Budget speculation kicks off new political season

Autumn: a season of mists and Michael Noonan. Because, between now and the middle of October, we’ll see almost as much of that slightly world weary expression and familiar pate than as Donegal defenders circling the defensive D in Croke Park.

World of Politics with Harry McGee – harrymcgee@gmail.com

This is the week where the Budget season kicked off in earnest. The party think-ins are out of the way.  The Dáil is back. The bilaterals – involving Noonan and Brendan Howlin on the one side, and line Ministers on the other – have begun. The CSO figures showing the level of growth in the second quarter (a sure fire indicator of the wiggle room that will be available for the Budget) have been published.

The last piece of the jigsaw will come early next month when the Exchequer returns for September are published.

If they go with trend, it will allow Noonan and Howlin to draft their respective parts of the Budget. Howlin tells Departments how much they are allowed to spend next year – they have to make adjustments accordingly; Noonan decides changes in State revenue generation including taxes, duties and he also decides the extent of the deficit the Government will run in 2015.

The figures for this year have been good. Growth wasn’t particularly strong at the start of the year but seems to have accelerated.

It is certain too that confidence amongst citizens – which is hard to measure – is returning, and they are beginning to be emboldened to make those big financial decisions they recoiled from during the hard years.

That can be seen on the housing side. Is it a bubble? They say it’s not. But prices are exploding and demand clearly exceeds supply – in certain areas of Dublin in particular. They are still a good deal below the peak but the peak was too high and there is a question – will the subsidiary peak that will be reached this time be also too high for Ireland?

That’s a developing story but already it seems that no human hand will be big and powerful enough to stop it when it begins to develop momentum and gallop towards another Nemesis.

In any instance, that’s in the future. For now, let’s deal with what we know about the October budget.  It’s clear that the Government will definitely not go for a €2 billion adjustment in the Budget. We know that the target set out in the Stability Programme is for the General Government Deficit to be reduced to 2.9% by the end of 2015.

With the economy performing better, the thinking in the Government at the moment is that it the percentage can be reached without having to take out all that money. Some figures in Government believe it can be reached with a neutral budget – where cuts and revenues will effectively cancel each other out.

The data from this week and early October – September is the second-best tax month of the year – will let us know the room for manoeuvre on October 14.

For more, read this week’s Connacht Tribune.