The importance of the annual Budget can be overstated. However, it is an important statement of the Government's economic and social priorities. As such, Budget 2005 represents something of a change as the Government sets out to present a new "caring" image.
In pursuit of this, it has decided to target available resources at the lower-paid and at social welfare recipients. The headlines of the package were welfare increases well ahead of inflation, a package aimed at those with disabilities and the lifting of those on the minimum wage out of the tax net. The overall impact of the package will be to give a bigger gain to the less-well-off sections of society. Most taxpayers will benefit to a certain extent, though the biggest gains go to lower earners and to those who benefit most directly from the lifting of the standard rate income tax band.
The overall direction of the package was appropriate. The Minister for Finance, Mr Cowen, has some room for manoeuvre due to the buoyancy of tax revenues. In spending the money, he has focused on some of the poorest sections of society through social welfare increases. The package to address disability is an overdue recognition of the huge problems faced by many disabled people and those who care for them. And the focus of the tax package on increasing tax credits was correct, as this is the most efficient way of targeting lower earners.
Inevitably, only so much can be achieved in one Budget. The legacy of the period of retrenchment made necessary by the spending spree before the last election will take time to undo. So, for example, the Minister did not have enough money to attack the problem of the low level of income at which people become liable to pay tax at the 42 per cent rate. However, Mr Cowen will be conscious of the fact that, provided the Government runs its full term, he will have two more budgets before facing the electorate. If, and it is a big if, economic conditions remain favourable, he will have more resources to spend in 2006 and 2007 while still maintaining relatively low taxes - and the possibility of making a significant impact in some key areas.
However, the key issue will remain whether this Government can deliver on its plans. The Fianna Fáil/Progressive Democrats coalition has an indifferent record, overseeing big increases in public spending before the last election which did not deliver commensurate improvement in service levels. Some infrastructure improvements have started to come on stream, but planned spending in this area last year fell way short of target. Now, following the Cabinet reshuffle, it is promising to pursue a reform agenda and to focus on value for money. Only time will tell whether it can succeed, both in the areas such as disability, highlighted in yesterday's package, and more generally. Writing a "caring" Budget is one thing. But delivering on its commitments is a challenge of a much greater magnitude.