Cliff Taylor: If there is a strategic brain around the Cabinet table, it is being kept well hidden

The Dáil debate on extending excise duty cuts was entirely performative, featuring a Government pretending it had a plan and a main Opposition party going ever further down the populist rabbit-hole. Ireland’s economic opportunities have been transformed by the vast resources provided by multinational corporation tax, but its politics have been distorted by it. Political debate focuses on how much should be given away, with little thought of the costs. The price of yesterday’s extension – €407 million – or the €1.3 billion-plus spent on the cuts since March are afterthoughts. The Coalition, blessed with a budget situation unique in Europe, is run on the basis of political expediency, rather that prioritisation.The risk here is of frittering money away and blowing a once-in-a-generation opportunity to invest in key infrastructure and genuine improvements in public services. When corporation tax finally tops out, or even falls a bit, what will Ireland have to show for it?READ MOREThe Government’s decision to extend the excise duty cuts has been justified by senior ministers on a variety of grounds, one more convoluted than the next. Announcing the Cabinet decision, Taoiseach Micheál Martin said it was a temporary intervention and the extension of the cuts was designed to “manage the transition in a responsible and sustainable way at a time of great global economic uncertainty.” Tánaiste Simon Harris said it was a “common-sense decision to keep the cost of petrol and diesel down and give households and businesses greater certainty”.The reality is that the Government is running scared of the risk of further fuel protests. And how can it offer certainty to households and businesses, unless Harris thinks he can head out to the Gulf and broker an opening of the Strait of Hormuz?The Government has set a €2 a litre trap for itself. By setting this as a kind of Rubicon for petrol and diesel prices – despite the fact that current prices here are not out of line with Europe – the Coalition has set itself up for trouble in November, unless international wholesale oil prices start to ease back. They may do. But if not, will the excise cuts be extended again undermining the arithmetic underlying the 2027 budget?[ Fuel excise cuts have been given a reprieve – but what happens if oil prices stay high?Opens in new window ]It is a classic example of a Government getting through today with no plan for tomorrow. If there is a strategic brain around the Cabinet table, it is being kept well hidden. The Government is delaying the restoration of normal excise duties on one hand but hinting that it will look after us if prices stay high on the other. In the Government statement on the delay, Harris said: “We will continue to keep developments in global energy markets under close review and remain ready to respond as circumstances evolve.” This is surely a clear hint that further extensions are possible.Spotting the opportunity, Sinn Féin voted against the motion in the Dáil, saying there should be no restoration of higher excise duties with prices at current levels. The party also wants the return of energy credits for all, which would be expensive and wasteful. Labour and the Social Democrats also support credits, though at least they propose restricting them to lower-income households.Dáil debates take place on the basis that the State’s budget will remain in strong surplus due to corporation tax. There is no consideration of the multiple risks caused by the AI bubble and geopolitical events. Irish political debate exists in a world free of trade-offs – the need to spend less or tax more to pay for the costs of new policies. Warnings from the Irish Fiscal Advisory Council get precisely zero traction. Whatever the reality of departments trying to manage budgets, the public message is that the State is here to help.This is all based on a fallacy that the Government can step in and protect the public, no matter what happens. Policy debate is driven by the image of hard-pressed households struggling to get by. And higher prices do indeed mean there are more of these. But there are also large numbers in the middle ground – feeling the pinch but getting by. And an increasing group of better-offs, benefiting from State grants to fit solar panels to recharge their expensive electric cars. Policy measures – such as fuel cuts or universal energy credits- that treat all incomes alike are a dreadful waste of money. Many of the better-offs will not even have noticed the energy credits coming off their bills in recent years, yet €3.3 billion was spent on giving these to all households. And what happens next year when the forecast increase in food prices feeds through to consumers? Will the Government offer a backstop here, too? [ Multinationals paid additional €1bn in July as new 15% tax rate kicks inOpens in new window ]Targeting can be difficult but is far from impossible. The same amount of money – or even less – can make a big difference to the households that need help, as Economic and Social Research Institute research has clearly demonstrated. But will the Coalition – obsessed with helping middle earners – listen? It is to consider other ways to support households and businesses on foot of a report due from the National Energy Affordability Taskforce. There are big questions here – such as whether the world has moved to permanently higher and more volatile energy costs and if so how to support the less well-off. The Dáil debate also raised questions about the Government’s intentions on the carbon tax, due to increase each year until 2030, in part to incentivise the move to less polluting fuels. And the budget is also likely to have new measures to help households to make energy upgrades with retrofitting, solar panels, EVS and so on – protecting them to an extent from price swings, as well as reducing emissions. Whether help for households in these areas, some income tax cuts and lower world energy prices allows the Government to deliver the promised phase out in excise cuts from November on is the big question. But it will not be answered until after the Budget. This is because the Coalition wants to deliver income tax reductions for the middle classes on budget day. And if it had to count in the cost of extending the excise cuts further into next year, it would put a hole in the €1.5 billion available for its tax package. So the income tax cuts will happen. And after that will come the decision about whether to go ahead with the planned phasing out of excise cuts, due to start in November. The tax figures in the October 6th budget will thus come with a health warning. The Coalition has caught itself in a trap, leaving itself reliant on events in the Middle East over which it has no control.