It is arguable whether formal ceremonies or rituals are required to mark important life events, anniversaries or simply the passage from one year to the next, writes Martin Mansergh.
The Estimates and Budget, which now come together within a fortnight, provide a focus on the management of our economic and social life. They provide many diverse groups, representing the poorest to the richest, with the opportunity to put their case. The Budget highlights marginal changes to welfare expenditure and taxes, making it difficult to introduce them by stealth. Within a broad EU framework, the Budget remains a major exercise in national sovereignty.
No incoming Minister for Finance has had his bed as well made up for him as Brian Cowen. The prudent financial management of the last 2½ years, plus the tax investigations, have all but wiped out any deficit this year. The 9 per cent increase in projected 2005 spending, near the upper end of expectations, is explicable, given significant underspending this year amounting to half of 1 per cent.
A projected revenue increase post-Budget of 5 per cent, notwithstanding one-off factors in 2004 and generous tax concessions, seems conservative, leaving a margin of safety if conditions deteriorate, but otherwise ensuring healthy public finances again next year.
Where some countries struggle to stay within the Maastricht guidelines, our position is comfortable. Minister Cowen has been able for the first time in living memory to introduce a Budget without any tax increases, which has encountered some health criticism. Yet it contains a social welfare package of €874 million and a tax package of €682 million. It brings general Government debt down to 30 per cent of GDP. In 1987, it was four times that amount.
Our economy requires sustained capital investment, of which it was long starved. Generous EU funding has largely been replaced by our own resources. Public-private partnerships play a useful but limited role.
The major emphasis is on the social side of the Budget. While pensioners make progress towards €200 a week by 2007, a €14 per week increase has been added to the lowest welfare payments.
Child benefit, while still short of target, is well over €100 a month more than in 1997. The Society of St Vincent de Paul has reopened the argument for increasing child-dependant allowance, not done since 1994 for fear of perpetuating a poverty trap. On the other flank, the ICTU and Senator Mary White are pressing for a childcare tax allowance. In Britain, a comprehensive development of childcare support is at the centre of Gordon Brown's pre-budget report.
Provision for children in the tax system was phased out under the Fine Gael-Labour Coalition by 1986, introducing a family-indifferent bias into the tax system. Charlie McCreevy set his face against any childcare tax allowance, despite it being part of the 1997 Fianna Fáil manifesto.
The ICTU, with employer support, may insist that it be revisited in next year's partnership negotiations.
Removal of those on the minimum wage from the tax net took precedence, and has been positively received by employers as well. It needs to be consolidated next year, after the minimum wage rises to €7 an hour. The next priority will be to reverse decisively the drift into the higher tax band of those close to the average industrial wage, even if for marginal income. The absence of indirect tax increases will keep down inflation, but equal vigilance is needed vis-à-vis rises in local authority rates and rents, and utility and other charges.
The more controversial tax breaks, many set to expire, will come under scrutiny. The tax strategy group, of which I was a member in 1997-2002, will have its work cut out sifting and assessing the submissions. Finding an effective way to ensure everyone pays some tax will not be easy.
There is at present neither floor nor ceiling to potential tax liability. It will be near impossible to persuade even patriotic multi-millionaires to reside here for tax purposes, if it involves them writing large cheques to the Revenue, a mere one of which would purchase a luxury seaside residence in a warm tax-haven. The unpalatable reality is that they will contribute on their own terms, or not at all.
Multi-millionaires, like high-earning artists and stallions, are highly mobile, just as multinational companies would be, if a suggested higher rate of corporation tax had not been firmly rejected by the Minister. Interestingly, Laurent Fabius has lost his battle to swing French Socialists against the EU constitutional treaty, despite arguing that the absence of tax harmonisation makes socialism impossible.
A welcome measure is the extension of stamp duty relief and reduced rates to first-time buyers of second-hand homes. Apart from helping young people, it will benefit the environment, and prospects of retaining the better older housing stock. It is still hard to pay duty on the whole amount, when only a little above the threshold.
The Budget was for the first time broadly welcomed by Father Seán Healy of CORI, showing that the Inchydoney exercise was not in vain.
The Taoiseach, to the astonishment of many, is not merely emphasising traditional Fianna Fáil values, and articulating a social republican philosophy, but also trying to rescue socialism from the discredit into which it has fallen and to redefine it. Full employment, wealth creation then redistribution, striving for greater equality, a value placed on retaining public assets and on the public sphere, improving public services, and meaningful social partnership are not bad places to start.
Some left-wing ideologues recognise Fianna Fáil's radical achievements in its early days, including the era of Seán Lemass. Others with their one-sided emphases are blind or impervious to Fianna Fáil's continuing left-wing appeal, and its achievement in making a large number of the people of no property the people of some property, while still looking after those without.
However, leaving Overseas Development Aid at 0.41 per cent of GNP in 2005 is not enough. We need to rekindle the positive attitude to third-level education of the 1990s. Overall, the Budget is good for confidence and good for social cohesion.