Tuesday’s budget was expansionary in the sense of delivering a net stimulus to the economy through expenditure increases and tax cuts. Last Saturday, the Government also slipped through some provisions for expenditure overshoots in 2015, mainly in health spending. These were quite significant, making the 2015 expenditure base larger and hence the 2016 increases look more prudent than they actually are.

Last year’s budget was expansionary too, so the last true austerity budget was in 2013. As it happens, the economy has been expanding at a rapid pace for the last two years: output growth is running at around 5% and is forecast to do the same next year; employment is rising and the unemployment rate, which peaked at 15%, should be comfortably under 9% next year.

There is no need, in an already expanding economy, to add to debt levels through further borrowing for giveaways. It would have been better to let the deficit disappear painlessly with neutral budgets. The deficit, as measured for EU compliance purposes, could even have reached zero next year.

There will be more pressure for fiscal loosening in 2016. With an election due, the political parties are polishing their manifestoes and will commit, whoever wins, to more giveaways.

The problem as always is that the Irish economy is extremely volatile, given to rapid swings in either direction due to external developments over which there is no domestic control.

These last two years, just about everything in the external environment has gone right: the oil price halved, Government borrowing costs fell, the euro slipped against the dollar and sterling and our main trading partners in Britain and the US saw some decent economic recovery.

It is an illusion to attribute the speed of economic recovery to the pursuit of domestic policies of any colour: Ireland has just gotten lucky for a change.

Neither Michael Noonan nor Brendan Howlin made a single reference to these favourable following winds in their speeches on Tuesday, attributing the economic recovery entirely to the Government’s efforts.

The main budget measure was a reduction in the Universal Social Charge, which was well-leaked in advance. The other measures were mainly tinkering at the margin with existing taxes and a series of expenditure giveaways.

One more radical – and overdue – measure was the reduction of the annual tax on trucks to a level closer to what is charged in Northern Ireland and the rest of the UK. When annual truck taxes get too far above UK levels, Irish hauliers become uncompetitive and people begin to register trucks up North. The result is extra work for gardaí and customs in a pointless game of hide-and-seek. This happened before, back in the 1980s, and was resolved in the same way: cut the taxes to roughly the UK level. Why were they allowed to get so out of line in the first place?

For taxes of this type, indeed for indirect taxes generally, it should be a cardinal rule to accept that the tax rates in the UK form an approximate upper bound to what can be charged here without revenue leakage.

All of the expenditure increases and revenue reductions are being financed through extra borrowing on top of what had been planned. It is true, as both Ministers Noonan and Howlin maintained, that the deficit is now down to a level inside the EU limits. But it is not true that the public finance crisis is over.

There is a mountain of debt to be serviced and rolled over out into the medium and long term in an uncertain environment. Nobody knows what Government borrowing costs might be a few years hence, and nobody knows how healthy the international economy will be. What is known for sure is that the eurozone can be a pretty unfriendly environment for small countries that get into trouble, and it would be prudent to get the State debt on a downward trajectory quickly.

On reasonable assumptions, the ratio of debt to GDP, much touted by ministers on radio and TV on Tuesday evening, will fall below 100% this year and towards 90% by the end of 2016. What the ministers failed to note is that this ratio flatters the Irish figures: national income is lower than GDP and large Government liabilities are not shown on the balance sheet.

The claims to prudence were adorned with references to former Fianna Fáil finance minister Charlie McGreevy, who justified a spending splurge by admitting: “When I have it, I spend it.” The current version is hardly a model of caution: “When I don’t have it, I borrow it.”

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Budget 2016