, this week’s budget appears to have landed rather more comfortably.
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There is no backbencher revolt; the opposition have not identified any fatal flaw that will require a U-turn in the Finance Bill (expect tweaks, no more). The Opposition are picking holes rather than rejecting it outright: “We would have given a €5 increase, not €4″; that kind of thing.
True, People Before Profit deputies railed against the inequities of the market economy and demanded the nationalisation of industry, the appropriation of private wealth and the end of capitalism. Stirring stuff for sure, but a minority view, it’s fair to say.
In the recent Irish Times/Ipsos poll, those who favour a ‘moderate change’ or no change at all easily outnumbered those who want a ‘radical change’
Sinn Féin, not quite a Government-in-waiting but the nearest thing we have to one, took a more nuanced view – Pearse Doherty concentrated his fire on the trusty subjects of housing and health. On the fairly lavish round of once-off (okay, twice-off) giveaways and the innovation of the savings funds, he was more circumspect.
My guess is that the budget, like last year’s, will turn out to be quite popular. There was a sense of this on RTÉ’s Prime Time on Tuesday night, when KPMG’s tax expert was on hand to explain to people how much better off they would be: quite a bit, for many of them, it turned out. They did not seem displeased.
As people work out the total of the various giveaways and tax changes, I suspect that this feeling will be replicated, especially among the middle-income families at which this budget was so clearly aimed. Examination of case studies and tables supplied by the Department of Finance showed that many middle-income couples stood to gain by as much as €3,000 or €4,000 a year. They will notice that.
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Which is not the same thing as saying that they will suddenly flock to support the Government parties. A popular budget does not a popular Government make; voters have long been able to distinguish men and women from measures.
But this week does signpost toward what is likely to be the terrain on which much of the next general election debate takes place: where public dissatisfaction at the housing crisis especially, but also unhappiness at the shortcomings of the health service, contend against the reality of a strong economy, rising incomes and comparably high living standards. Change versus stability; hope and risk versus certainty; put whatever label you want on Sinn Féin versus Fianna Fáil and Fine Gael.
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That will work differently for different people, of course. If you are a 20-something stuck in your parents’ house, or a 30-something paying exorbitant rent, despairing of ever owning your own home, then stability doesn’t sound all that appealing. But if you’re a mortgage-holder, the prospect of falling house prices is more complex.
“We need to look at house prices, because the only way we can tackle the affordable housing crisis is if house prices come down,” Eoin Ó Broin told the Dáil. He’s right. House prices are too high. But a policy to tank them might not be too popular with homeowners – by far the most numerous group of householders – either.
Much of the political discourse has tended to focus on those who want a change; but there are many for whom change may be threatening, or at least not quite so appealing. In the recent Irish Times/Ipsos poll, those who favour a “moderate change” or no change at all easily outnumbered those who want a “radical change”.
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I think it’s clear this budget was aimed at the first group. That’s where the voters are for Fianna Fáil and Fine Gael. The challenge for Sinn Féin is to convince voters it would deliver change, but not a change for the worse. The challenge for the Government parties is to convey the idea they are changing the things that need change, and keeping the things that don’t. And that’s what the political message of the budget was.
There is one more thing to say about the budget, one measure which was the antithesis of that Truss-Kwarteng disaster.
We have often despaired around here of the unwillingness of Irish politicians to plan for the long-term and to take decisions for which there is no short-term political gain, but which are right for the country. The establishment of two long-term savings and investment funds by Paschal Donohoe and Michael McGrath is all the more impressive when you consider the apparent lack of voter interest in fiscal and economic prudence, and the demands from their ministerial colleagues for the sugar-rush of extra spending. It was a conscious act of good government, and it deserves to be recognised as such.