The two biggest components in the budget outcome for the current year were unrelated accidents: a huge overspend, yet again, in the health service; and an unexpected influx of corporation tax receipts. The two conveniently offset one another, facilitating an outcome which can be represented as prudent.

It is not: there would have been a big deficit overshoot were it not for the unpredicted tax boost, caused by unrepeatable changes to accounting rules. Tuesday’s direct tax giveaways for 2019 are financed through indirect tax increases and a rosy outlook – and hence rosy revenue forecasts – for the economy generally.

The fruits of economic success have largely been spent on unplanned overshoots. The annual budget process, despite the very recent experience of the consequences, has become an annual outing for the suspension of cautious financial management.

Since 2014, Government spending (capital plus current) will have grown 25% in five years, with current spending up 20% and a far bigger jump in capital from a low base. Over the period, the general price level as measured by the consumer price index (CPI) will have risen very little – at most by about 4% over the full five years. Price inflation was zero from 2014 through 2017 and has only begun to creep into positive territory recently.

These post-crisis budgets (the troika programme was completed at the end of 2013) have seen steady and consistent increases in the real volume of current spending, which will be continued into next year.

Each budget has been accompanied by complaints from opposition politicians and lobby groups that the increases allotted were inadequate. The 2019 increase for education is almost 7% but the teachers’ union promptly denounced the hike in the capitation grant as “a pittance”, while extra university funds will leave them “treading water”, according to the Universities Association.

Restraint in spending and a refusal to dish out reductions in direct taxes would have seen the budget comfortably into surplus ... if the economy continues to expand, the gamble might pay off – but there are no guarantees

The same chorus of complaint was repeated across the board and it is ever thus. There is now an active campaign of grievance-mongering in Tipperary – the first county-based example. What about Longford or Carlow or Roscommon?

The annual budget has become an opportunity for spending demands from existing lobby groups and completely new ones, none of which will ever express satisfaction with whatever spending increases are offered.

Well beyond prudence

In the aggregate, this budget and its immediate predecessors went well beyond the bounds of prudence. Restraint in spending and a refusal to dish out reductions in direct taxes would have seen the budget comfortably into surplus by now, using the sharp recovery to build some resilience into the State balance sheet. If the economy continues to expand, the gamble might pay off – but there are no guarantees.

Last week, the interest rate required of Italy shot up sharply in government bond markets, reflecting the unwillingness of the new Italian government to face the budget music. This happened before, in 2010, and Ireland was one of the casualties, ending up in an IMF programme.

The level of Irish official debt today, after a strong period of economic recovery, is not quite as large, relative to national income, as is the case in Italy and the political class not quite so belligerent. But debt relative to Government revenue is not too far behind the Italian figure, which in turn is exceeded in the eurozone only by Greece.

The level of public debt is way too high for comfort, or for false optimism. The risk is the same as it was in 2010. If things go pear-shaped anywhere in the eurozone, this country could be in the firing line. Any difficulty in borrowing to roll over maturing debt translates directly into reliance on official lenders and exposure to the arbitrary policy decisions of the ECB. Remember how well that worked out last time?

A record of having used the recovery to actually get into surplus and to have commenced debt reduction would pay dividends in that scenario. Instead, the politicians have decided to take a flyer on it and hope for the best, in order to preside over a series of loose budgets which satisfied nobody.

While Government debt has continued to rise, the non-Government sector has been reducing its exposure and is now less indebted than it was.

The banks, too, are better capitalised and the next crisis – if there is one – is less likely to be exacerbated by failing banks.

The next crisis lies buried in the Government balance sheet. The riskiness of the budget policy pursued these last few years has been pointed out repeatedly in speeches by the current and former governors of the Central Bank and by the chair of the Government’s Fiscal Advisory Council. At this stage, the risk has been taken: if trouble strikes over the next couple of years, their timely warnings will have been ignored at serious cost.

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