Budget Day is fast approaching, but this time against the backdrop of war in Europe. Neil Hughes gives his take on what the Minister for Finance should prioritise for 2023
The uncertainty the Russia–Ukraine war has brought about in terms of global inflation will undoubtedly add to the already difficult job facing the Minister for Finance in the lead-up to Budget 2023. But, the war is not the only issue.
The fallout from both Brexit and the pandemic has been hugely challenging for Ireland, our government and businesses — in particular, for SMEs and micro-enterprises. The government had to quickly bring in radical measures, such as subsidies, to deal specifically with the economic shock of COVID-19.
Despite these measures, some companies needed additional help to prevent them going out of business. In December 2021, the Small Company Administrative Rescue Process (SCARP) commenced in Ireland and is already helping small companies that scraped through COVID-19 to pull through the recovery phase.
Those companies that emerge successfully from SCARP will hopefully continue to provide employment and tax revenues in years to come. This shows how a process like this can protect businesses, jobs, and the economy.
Now, however, Minister Donohoe faces the challenge of balancing the competing demands and priorities of government departments in Budget 2023. The housing crisis, inflation and energy independence are top of the agenda and, in a time of war in Europe, it is becoming increasingly apparent that incremental measures will not be sufficient.
The pandemic has proven that emergencies require radical responses. Nudging tax bands or rates, small percentage increases in social welfare payments, or tinkering with subsidies, will appear lacklustre compared to the cost crisis unfolding in some households and businesses.
Now is the time for far-reaching initiatives that can influence and change the behaviours of people who are vital to solving the country’s problems.
This might involve radical measures that incentivise the development of housing schemes and speed up planning processes, and the introduction of headline-grabbing incentives to encourage both households and corporates to invest in renewable energies.
Along with Scotland and Denmark, Ireland has some of the best renewable opportunities in Europe. In this upcoming Budget, the government must create a platform for those opportunities to be quickly exploited.
Finally, those most vulnerable in terms of energy and commodity prices must be comprehensively protected as we face the prospect of energy rationing akin to World War II, when gas company-employed inspectors nicknamed “Glimmermen” went door-to-door in Ireland, seeking to catch anyone evading gas rationing.
It is extraordinary that, in 2022, the Minister for Finance must frame a budget that features the possibility of rationing energy in Ireland once again – but such is the scale of the task facing policymakers who must address the needs of an increasingly alarmed electorate.
The best course to follow is clear. To borrow a phrase from the early 1990s: Minister Donohoe needs to be radical – or redundant.
Neil Hughes is Managing Partner at Baker Tilly and author of A Practical Guide to Examinership