Opinion: Government should be open to outside ideas at Budget time
The work of Auguste Comte, a French philosopher from the first half of the 19th century doesn't feature very much on the bestsellers lists these days, writes
He had many worthwhile things to say, and is widely regarded as the founder of modern science of sociology. However, like many earning a living from the pen, Comte had some wilder notions and towards the end of his life came up with the idea of cerebral hygiene.
In order to ensure his own purity of thought, Comte more or less refused to read the writings of the other thinkers of his day, and tended to read only what he had already written himself.
In the run-up to the Budget, you cannot but wonder if the Government is enforcing its own particular brand of cerebral hygiene. Even though Paschal Donohoe described his day job at the Dublin Economic Workshop as including a flurry of consultations with civil society partners, there is some consensus among industry groupings and other lobbyists that it is hard to land a message with the current administration.
The National Economic Dialogue, conducted in June of this year, was supposed to be an event where civil society can put its perspective to the relevant government ministers, but at the plenary sessions at least, elected representatives with ministerial authority were conspicuous in their absence. The flipside to this official indifference is that self-serving policy suggestions can cheerfully be made by all kinds of interested parties without any risk that they might be acted upon.
In truth, any policy suggestions made in the weeks before Budget day are far too late to have any impact.
The big decisions have already been made, and the fine print is being hammered out under the terms of the Confidence and Supply arrangement with Fianna Fáil. There is likely to be some progress on reducing the burden of income tax, particularly those on the margin of income around the industrial average wage where the income tax rate goes from 20% to 40%.
Indeed, at the National Economic Dialogue held in June of this year, the Minister signalled that changes to the income bracket, where the 20% band, applies are very much on the agenda.
There are more people in work now – 200,000 more than at the time of the last general election. Modest increases are appearing in the pay packets of workers due to stronger economic growth. If, however, the tax bands and allowances don't keep pace with such modest increases, the net effect is a higher burden of taxation. That makes a real difference to take-home pay.
After the next budget I think workers will be a little bit better off. There could be some tinkering with the 9% Vat rate for hospitality and other activities, and some move towards carbon tax reform where increases seem inevitable.
Most lobby groups confine their attentions to ideas which would influence taxation or spending. Most of the ideas from interested non-governmental organisations will be consigned to the scrap heap.
Instead, just as was the case last year, the key influences on Budget 2019 will be adherence to the EU Fiscal Rules which govern overall borrowing and spending within eurozone economies, the terms and conditions of the Programme for Partnership Government, and the priorities of the Confidence and Supply agreement. Even though circumstances have since changed, the Minister’s thinking will be constrained by ideas mainly written down already by himself and his parliamentary colleagues two years ago.
This form of self-limitation is a type of cerebral hygiene, Comte style, but it is seriously flawed.
Interest groups should get a hearing from government in the Budgetary discussions, as they know - first-hand - how effective or ineffective tax rules and spending initiatives are on the ground.
