Budget 2022 will be a challenge for political and public debate

With think-ins under way and the Dáil back next week, the autumn political season is well and truly afoot. Though in truth politics never goes away; it just gets more kinetic and confrontational when the Dáil returns. Anyway, even if we never went away, we’re back.

The week ahead will see further instalments in the continuing fallout from the disastrous Katherine Zappone appointment. Sinn Féin couldn't resist a no-confidence motion which will enable it to reprise its favourite message, and greatest hit – the cronyism of the elites. Assuming that Fianna Fáil TDs don't kick up too much trouble about marching through the lobbies in support of Simon Coveney, the Government will hope that the predictable Dáil set-piece (you could write the speeches now) will offer it a sort of catharsis, and let the battered administration put yet another self-inflicted crisis behind it.

Soon enough, there will be real decisions to be made as Budget 2022 hoves into view. Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath – still the most solid axis of Government – sought to put their colleagues on notice last week when they issued a warning at the Cabinet meeting about the need to stay within agreed spending limits.

The Government... has to decide how far State involvement and support in various sectors should extend

In the good old days, this used to be known as the "end of the world memo" from the Department of Finance, when the Merrion Street mandarins would seek to terrify the line ministers about the precarious state of the country's finances and the consequent impossibility of sanctioning any spending increases. As a tactic, it met with decidedly mixed results, as an observation of the growth in public spending will attest. In 20 years gross voted expenditure has grown from €31 billion to €82 billion this year.

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The truth is that, all things considered, the public finances are in reasonable health right now. Strong growth is returning and the debt mountain accumulated first during the financial crisis and latterly during the pandemic (it’s heading for one-quarter of a trillion euro) is as cheap as chips to service for now.

It’s still a mountain though, and likely external circumstances – EU rules, interest rates, decisions made in Frankfurt and Washington about tapering central bank support for the economies of the West – will constrain the ability to keep borrowing even if the Government wanted to.

This return of fiscal gravity was always inevitable, and it is coming soon. It will be gradual, but irresistible, and it will mean that every political problem cannot be solved with additional government spending. It will mean that behind closed doors in Government Buildings in the coming weeks, there will be a much more difficult and hard-fought budgetary process than last year. That will be a test of the Coalition’s coherence and competence.

But it will also be a challenge to our broader political and public debate. If the fundamental questions of politics are about the reach and extent of the State, then the Government – any government – has to decide how far State involvement and support in various sectors should extend.

These are questions for politicians who make decisions, but also for the people who elect and employ them

Last week, the Coalition trumpeted its Housing for All plan, promising to spend €4 billion a year. Not enough, says the Opposition. But what exactly is enough? Dan O’Brien of the Institute of International and European Affairs think tank pointed out during the week that between social housing and public subsidies for private rented accommodation, the State has the highest percentage of population in the EU (22 per cent) who receive support for their housing needs from the state. In the coming years, the State’s involvement in the housing market is going to increase, a move for which there is broad political and public support. Few people doubt the need for this move; nor do I. But that public money spent on housing will have to come from somewhere.

There are three possible sources: from additional borrowing, from resources diverted from elsewhere, or from tax increases. That has to be part of the debate too, or we are just storing up potentially dreadful difficulties for the future.

These words are written in the Slieve Russell Hotel in Co Cavan, venue for this year’s Fianna Fáil think-in. The last time the party was here, in 2005, it saw an enjoyably riotous evening at the very height of the doomed late-phase Celtic Tiger. As we return to a more normal politics and economics, the great question usually fudged since the crash remains – do we wish to learn from the mistakes of the past? Can we figure out a way of meeting our social needs in a sustainable way? If we accept – most people do, I think – that the State can’t immediately meet every demand for spending, how do we choose what to prioritise, and then how do we finance it?

So how big is the public appetite for fiscal prudence, for a commitment to keep the public finances on a sustainable footing, for affordable public spending programmes?

These questions will present themselves across the full range of spending decisions to be reached by the Government in the coming weeks. On health, education, social protection, childcare, infrastructure, on all the rest of it. In each area lobby groups, Opposition parties and Ministers will line up to demand priority. But if everything’s a priority, nothing is a priority.

These are questions for politicians who make decisions, but also for the people who elect and employ them. One of the lesser spotted findings of that Fianna Fáil report into its poor general election campaign is that party members thought the manifesto – in which spending commitments were kept in check and were all fully costed – was “overly cautious”. They believe that caution damaged them electorally.

So how big is the public appetite for fiscal prudence, for a commitment to keep the public finances on a sustainable footing, for affordable public spending programmes? Some very senior people in Government believe it is not very big at all. And if that is true, then it’s not just Fianna Fáil that risks charging headlong towards a repeat of the mistakes of the past. It’s the rest of us as well.