We need some serious thinking on how to hold on to as much of the recent economic gains as possible in what could be a rocky period – and so leave ourselves in a position to build again in the years ahead. If the debate on the October budget is all about whether pensioners are going to get another €5 a week or whether payers of income tax are going to benefit from some small adjustment in a tax band or credit, then we are completely and utterly missing the point.
Our room for manoeuvre in economic policy may narrow very significantly for a period, and so choosing priorities becomes vital. Putting am extra fiver in the pockets of pensioners or taxpayers ahead of a general election is not one of them.
It is difficult for Taoiseach Leo Varadkar and his Ministers to strike the right tone. The economy has been steaming ahead despite all the uncertainties around the place and some signs of nervousness. Now we are facing into the possibility of an economic shock from a no-deal Brexit, which is looking more likely but is far from certain.
Meanwhile warning lights are flashing amber in the world economy, with real fears of a US recession, driven in part by the building trade war between the US and China. And the big EU economies are also in trouble.
The backdrop for Ireland, a small open economy, is changing with remarkable speed. We need to safeguard our gains, and keep our options open as far as we can. And focus on the key things which have allowed our economy to be successful in recent years, and the issues which need to be addressed to ensure this continues.
In a world where doors are being closed, Ireland’s card is to remain open to trade, to immigration, to our role as a kind of bridgehead for companies entering the EU’s market. Our relatively small size makes this possible and to an extent it is obvious, but it needs to drive economic policy too.
Best talent
You can't continue to attract the best talent if rents here are among the highest in Europe, for example, or we don't make the kind of investments in public transport and infrastructure to make Ireland move liveable.
Nor can you continue to succeed in today’s knowledge-driven economic world if under-investment in third-level education continues.
So one key thing in the budget is to send out a message that despite the madness of Brexit and the craziness of Trump’s tariffs, normal business continues in Ireland.
We can do nothing about Trump's row with China. Nor, for now anyway, can we do much about Brexit. All the talk about whether Ireland should compromise on the backstop issue means nothing unless some kind of proposal comes on to the table. So far Boris Johnson hasn't shown any inclination to do this.
Sooner or later, before or after Brexit, there will be hard talking to be done, but for now we are spectators in the extraordinary drama that is UK politics.
We need to prepare to deal with the Brexit hit, of course, and there would be real problems in areas like the beef industry other parts of indigenous industry and in rural Ireland. But we also can’t lose focus on the bigger picture. During the last downturn there was a massive cut in public investment – one of the causes of the housing shortage and other infrastructure problems we now face. Post-Brexit, and with trade wars potentially raging, we can’t make this mistake again.
In particular, solving the housing problem is key to maintaining Ireland’s openness to inward migration, an essential factor for companies investing here. In some high-tech sectors nearly half of new jobs are filled by people coming from abroad. As well as all the vital social reasons for fixing the housing crisis, this is now a real economic imperative too.
We also need to ensure that the big increase in State investment planned – in public transport, roads, education and health facilities, research and so on – remains on track.
Political rustling
Beyond ensuring that this is the case there is a strong argument not to do much else in the budget because by then we will probably still be in the midst of Brexit uncertainty. Despite all this, as predictably as the annual appearance of the Rose of Tralee on our screens, the pre-budget political rustling is already starting.
The Independent Alliance has let it be known that it wants a €5 across the board increase in pensions and social welfare payments, and Fianna Fáil looks set to row in.
The list of demands will grow as the leaves start to fall from the trees. Our budget debate is at risk of taking place in some kind of parallel universe where Brexit and trade wars do not exist.
This is not to say we are heading for some kind of second great economic crash. We don’t know whether a no-deal Brexit will happen or what it will mean beyond the likelihood of a sharp hit to growth and our exchequer finances – and real problems for some sectors.
An international growth slowdown would hit us too, though we might be small enough to ride it out.
It’s a bit of a cliche calling for a longer-term approach in budget policy and the avoidance of the “one for everyone in the audience” approach. It’s just that right now, in this budget, as we head for an autumn of uncertainty, we really need to keep our options open and focus on the things which will help us hold on to recent gains and support growth in future.