Cliff Taylor: The most interesting assessment of the budget is the one you haven’t yet heard

You’d be best to ignore most of the debate on the budget. The performative nature of it all would wear you out. The Minister for Finance riding to the rescue of people who are “getting up early or staying in work late”. Sinn Féin’s Pearse Doherty dismissing it as an “an insult to workers”. The trade unions calling it as a “halfhearted apology” for last October’s decision not to have an income tax package and not enough to get them to call off industrial action. You could have written it all beforehand. What is the reality? Perhaps the most interesting assessment came from the researchers at the Economic and Social Research Institute (ESRI). The headline is that the budget tax and welfare changes more or less made up for expected inflation next year, with slightly bigger gains for some less well-off sections of the community. In other words, Budget 2027 was neither a triumph nor a disaster for living standards. The basis for this falls into the basket of a bit wonky but nonetheless important. The ESRI looks at inflation and expected wage increases next year and asks what the budget will mean to a sample section of the population. Its conclusion is that spending power will more or less mark time for most groups. In other words, if you get a 4 per cent pay rise, then the budget does enough to ensure tax does not take a bit more of your income. And people on welfare have been broadly insulated from higher inflation – some of the basic increases were on the low side, while some specifics like the extra disability allowance helped.Nor is this unusual. The ESRI’s assessment is that this has generally been the case over the last seven budgets. Tax and welfare changes have more or less adjusted for inflation, with the less well-off doing a bit better. In other words, there has been no great change in living standards since before the pandemic due to budget policy, bar a bit of extra support for the least well-off. READ MORE[ Budget 2027: Big business pays the bills as Coalition rolls the diceOpens in new window ]It took a fair bit of cash to achieve this. Ireland’s budget this year is way ahead of others published so far across the EU, many still in draft form. According to figures from Ibec, the business lobby, the discretionary budget measures – the extra tax and spending – per head of population for 2027 will be €1,500 in Ireland, compared with under €100 in Finland and the Netherlands and minus €600 in France. The Coalition has room to put inflation protections in the welfare and tax systems; France is facing into a period of austerity.You would have to reflect that, despite the corporate tax boom, Irish budgets are not boosting real spending power. One missing piece to the puzzle here is the rising Irish population, up by 600,000 people or 14 per cent since before the pandemic. Total employment has risen by more than 19 per cent over the same period. It costs more for the Government to provide services and give any tax relief. Irish budgets have, in part, been running to try to keep up. Spending growth of 9 to 10 per cent annually has been too high, but part of the story is providing healthcare, education and so on for a bigger population.This standstill in spending power probably explains an element of public grumpiness. So do fears that official inflation forecasts undershoot the likely trend over the winter. Voters are told that the economy is booming – and it is. More jobs are being created. The number of better-off households has grown sharply. But there are also many who don’t have more cash at the end of the month and could be hit hard by higher fuel costs over the winter. And a middle ground not feeling better off. Spending power has not soared alongside GDP.There are, of course, options for reform. An Irish government could, for example, plan to raise tax elsewhere to cut the burden on low and middle earners. Sinn Féin and the other Opposition parties generally favour higher tax on the €100,000-plus earners to fund some relief elsewhere. But the more economically sensible routes to move tax away from incomes – like taxing property more heavily, for example, are off the table. Sinn Féin even wants to abolish the local property tax. Nobody argues for significantly lower spending growth.So don’t expect any big reforming budgets in the near future. In the short term, tax bands and credits and welfare rates will be nudged along, at least for as long as corporate taxes keep flowing in. Budgets will continue to be “bigged up” by the minister of the day and damned by the angry opposition – and the sugar rush will continue to be quick. In a sensible world, the tax and welfare systems would be adjusted automatically for expected inflation. But Irish politics doesn’t do sensible very well.[ What are the key takeaways from Budget 2027? From income tax cuts to surprising omissionsOpens in new window ]Without any real boost to living standards from budgets, the more fundamental public concerns remain about delivery. They focus on areas like the availability and price of houses – up more than 50 per cent since 2019; social services, which are struggling to cope with a larger population and creaking infrastructure. Crowded and inadequate public transport, lack of social housing, waste, water and power infrastructure are all struggling to keep up. There are too few childcare places – the budget impact here remains to be fully fleshed out. And so on. These have a real impact on people’s lives – and often knock-on costs in time and money. But from Government they require relentless focus and a lot of grinding work to deliver.This is where the budget still sent some unsettling messages. The chaotic negotiations that led up to it do not suggest a coherent Coalition with a clear focus. The post-budget debate focused on things that were not planned at all by the wider Cabinet – notably threatened cuts to the RTÉ budget. Budgets can only skate over the surface in a lot of areas, at most setting a direction. There was good, bad and average in this one. The welcome increase in State investment goes on. But the chaotic run-in does not inspire confidence – there really must be a better way to do it than a multilateral, complex, negotiating process that ends up as a zero-sum game for Ministers and leaves a lot of last-minute decisions. It is no way to run a railroad.