Paschal Donohoe believes this was a budget that was responsible, sensible, and consistent with maintaining the stability of the public finances.
“It is a responsible budget for a modern and caring Ireland that aims to be at the centre of a changing world,” he said at the end of his statement to a packed Dáil this afternoon.
In the weeks and months leading up to the budget Donohoe has preached prudence, warning that this government would not repeat the mistakes of the past, nor put the states buoyant economy at risk at a time of global economic uncertainty.
Yet at the same time Donohoe knew also that this could be his last budget as Minister for Finance. So there is a political reality that dictates that when the economy is roaring and employment is at its highest level ever, people need to feel this in their pockets so as that they might then consider re-electing Fine Gael whenever that election comes.
The days of lumping €25 onto child benefit every year, as Charlie McCreevy did in the early 2000s, are over. So instead, on the floor of the Dáil this afternoon, prudent Paschal has delivered a budget which tries to spread a little bit to everyone. Modest tax cuts that will put an extra €20 or so in the pockets of middle-income earners every month and a fiver on the pension - and a raft of other welfare payments (Fine Gael has learned the lesson of the backlash against a derisory €3 increase a few years ago) are the headline measures.
Donohoe is hoping that the warnings from hotels and restaurants that the Vat hike will result in large-scale layoffs do not come to pass
This will be paid for in part by raising the Vat rate for the hospitality industry, much to the consternation of the industry which has lobbied hard for the retention of the special 9 per cent rate over recent years. Donohoe is hoping that the warnings from hotels and restaurants that the Vat hike will result in large-scale layoffs do not come to pass. He argued today that it was “responsible policy making” that would allow the government to invest more in housing, education and childcare. But it’s probably the biggest gamble of the budget and the industry has already said its minister, Shane Ross, should consider his position.
In total a package of new tax and spending measures costing €1.5 billion has been announced by Donohoe today, some of it pre-committed expenditure and other measures that have been mooted for weeks and confirmed today. It goes against the advice of the Fiscal Advisory Council and other leading economists who are growing worried that Ireland is overly-reliant on multinationals, their corporate tax revenue and the payroll taxes generated from the thousands they employ.
When around 40 per cent of the €8 billion in revenue generated from corporation tax in the state came from just 10 companies last year it's not hard to see why there is growing concern. The majority of the extra €1 billion in corporation tax revenue paid to the exchequer this year came from one company alone, a large US multinational.
Yet in the face of all this, as well as Brexit and the impact of Trumponomics, Donohoe argued today that this budget is about “securing the future and renewing the centre”. He believes the Rainy Day Fund, which will be allocated €500 million next year, will guard against future shocks. But as we know, this is small money when such a shock hits.