The healthy state of the public finances has allowed the Government to announce a generous budget, while also promising to put away significant cash for the future. Budget 2024 is not a conservative package, involving measures valued at close to €14 billion. With the economy slowing and big bills coming down the track for the State, it is doubtful whether many future budgets will have the same level of resources to disperse, even if sizeable surpluses are forecast for a few more years.
Central to consideration of the budget is the once-off measures, now fast becoming an annual event. The scale of these is striking – and the concern must be that phasing them out is likely to be politically difficult. Helping less well-off families through the cost-of-living crisis is necessary and the commitment to tackling child poverty is welcome. But there are questions about the mix between once-off and permanent measures. And the extension of expensive universal benefits such as the energy credits on such a significant scale, while helping some households that need it, also wastes State funds by giving cash to many who don’t. It also risks fuelling inflation.
The plan to help mortgage holders will please some – particularly those on tracker loans – but will annoy those who do not benefit. The commitment to make this support temporary will be hard to keep, with interest rates set to stay high.
The permanent tax and spending measures, however, appear broadly appropriate. Taxes need to change to reflect wage inflation, and spending must rise to maintain and build services and undertake investment. Here, as ever, delivery will be everything. More cash, in real terms, should mean better services and the Government also faces a big job in delivering new capital projects in a more timely and cost-efficient fashion.
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The decision to breach the 5 per cent spending rule is reasonable, given the rate of inflation. But, as the Fiscal Council has pointed out, there are questions about whether much of the spending presented as temporary is now, in fact, permanent, or at least semi-permanent.
There is a need to clarify this and develop a more permanent strategy. The welcome plan to put cash in two State funds in the years ahead may help here, as it involves commitments to make payments from the exchequer each year. These funds can underpin State investment and also help to support the public finances as costs build in areas like ageing. The key question is whether the public finances in the years ahead will remain healthy enough to allow the funds to be built up.
The 2024 budget is, above all, framed with the next general election in mind. The political compromise was to give much of the additional cash to voters through once-off rather than permanent measures. But the distinction between these is fraying fast.
