Irish Budget 2024: A €10.5 Billion Pre-Election Strategy?

A Closer Look at Ireland’s Fiscal Health and Investment Plans

Yesterday was Budget Day in Dublin, and Rachel Reeves must envy the Irish Finance Minister Jack Chambers. A €20bn surplus, rising consumer spending, and a debt ratio half the eurozone average are luxuries the British Chancellor can only dream of. A Bloomberg headline like “Ireland, flush with cash” feels far from reality for the UK.

Ireland’s government announced a €2.2bn cost-of-living package, €3bn for infrastructure, tax cuts, and extensions for help-to-buy and mortgage relief. Few nations enjoy such rude fiscal health.

Political Strategy or Sound Economics? The Challenges Ahead

With an election looming by March 2025 - reports suggest as soon as next month - this budget has been called a “giveaway pre-election budget” and a “€10.5bn bonanza.” But this is not some forlorn final roll of the dice. Since replacing Leo Varadkar, Simon Harris has turned a nine-percentage point deficit against Sinn Féin into a six-point lead. Once feted as the political leader to deliver an historic electoral changing of the guard, Mary Lou McDonald oversaw a bruising set of results at the recent local and European elections. Upending the status quo might have to wait.

Yet challenges persist. Ireland’s prosperity, which is heavily reliant on foreign investment, creates challenges. One odd example is the ECJ-mandated windfall generated by Apple’s €13bn in back taxes, which the government spent millions fighting. This judgement in turn further complicates Dublin’s increasingly precarious geopolitical balancing of Washington, Brussels and Beijing. Elsewhere, the Irish Fiscal Advisory Council warns that the 7% spending hike risks overheating the economy, surpassing the government’s own 5% limit. When Chambers warns of using “potentially transient receipts to fund permanent expenditure measures”, he is being neither stingy nor blind.

Long-Term Risks and Short-Term Wins

Still, these are political choices. While strategic challenges remain, Budget 2025 focuses on immediate wins on serious issues. So, what would Reeves give to have the choices of Chambers? The answer is likely to be found at the polls.

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