How will Budget 2012 really affect Irish politics?

Grassroots - An inside look at local politics – from the pens of the politicians themselves

Some money...yesterday.

Some money...yesterday.

While the new FG/Labour coalition has had several big ‘set piece occasions’ since coming to power – the renegotiation of the EU/IMF agreement and the jobs initiative during the summer for example – last week’s Budget was always going to be a watershed moment.

Budget 2012 provided the Government with the opportunity to put its own stamp on policy rather than merely cleaning up the mess left behind by the previous FF-led administration - and the cover that afforded them. So how did it perform and what will the political implications be?

When Insider considers some of the furore generated by budgets in recent times – whether it be the disastrous handling of the ending of medical cards for the over-70s in the first budget of this recession in 2008, or in better times the controversy generated by Charlie McCreevy’s tax individualisation in 1999 – it has become an absolute imperative to manage the process to ensure there is no immediate political explosion.

In this sense, Insider feels the Government did not do too badly. Even the controversy generated by the decision to curb certain disability payments was swiftly reversed and FG/Labour managed to convey a sense of understanding and taking on board of concerns in doing this.

Good points

In the Government’s favour was that Budget 2012 appeared to contain targeted measures designed to support business and job creation. The recessionary budgets of the FF/Green Government appeared to be a compilation of concocted measures designed solely to raise revenue with little thought given to the direction in which the government wanted to take the State.

On this occasion Minister Michael Noonan was keen to convey a desire to target what few resources he could to assist companies that have a chance of succeeding – predominantly those in the export and agricultural sectors – to do so.

While of course there are no guarantees that these measures will have any spectacular return in the immediate future, the message was well delivered and, it must be said, well received.

On the other hand...

Unfortunately for the Government the overall strategy itself leaves the Budget open to criticism and indeed leaves the Government vulnerable over the medium term. Insider sees three very obvious criticisms that may be levelled:

1. In seeking to diffuse the potential of a landmine going off on Budget day, the Government has focused more on spending cuts that will take some time to feed through into people’s consciousness – this may mean the Government faces discontent later in the winter and next spring.

In particular the cutbacks that will take hold in the health and social welfare sectors may lead to resentment in 2012. The imposition of stealth costs – such as possibly steep increases in health insurance costs and the monthly increase of €12 in the cost of prescription drugs – may also come back to bite the Government when they come into force.

2. There is an argument that certain measures were badly targeted and will prove economically damaging. Insider is referring in particular to the measures designed to stimulate the property market.

While a functioning property market is desirable in any economy there must be a concern that the changes announced last week go too far. Minister Noonan was keen to emphasise that getting back to where we were cannot be our objective. Insider therefore winced to hear some of the old voices from inside the property sector re-emerge to hail last week’s package of measures.

Insider is particularly concerned that several of the measures were blatantly and aggressively designed to persuade people to purchase property over the next 12 months.

3. There is an argument that the Budget will not succeed in its primary objective of meeting budgetary targets and that the Government will have to revisit more unpalatable measures down the line.

Such decisions could be more difficult for the Government in later budgets. For example we have already heard rumblings of the Government having to revisit the Croke Park Agreement. Also, should FF/Labour, rather than gently introducing a household charge of €100 that will increase dramatically in due course, have instead bitten the bullet and introduced a steeper charge up front?

Political implications

So what impact will all of this have politically? On first reading this has gone reasonably well for the Government. While there has been some negative reaction from certain sectors, the public mood overall appears to be one of resigned acceptance.

The process has, as Insider noted above, been reasonably well managed politically. FG/Labour also does not have to contend with the level of opprobrium and resentment that was felt for Fianna Fáil-led governments that created the mess in the first place.

The opposition reaction has also lacked bite with FF largely supporting the measures (could the party credibly do anything else? ) and even Independents such as Finian McGrath (who may have been expected to be furious about cuts to disability funding for instance ) being quite muted in their critiques.

Danger signs

Insider can however see some danger signs. First of all in terms of the prospect of a delayed reaction from the public as discussed earlier- and in this regard Insider feels Labour may be more vulnerable than FG as most of the negative reaction is likely to centre on the spending cuts announced by Brendan Howlin rather than on the measures announced by Michael Noonan. Labour’s desire to see Minister Howlin share the limelight on Budget day could yet backfire.

That said, some Labour backbenchers will take comfort from the negative public reaction to the decision of three of their backbenchers to resign the party whip recently. Recently elected TD Patrick Nulty was made to look particularly foolish when he walked out after barely a month in the Dáil.

The public appears to have more respect (for the time being at least ) for those such as Galway West TD Derek Nolan (appearing on RTÉ immediately after the Budget speech! ) who stood their ground and stood by their decisions.

Another danger for the coalition is the danger of tensions between FG and Labour. Already we have seen some egotism creeping in with some ministers playing a game of one-upmanship in the run-up to the Budget and Minister Joan Burton getting into an unseemly row with FG backbenchers over certain cuts in its aftermath.

In a more general sense, while Minister Noonan performed well in the Dáil chamber, Insider has heard some negative remarks about his performance in the aftermath of the Budget, such as that he is starting to sound rather like the late Brian Lenihan with remarks along the lines of “the economy will grow next year but not by as much as we thought” starting to sound like Lenihan’s “the worst is over” claims!

Return to Croke Park?

In the aftermath of the Budget we have also seen FG TDs seeking to put the Croke Park Agreement back on the agenda. While there may be some merit in this Insider cannot help but feel it is partly motivated by a desire to wind up their Labour colleagues.

Insider would caution both parties that if the Government seeks to reopen the agreement it should do it soon because right now it can argue that this was an agreement negotiated by the Fianna Fáil-led government and which they are entitled to reopen, a position that will not be sustainable for much longer.

The European question

Finally however Insider feels compelled to comment that over the coming months the Budget may pale into insignificance in comparison to the other big event of last week - the EU leaders’ Summit.

Insider expects to return to this issue in due course but for the time being cannot help but feel that Enda Kenny finds himself in the most impossible position for a taoiseach since Éamon de Valera during World War II.

He is almost damned either way – an implosion of the Euro crisis that may wreak absolute havoc on the Irish economy but a possible solution that involves a referendum that may prove impossible to win, or, at the very least, will be a bruising experience.

That however appears to be something to put on the backburner until 2012 – and with another turbulent year on the cards politically and economically Insider hopes that we can all at least enjoy the festivities of the Christmas season in the meantime.


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