Irish Budget Analysis: The beginning of the election cycle?

The Coalition Government of Fianna Fáil, Fine Gael and the Green Party has announced what some commentators have characterised as a pre-election budget with spending increases and tax cuts worth over €9 billion, that gives almost €2.7 billion back to voters in the coming months, as well as €4? billion in non-core spending.?

With a general election on the horizon, and each Government party seeking to shore up as much electoral support as possible, a determined effort was made to support the so-called ‘squeezed middle’ and lower income households, in the context of the cost of living and housing crises.? Headline measures for mortgage holders, welfare recipients, parents and small businesses were all announced, leading to criticism from the Irish Fiscal Advisory Council about the Government breaking its own spending rules.?

The Budget bonanza was made possible by strong national economic performance, illustrated by a €8.8 billion surplus and national debt expected to fall below €200 billion by 2030.? In his address, Minister for Finance, Michael McGrath, welcomed full employment but noted that capacity constraints in the economy and their impact on key priorities, such as housing.?

The Government has sought to strike a balance between fiscal prudence, while also demonstrating to the electorate that it recognises the major challenges which many in society are experiencing. Whether they have delivered enough in Budget 2024 to win the support of floating and undecided voters will only become clear over the coming months. The Main Opposition, Sinn Féin, and other Government detractors have described the announcement as more of the same and lacking the urgency, vision and the compassion required in the current context.?

Evidence of the Government’s effort towards fiscal prudence can be seen in the establishment of two major new funds to help future proof Ireland’s economy and public finances.? The Future Ireland Fund, with a potential to grow to over €100 billion by the middle of the next decade, will help to protect living standards and public services for current and future generations. Separately, €14 billion will be put aside in the Infrastructure, Climate and Nature Fund by 2030 to allow for sustained levels of investment in infrastructure in the event of economic downturns and to support climate and nature related projects.

There is no doubt that the Government hopes that the multi billion euro package of measures for individuals, families and businesses will be received positively by voters. The question remains whether the Government will see a budget bounce in the polls and whether it has struck the right balance between supporting the economy and society, without adding to the problem of inflation.

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