Budget 2017

Speeches start at 1pm; as is now traditional, the whole thing has essentially been leaked to the papers, see here and here for representative samples, there’s also a live stream with the relevant documentation beside it.

Comment moderation is off to simulate the ‘live blog’ thing I still can’t quite get right on this site.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

46 replies on “Budget 2017”

I don’t envy Baldy. The markets are playing chicken with the Tory lunatics via sterling. Who will blink first? Imagine if BLTD was around to see this happening. The spivs are being roasted. Callahan Erdoes at JPM pointed out the strangeness of capitalism without a cost of capital. The Republican Party is in meltdown mode. Baldy has to protect the interests of Irish people .


“Demand increases supply”

Logic: there is insufficient demand for new houses so they are not being built, therefore we must increase demand.


It’s a ‘fiver for everyone’ budget! Henceforth, this day will be known as ‘Fiver Tuesday’. Member of my household just gone for a walk to contemplate how we will spend ours…

Meanwhile, did I hear Paschal Donoghue wrong, or did he say that there will be a €39m increase in spending on third level education? That won’t go far in mending the hole in the bucket.

It seems fairly certain already that the budget will enter popular folklore as the “€5 budget”. This, oddly enough, may be helpful IMHO in that it will demonstrate another outcome to abandoning the Westminster model of budget preparation i.e. only the minister, and, ipso facto, his government, pulling rabbits out of a hat in a budget speech under that model, can gain political kudos or, at least, win political ground relative to other politicians.
It is to be hoped that this penny will drop and politicians collectively in the Dáil will do what they are supposed to do; examine, debate – in public – and approve a budget, as initially submitted by the government of the day.
The commentariat has yet to twig this. A “winner” has to be found. The leading candidate is Catherine Zappone.

The most intriguing aspects of the new budget are (i) that it could be adopted at all and (ii) that the nominal EU constraints preventing a run-away growth in expenditure are not, in fact, those supposedly doing the job.

On (i), the move from the Westminster model of budget preparation is confirmed, even if the consideration of it is still not taking place where it should i.e. in the Dáil and the presentation remains, regrettably the same. The budget figures overall, however, when compared to the situation pertaining in the UK, are exceptionally positive, given the recent nature of the budgetary crisis that impacted the country.

On (ii), those not in possession of at least a degree, if not a PhD in economics, will find it impossible to follow the explanatory note on the link to EU rules. The saving grace is that they do not really need to do so as. While these rules may have some relevance for countries that do not have economies skewed by enormous dependence on FDI, they seem meaningless in Ireland’s case, a fact implicitly recognised by the MOF in setting a different debt target to that required under the SGP cf.


The other major lacuna is, of course, epitomised by this comment by the Minister for PER.

“As Minister for Public Expenditure and Reform, I have consistently reiterated the need to consider the totality of spending when examining budget priorities.”

This is, of course, exactly what no Irish government has ever done. If it is to happen, it cannot do so via the “sampling” approach of still another Public Expenditure Review. It can only happen by establishing legislatively binding expenditure ceilings and building the review/assessment process into the actual programmes, with a supervisory role for the Dáil.

I would quote what the MOF had to say on the “rainy day fund”; if I could find a link to his speech.The message, however, was clear; Ireland remains at the mercy of the bond markets if it does not cut its level of debt; and be seen to be committed to doing so.This is the one lesson that appears to have been learned and to have a level of public acceptance. Or maybe not.

Surprised no one mentioned yet the appointment of our own Seamus Coffey to review Ireland’s corporation tax code.

The government, and all supporting parties are clearly still in debt reduction mode; debt reduction above all else, including a roof over the heads of the citizens.

The targeting of debt reduction to a ratio of 45% of GDP, when 10 year money is virtually free, has to be one of the most selfish ambitions ever promulgated by the aging administrators of the state. The purpose is none other than to ensure that payment of their own pensions is copper-fastened, while a whole generation of young people remain without houses, without pensions, and still many without jobs.
This is certainly now a ‘country for old men’ and ‘old women’, intent on tying a lock and chain around the state money box, to be prised open for their health and pension needs first and foremost, and for little else.

As for expenditure ceilings, they deserve every bit of ridicule that can be heaped on them; because to argue that a country tax rates are sovereign, while agreeing to rigid expenditure ceilings, regardless of how much tax is collected is the kind of logic that would Homer Simpson proud.

JR debt reduction is ok considering.
They should force the pension funds to invest in growth by taking away their tax breaks if they don’t. Pension funds are insane at the moment , investing in US Junk bonds so bringing them back to reality is no harm.

The documents associated with the budget are becoming a flood, something that is not very conducive to objective assessment of what is missing and what needs to be done in the matter of financial management.

Two links, somewhat dated, to underline the vacuum behind the current sea of documentation.



The Fianna Fail/Fine Gael/UI Coalition … oops … Special Purpose Vehicle … appears to be working well ….. for FF.

That said … methinks the two cozy Munster Micks should follow their hearts and legalise this partnership.

Major crisis … yet no real change.

The reaction on this site to an underwhelming budget has been rather..underwhelming. But it does perhaps show that the cautious moderators could relax the moderation of comments without risking a ‘food fight’. Instead we might get some more life into the exchanges.

It looks like we are back to risk on with sterling getting hammered and the GOP in meltdown so there should be more activity on the site

@ Ninap

Google “Irish+reform” and the Irish Reform Act 1832 heads the results listing.

Thirty years ago this month, the late UCD constitutional law professor and Fine Gael TD, John M. Kelly, wrote in ‘The Sunday Tribune’ :

Ireland’s political and official rulers have largely behaved like a crew of maintenance engineers, just keeping a lot of old British structures and plant ticking over… The challenge is to evolve structures — within which the people can be drawn to individual and community responsibility for their own development.

Brexit was well flagged but like many things in Ireland it requires a crisis for change to happen if at all.

Even putting in place a modern public accounting system is a challenge.

The underwhelming response here is perfectly understandable. Pat Leahy, in the IT, laments that “[t]his budget is politically reactive, seeking to reflect the public mood and meet the demands of interest groups rather than proactively set out an economic and political direction for the coming years.”. That’s what most budgets involve outside of crisis periods. The surprise is that he – and some other commentators – seem to be surprised. It is almost always an exercise in tweaking the fiscal parameters to secure some measure of public consent for the Great Redistribution required to ameliorate the impact of pervasive and endemic rent-seeking and inefficiency in the sheltered private, public and semi-state sectors. Those with their snouts in the trough won’t make a sound; they’ll have made sure their interests were being attended to long before the announcement of the budget.

The so-called New Politics is not making any real difference; it just needs a bit more communication and choreography – with quite a lot more of this in the public domain (instead of being thrashed out in internal parliamentary party meetings). Instead of choosing between majority FF or FG dominated governments, it appears that a large number of votes have, either deliberately or unwittingly, opted for the choice of minority FF or FG governments. And there’ll always be a bit of yelping from the deluded left and pseudo-left to make sure the largesse of the Great Redistribution is maintained.

The only thing that is, perhaps, suprising here is that so many commenters feel they have to hide behind pseudonyms. Apart from the licence it provides for anonymous ad hominem attacks, there seems to be a perception that expressing views openly will attract extreme sanctions. It’s a sad little country if that’s the case.

Paul if you go to other social networks such as LI you will look long and hard for a dissenting opinion from someone with a career who is there under their own name. The economic system is going to hell in a handcart but you won’t find any directors or managing directors questioning the Groupthink . This is why systems collapse.

Noonan issued an update on tax strategy, which claims that Ireland has been in the vanguard of international tax reform:

Ireland remains a leading supporter of international efforts to increase transparency in the area of corporation tax…Ireland has strongly supported this proposal (automatic exchange of tax rulings) which is consistent with the approach currently taken in our national tax legislation…Ireland continues to encourage other developed countries to follow our example and carry out a spillover analysis into the impact of their tax system on the economies of developing countries. Ireland is a leader in this area of research: only one other country has previously carried out a similar spillover analysis project…Ireland is also an active participant in the EU Platform for Good Tax Governance.

As recently as 2014, Noonan argued that including profits transferred to non-resident Irish firms in determining the effective tax rate was a “flawed premise” even though mandatory data provided by US companies to the Bureau of Economic Analysis on “Irish affiliates” included those profits.

The pdf garbled report is here:


A report on tax expenditures including the R&D tax credit was also published :


The cost of the 25% R&D tax credit reached €553m in 2014, with outstanding (unused) credits of €592m in addition to this. The report says:

Our analysis indicates the tax credit achieves reasonable additionality. We estimate that of the R&D conducted by firms since 2009, 60% is additional R&D i.e. the tax credit incentivises firms to perform R&D that would not have occurred in the absence of the tax credit policy.

Analysis of the firm characteristics of the R&D tax credit show that it is mainly older, larger and non-Irish firms who derive financial benefit from the scheme.

There is no reference to the poor patenting record despite the rise in spending and the new patent box scheme where a CT rate of 6.25% applies.

As Ninap mentioned, Seamus Coffey has been commissioned to produce a report on the CT code.

Given the uncertainty about the evolving international tax rules including the UK’s CT response to Brexit and possible reform in the US, I would think that an international tax expert could provide a more comprehensive view than a local one.

There are also issues on whether Ireland should facilitate brass plate operations, which beyond professional firms provide no economic gain but have a reputational risk.

James Stewart of Trinity College was among a small number of people including myself 😳 who were not surprised that the cosy consensus would be upended.

One problem with the Budget as a set piece of theatre is that it gives a misleading impression of what is actually happening in terms of spending and taxation, particularly the former, while also illustrating why the existing Euro rules on fiscal policy are both too complicated and inconsistent.
There was much talk about the €1.2bn or was it €1.3bn fiscal space available to the Minister, even by the man himself. but that was not the case. The Budget documentation shows that expenditure under the Benchmark rules could rise by 1.2% in real terms or by 2.4% in nominal terms, the latter equivalent to an increase of €1.6bn. In fact expenditure rose by €1.9bn, so breaching the limit, because the pre-budget figures already included higher spending from pay increases stemming from the Landsdowne road agreement and from demographic pressures on health and education. Yet the projected fall in the structural deficit , at 0.8%, is larger than the 0.6% required.

So we pass one and fail the other. Moreover, the reverse appears to be the case in 2016- the fall in the structural deficit is now projected at only 0.3% but the Government underspent relative to the permitted benchmark.

Does it matter?. Probably not, as it would appear from recent decisions regarding Spain , Portugal , and now Greece that the Eurogroup is keen to avoid kick starting another crisis. Witness, also, the bending of the stress test rules to facilitate Deutsche Bank.


“Comment moderation is off to simulate the ‘live blog’ thing I still can’t quite get right on this site.”

Didn’t notice you had suspended the moderation until mentioned in the comments. I don’t think you can switch off, for the occasional post, the stifling effect that pre-moderation, done by people who don’t have the time to clear comments promptly, has had. It took quite a while, and a very interesting economic backdrop, for this blog to become a popular resource with high quality discussion that you could easily pick out from the occasional nonsense. If you checked the discussions, you were probably going to learn something – so lots of people did so.

Philip welcomed comments in the “About” section, expressing the view that they made the subject more interesting and fun – that has been removed. The blog used to function along the lines described:

“A few operational notes:

First-time commentators are held in the ‘moderation’ queue – while this is cleared fairly rapidly, please be patient if there is a delay.
On occasion, a comment from even regular contributors gets sent to the SPAM queue. We also clear this quite rapidly but there is no need to re-post your comment if it is does not automatically appear: please be patient. Where comments are allowed on a post, please refrain from comments that digress too far from the goal of providing commentary, information, and intelligent discourse about the Irish economy. Also please refrain from ad hominem comments – these will be deleted.
All comments are sent via email to the original contributor of the post and they have the option of deleting it at that point.”

Other people in other media, more recently have expressed views like “Commenters are a waste of time”.

There is nothing in it for commenters here, especially anonymous ones. It is very easy to just not bother.

Agreed. But it is like the EZ. It will be reformed when there is no alternative. And the macro situation is fascinating. The old media are hopeless. And Tull must be somewhere following Sterling Godhelpus.

Is there any evidence to suggest that the new tax rebate for first time buyers will do anything but increase house prices?

As many have suggested above, the budget is totally underwhelming, and designed to ensure it passes in parliament, nothing more. But if it does contain a “vision” for economic policy, it’s that buying a mortgage and “getting on the property” ladder remains the core ambition of Irish public policy. Buy a house, get prices rising, and ensure the wealth effect leads to political support for the centre.

In this regard, what’s most remarkable about the budget is how similar it looks to the past. Déjà Vu.

I think this was very much a subsidy for developers dressed up in a politically palatable way. There had been other ideas floated such as cutting the rate of VAT on new houses to 9%, but they wouldn’t have gone down as well with the public.

I presume the idea is to push up the price of new builds relative to 2nd hand houses and thus encourage more construction. Alongside other stimulus measures, it may be helpful in that sense. Whether the benefits outweigh the costs, I’m not sure. Time will tell .

This comment by Sean Whelan is as comprehensive as one could imagine in terms of setting the debate in its proper, i.e. international, context.


Daniel McConnell in the Examiner had this very apt comment.

“It is a budget of many authors, but it is the love child of none of them. The surreal atmosphere that engulfed Leinster House yesterday typified the uncharted waters the political system finds itself in.”

In fact, the waters are not uncharted at all. The opening protective salvo by the FF finance spokesman in the Dail showed that the party is committed to a three budget strategy. The political question is whether or not the politicians directly involved (FG + Independents in government + FF) will have the wit to grasp that they are better off from an electoral point of view debating publicly in committee budgetary issues rather attempting to claim credit for this or that when the budget eventually emerges. In short, adopting the budgetary practice normal in most developed countries outside Westminster.

The other absolute priority must be to break the “layer cake” approach to fixing problems of which DPER (excluding the Public Expenditure Division of the DOF marooned there) is itself a prime example i.e. attempting to centralise review and oversight functions, adding another layer to management and hindering rather than helping, while at the same time FAILING to centralise the one essential function that can and should be centralised i.e. introducing a proper system of government accounting. Without it, the country will continue to fly blind (and into walls).

“The Living City Initiative I introduced to encourage urban renewal and promote the renovation of city centre properties for residential and commercial use has been reviewed as promised in the Programme for Partnership Government. In light of the review being published today, I am expanding the scope of the Initiative by including landlords and removing the cap on maximum floor size.” from Budget speech.

Anybody care to hazard a guess on how much in tax relief is currently being given away, and how much will be given now that this scheme is being extended to landlords.

The map for Dublin area is attached.

Effectively landlords can now get full tax relief on money spent for the refurbishment cost of properties. Not bad if you are a cash rich landlord.
I would also wonder how many properties will be taken out of use as landlords rush to avail of government largesse to them for refurbishing properties.

This might be the last budget before the Gotterdaemmerung of neoliberalism. No financial model seems up to capturing what is actually going on now. God only knows how tax revenues will be 3 years out. The markets may well strangle Brexit with the guts of the Tory party. And mark to market is the ideology. We are in for a wild ride.

It appears many people believe this budget was a missed opportunity for change:

“underwhelming budget”….”politically reactive”….”what’s most remarkable about the budget is how similar it looks to the past”….

Since unemployment continues to fall and the economy continues to grow strongly – why the desire for significant change?

Look at Brexit and Trump to see what you get when you want change. I’ll take slow and steady any day!

Breaking the indefensible link between the salaries of politicians and senior public servants, including in health and education, created by the Buckley Report (2000), would be one significant change. And which is most unlikely to happen, short of a Damascene conversion by both parties cf. Catherine Murphy on the topic.


Budget 2017 is still in need of a title. One might be The Fiver and the Five Thousand Budget. TDs are neither civil nor public servants, but elected representatives of the people to a body charged with both raising and correctly dispensing taxpayer’s money. The last mentioned appear to be waking up to this fact.

This budget was simply about maintaining Power within the FF/FG populist centre roight. Period.


Discussion on ‘Fiscal Space’ draws on the SGP which is economic nonsense. A Citizenry starved of Investment and subjected to financial system larceny on an unheard of scale followed by austerity which targetted the lower echelons deserves more. In particular, the SGP prevents a progressive investment strategy on a scale which the needs of the Citizenry demands.

@The Independent Alliance

Check out Lenin! Look in the mirror. Well intentioned but Useful Idiots to the FF/FG charade.

@DoD. Away with your Lenin. Bionn adharca fada ar na ba thar lear.
Go long on mortas cine. Davitt.

What is fascinating about now is the pensions angle. FG/Latin American junta types will always claim competence. Loads of them in Asset Management. https://www.youtube.com/watch?v=2_2lGkEU4Xs

Deflation is war. It is low nutrient territory. It is Venus Flytrap finance essentially.
It is a very long way from the golf course.
It forces Asset managers into positions of weakness such as US Junk bonds.

You have to isolate the Asset Managers from the pension funds.
And that is done by finding better ways to invest the peoples’ money.

Because deflation will destroy everything.
And we need people to get payrises.

The weakness of the 1% in the war is a) no public constituency b) all they can offer is maybe 1%
Hegemony is very interesting


I think we are deep into Bourdieu territory. The elites can’t hide the nonsense.
Eg the head of JPM Asset Management talking about capitalism without a cost of capital.

When the cleavages begin to develop between the elites and the people is when it becomes particularly interesting.
Trump vs the GOP is definitely worth the popcorn.
And back at the ranch no financial asset has an intrinsic value.

Finance have produced a paper on the sectoral exposure of the Irish economy to the UK


It concludes that “Overall, excluding the Pharmachem sector, the exposed sectors are mostly Irish owned, regionally based, have relatively low profit levels and have a greater share of small and medium- sized enterprises. In addition they have a relatively high multiplier and account for a relatively high share of employment in regions which have experienced a slower labour market recovery since the financial crisis period’

Finance have also revised down their Irish growth forecasts for 2016,2017 and 2018, although next year’s (3.5%) is based on a euro/sterling average of 0.85.

One curiosity about their forecast for this year (4.2%) and indeed the current consensus (around 4.5%) is that it is ignoring the base effect of last year’s GDP figure. Annual growth has averaged 4% in the first half of 2016 so 4.4% is required in H2 to get the annual 4.2% Finance estimate, and 5% to arrive at the consensus figure. Yet quarterly growth in q3 last year was 2.4% followed by 3.4% in q4, implying that quarterly growth of that magnitude is required just to maintain the 4% annual change, let alone an acceleration. To compound the problem, the consensus estimates for quarterly growth in q3 and q4 are around 0.8%, which if they materialise implies a very sharp slowdown in the annual growth figure in H2.

Of course the revisions to the 2015 figures show that anything is now possible for Irish GDP but on the face of it Finance’s forecast and the consensus do not make sense in the absence of massive revisions to last year’s quarterly data or a very strong finish to 2016.

On finding an extra €300 million down the back of the sofa cf.


Ireland, for some reason, is missing from the individual country assessments (Appendix III – pages 20 to 26).

Wrong model of sofa?

The best model, on the basis of outcomes, as I have argued before, is the Swedish one, as succinctly put in the paper.

“Nominal expenditure ceiling for CG and pension system set for a three-year period with the outer year added annually. Ceilings cannot be adjusted except for technical issues. A budgetary margin is used as a buffer. Interest expenditure is excluded from the ceiling.”

Instead of a buffer, the government has opted for the promise of one in the future, with Brexit coming straight down the tracks!

Annual budgets are the political equivalent of a National Holiday – lots of ‘parading’, hubris, consumption of beverages, noisy, flashy fireworks and lots and lots of smoke – mirrors being too expensive, and all. So what’s new about this latest? Nowt, except …. ??? Maybe it will come to me – as in a small add-on to my pension 😉

Of course the usual Oliver Twists were out in force with their respective Begging Bowls, beeeech’ng the relevant ministers – “Pleeze min’ster giv us sum mooer – taxpayers money!” Nowts changed? I believe it has, but not in the manner that is customary – nor expected. Global and EU economic rates-of-growth at 1.5%? That will not be sufficient to pay state salaries and pensions or welfare or whatever.

“Move along! Nothing to see here!”.

It’s a shame that his piece has been afflicted by the “Curse of the Sub-editor”:
but Dan O’Brien highlights the tenuous nature of the trade-offs that underpin the fiscal manoeuvring that is presented in this annual budget ritual. As has been noted, the entire process is entirely reactive in political terms. Having favoured the various influential special interests to which they are beholden for the rest of the year, governing politicians seek to minimise the number and scale of fiscal manipulations in the budget that are required to finalise any necessary further sweetening of these special interests. The task then is to make the impact of the rent-seeking of these special interests that is authorised by government and the other fiscal concessions they are awarded palatable to a majority of voters. This requires a careful application of whatever fiscal largesse might be available.

Relative to other members of the OECD Ireland devotes proportionately more of its fiscal resources to welfare transfers to reduce the excessive inequality of the distribution of market (pre-tax, pre-welfare) income and its marginal tax rates on incomes increase rapidly at relatively low levels of income. Once there is sufficient largesse available governments keep their fingers crossed that the tweaking they perform in the budget will secure sufficient popular consent – or, at the very least, contain and defuse any public anger. But it can be a damed close run thing.

Generally, once the rent-seeking that takes place subject to public authorisation isn’t too blatant or obvious, any public discontent may be minimised or deflected. But if it is, there is a risk that public disgust and anger could boil over. That’s what happened with the water charging proposals. And it explains the government’s panicked response and the subsequent massively over-egged, multi-inquiry, multi-institutional package. It wouldn’t take much for a similar public expression of disgust and anger to be provoked by the revelation of another bit of excessive and blatant rent-seeking.

The irony of the situation is that, while Dan O’Brien is absolutely correct in what he writes, Ireland, by comparison with other EU countries confronting similar unjustified spending pressures, is the least of the Commission’s problems. Indeed, the country remains its star pupil. Both politicians and electorate are behaving as if being permitted by an indulgent parent to spend all their pocket money, some of which had to be borrowed. This a clear confirmation of a lack of maturity at a national level which may be more fully exposed by Brexit. In the same way as the UK has been pulled up by the currency markets, it may fall to the bond markets to do the same for Ireland.

2017 promises to be an interesting year!


I heard a rumour that Ciaran Fitzgerald, Ginger McLoughlin, Paul O’Connell and Blind Biddy were starting a new political party …. new poetic expressions of mortas cine are urgently required!

I also heard that the FF/FG Finesse mentioned something on non-taxation of Vulture Funds …. something about ‘property’ however it might be ill defined these days …


It does seem that reaction to the budget has been muted.

A suggestion? It’s that anything worth saying has already been said….and both this and the previous government have paid no attention. And seem unlikely to pay any attention.

Bad, unimaginative, politically cynical and self-serving budgets have become the norm. Expectations have been lowered to the point where the latest budget is what we expect. The last crisis has been thoroughly wasted and unless there’s another one the prospect of political progress in Ireland seems unlikely (and who wants another crisis!?!) FF is back on top of the polls and we have FF and FG in government…with the slight variation that now they’re in government at the same time instead of alternating.. The only alternative to the continuation of politics as usual is the very bad alternative of SF. Time to give up hope, no?

Chairman May has just told the plebs there are no Brexit savings for the NHS which has a 22 bn deficit. The wheels are coming off the UK. Very bad news for Irish SME’s. This is much bigger than 2010/11 cos the CBs have nothing left to.protect asset values.

Paddy Irishman and Paddy Englishman go to a bar. Paddy Englishman asks “Can you buy me a pint?” Paddy Irishman replies “didn’t you hedge your risk?”

Very topical and balanced debate i.e. without the parties trying to shout each other down, on the Claire Byrne show.
Consensus that “we don’t have the money” but the discussion did not move to how we should go about getting it (other than lifting ourselves by our own bootstraps by raising taxation).

Just for clarity:

The grant (transfer) to first time house buyers is intended to allow developers to sell at higher prices. This will incentivise them to build.

It is another manifestation of the familiar line that “we need to get prices up another bit”.

There is a moral hazard type problem here, which might actually be counter-productive. They have established that Hoard-Wait-Lobby is a winning strategy.

Here is Colm McC:


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