October 15, 2015
The Government has staked out its election turf with aspirational BudgetPosted in Irish Independent · 71 comments ·
Imagine Michael Noonan with a thick, luxuriant George Micheal-esque ‘Careless Whisper’ mullet. Then think of Brendan Howlin, his Andrew Ridgely-style sidekick, crooning ‘Club Tropicana, drinks are free’. Now you get the picture. We are in the mid-1980s and the government has just delivered a classic, almost Tory 1980s budget.
By focusing on the self-employed and those moving towards the upper-middle, the Government has staked out its election turf. This is an aspirational budget, aimed at convincing the middle classes that this is the government you can trust.
The message is clear: Fine Gael will look after the financial interests of the broad middle, and Labour will tack on the nice bits about being compassionate and championing votes for marriage equality and the like. The package is Ronald Regan without the nasty bits. By elbowing out the rest from the centre, the government is trying to marginalize all the opposition into ‘high risk’ categories. This is a very sensible electoral move. The Coalition is saying a vote for us, Fine Gael, will allow you to take a bit more home and you will also get the nice, cuddly progressive agenda of the Labour Party.
We have no idea if this will work, but what it seems to do is move the minority party further to the right than may feel comfortable. However, a Trinity College study from the mid-2000s revealed that Labour Party voters came from wealthy, liberal backgrounds, while the real working class voted then for Fianna Fáil (and now, one would assume, Sinn Féin or Independent).
If this remains the case, the Budget makes absolute sense for both parties.
When you look at the main thrust of the Budget, it appears to be good at giving a bit to everyone. With all eyes on the commuter belt and the negative-equity generation – most of whom are in their 30s – the move on free childcare is a clever one. Considering that the average age of the first-time mother in Ireland is 31 and the most likely age of a person in negative equity is between 33 and 40, directing free childcare at children aged between 3 and 5 is as close to a laser-guided electoral strike as possible.
Just because it is political, it doesn’t make it wrong. In fact, expensive childcare is one of the key costs for working families. Anything that brings down this cost at such a crucial stage in family life is a good thing, particularly as these thirtysomethings are either in negative equity or are being squeezed by the exorbitant rents in a dysfunctional Dublin housing market.
Also targeting this group are two more measures: child benefit will be increased by €5 from next year, and free GP care will be made available to all children under 12. Given that you use the doctor most when you are very young and very old, this will help young families. How many families do you know who won’t take their children to the doctor because of the GP charge?
Finally, the two weeks of paternity leave will also come in to law from next September.
In broad stokes, this budget is also supportive of self-employed people and those with something to sell. The top marginal rate of tax is being brought down below 50pc for the first time since the banks imploded and with them the credit binge, which saw tax revenue go through the roof.
There will also be a €550 tax credit for small business owners. This Earned Income Tax Credit will be available to all small business owners including farmers, retailers, publicans and tradesmen. This is something that is a step in the right direction as small business owners are Ireland biggest employers.
However, and here’s the classic 1980s bit, Capital Gains Tax is being reduced from 33pc to 20pc. This is the biggest single move on tax and it benefits those people who own capital.
As this column has pointed out before, there are those people whose income comes from wages – the vast majority – and there is a small minority whose incomes come from investments. By reducing CGT so dramatically, the State is siding with those people who own capital. These are mainly the already rich. So, while the income-tax system may be progressive, when you include VAT and other charges as well as the sharp fall in the tax burden on capital, it’s clear that the big winners are the already rich.
This is not the unintended consequence of policy. It is policy. As an electoral budget, which aims to create the platform for the general election, the Coalition is clearly saying to the electorate, vote for us for stability and security.
This is a middle-ground manifesto for the middle ground of middle Ireland and as such it make sense politically. Economically, it is aspirational and coherent. They won’t lose votes over this Budget and presumably that was the point of the whole thing.