What’s the Plan?

So, Budget 2009 has come and gone (at least until next week, when Brian Lenihan starts reversing decisions, and March, when he needs a mini-Budget because all the income predictions are wildly optimistic).

Minister Brian Lenihan

Minister Brian Lenihan

But where’s the plan?  Why is there no articulation of how this Budget, and the two or three to follow, will bring us out of this situation and get things running properly again?  Why no enunciation of how, by cutting extraneous services, agencies, Ministers of State and, indeed, tax loopholes, we can return the public finances to a more sustainable state?

I’m not looking for a solution to the world financial crisis, but surely it’s not beyond the bounds of appropriate management of the Irish Exchequer to have some idea of where we’ll be this time next year, and what we’ll be doing.  While events may mitigate for or against some of the measures, at least there’ll be a rough plan.  At least we’ll be working towards an ultimate goal rather than towards simply trying to get the next six months over with.

I’ve long been an advocate of changing our budgetary system.  Rather than having a big budget every year, I believe that we would have a more stable and better managed economy by having a “Super Budget” every three years, then having “Mini Budgets” in the intervening years.  The Super Budget would set the overall economic, taxation and spending plan for the three years (including any predicted significant changes that might be gradually introduced during the three years), while the Mini Budget would simply implement mid-term changes and adjust for changes in the economic circumstances.

Of course, if there were a major change in the Exchequer situation during the term of a Super Budget (like this year), you could always have another, but that should be the exception rather than the norm.

The advantages include having more predictability and stability, which is good not just for us, but also beneficial for multinational corporations wishing to locate here and existing multinationals who are bidding against their company’s operations in other countries for internal jobs.  The effect of the type of pro-cyclical budgeting that Fianna Fáil have engaged in over the past ten years (where spending is ramped up hugely when the economy is growing fast, and cut back drastically when it slows) would be generally avoided, while more counter-cyclical budgeting (where you hold back some money when the economy is growing fast in order to keep inflation and growth at manageable levels, and then spend that money when the economy slows down, thereby lessening the effects of the downturn) would be easier.

Unfortunately, it would make pre-election splurges (like those of the 2002 and 2007 Budgets – but noticably not 1997) much more difficult to do and easier to notice.  So we won’t see Fianna Fáil going anywhere near it anytime soon.


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