If a week is a long time in politics, five years is an eternity.

In October 2019, Paschal Donohoe delivered his last budget as minister for both finance and public expenditure. It was framed against the hardening prospect of a hard Brexit and was immediately overshadowed by political convulsions in the UK. Budget 2020 deployed a small increment of the state’s largesse to attempt to solve some of the many problems of our society. It allocated large amounts of money, significant contingency funds for a hard Brexit, in the hope it would never be spent. “This is a budget without precedent,” Donohoe told the Dáil.

A year later, Brexit was overshadowed by a global pandemic. “We have faced numerous difficulties since independence, but never one like Covid,” Donohoe said. 

To deal with the crisis, Donohoe and Michael McGrath, then installed as minister for public expenditure, unveiled an unprecedented €17.75 billion budgetary package. 

“We had to go big in this budget,” McGrath told me in his post-budget interview. 

As it turned out, the main criticism from the opposition benches was that it did not go big enough. 

The following July, the Government was forecasting a deficit of just over €34.5 billion for 2021 and 2022 combined, a hefty number largely attributable to the weight of Covid-19 economic supports. 

By the time of October 2021’s budget, the number was revised to €21.5 billion for both years, a reduction of 40 per cent. Meanwhile, the government’s attention was pivoting to global tax reform and economic expansion.

By October 2022, it was able to unleash an €11 billion package without needing to borrow money, while also establishing a new National Reserve Fund. It was a budget designed to alleviate a cost-of-living crisis caused by war and inflation. But it was funded largely by a handful of technology and pharmaceutical multinationals. 

“This was the most complex budget I’ve done – but not the most demanding,” Donohoe told me at the time.

The €11 billion was surpassed a year later; Budget 2024’s €14 billion tax-and-spend package was dramatic in its size and scope. 

“I think it will take time for people to absorb all of the different measures that we set out in the budget,” McGrath, now finance minister, told me in its aftermath.

Brexit. Covid. War. Inflation. Tax reform. Heightened global instability. The list goes on.  

Each, in their own way, framed the journey to Budget 2025, delivered by Jack Chambers and Paschal Donohoe last week. And each of those budgets, in their own way, showed the power and muscle of the State.  

That power was evident again last week. With the Exchequer overflowing from multinational tax receipts, not to mention the proceeds of selling down the state’s position in AIB and the Apple tax funds, the government decided to spend – and spend big.

It was, by any definition, an election budget on steroids. 

But, by allocating significant money to future-facing funds and long-term infrastructure projects, it also allows the government room to argue some element of fiscal prudence.

I looked back on the previous budgets because they highlight the growing instability of politics, of economics, of global trade, and of health and climate. And these changes will only accelerate going forward. 

We have navigated so many unprecedented crises in recent years that both words are losing meaning.

Budget 2025 was largely financed by multinationals, yet the flow of future FDI, and the tax receipts that follow, is under greater pressure than ever before. 

It is why the Government is pivoting in tone to the indigenous economy, as evidenced by Peter Burke’s interview with me last week. 

“I felt it was time to change the dial in the department to give a push to family business,” Burke, the minister of enterprise, trade and employment, said. 

It is also why the government is allocating, albeit some in principle, vast sums to shore up Ireland’s infrastructure and energy needs, a deficit both domestic and international industries are increasingly concerned about. As I wrote last week, we live in an economic paradox; a “surging economy with massive infrastructure shortages, a rich country lacking the capacity to deploy the sums of money at its disposal”.

Underpinning all of this is a looming election. Whether it happens next month or next year, an election is imminent. Brendan Murphy, a tax partner with Baker Tilly Ireland, told The Currency that it was, pure and simple, an election budget. 

And, as you tease through the one-off spending, the double-double bonus payments, and the lump sums, it is hard to disagree. With an election coming, the coalition was happy to spend some of the money at its disposal.

The Fiscal Advisory Council is certainly displeased, arguing that the government is repeating past mistakes (pumping billions into an economy that is at full employment) and stoking inflation.

“Ireland needs a more serious vision that delivers on the economy’s needs without repeating the boom-to-bust pattern of its past,” the council warned.

Chambers, however, brushed aside the critique when I put it to him on Friday. “We absolutely set out a clear, long-term strategic approach for the future of our country in a number of areas,” he told me, referencing the commitment to use the AIB money, followed potentially by the Apple loot, on strategic infrastructure.

Plus, he argued it was government policy to deliver a surplus. 

“If you look at the trajectory to the medium term, the expectation is there’ll be significant surpluses, and we’re fully supporting the two funds [the Future Ireland Fund and the Climate and Nature Fund] that we’ve established. So that’s very different to the growth in public expenditure that we had in the noughties, for example,” he says.

Likewise, he practically bristled when I asked about the government spending on one-off cost-of-living measures, arguing that it was actually down on last year. 

“We stuck within the parameters of the summer economic statement, from a tax and expenditure perspective,” he countered when I asked if Budget 2025 was framed around the election cycle as opposed to the fiscal cycle. 

It is worth returning to Donohoe’s October 2019 budget I referenced at the start of this piece. It was, by any standards, a prudent budget, and its cautiousness would later prove invaluable in helping the State navigate the pandemic. But it was blamed by many within his own party for hurting Fine Gael at the polls in the election that followed. 

Given the scale of Budget 2025, this criticism is unlikely to be repeated when an election is triggered.  

Donohoe and Chambers can argue otherwise, but it is impossible to separate this budget from a forthcoming election.

*****

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