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There may be trouble ahead: A look back to the Budget of a decade ago

The Celtic Tiger was about to stop roaring.

90098642_90098642 Minister for Finance Brian Cowen in December 2007. Source: LeonFarrell/RollingNews.ie

OVER THE PAST number of years, our budget look back to the Ireland of ten years ago has been a timewarp back to the Celtic Tiger.

‘Giveaway budgets’ and allegations that governments were trying to ‘buy votes’ were the norm.

This year’s look back is somewhat different though and it’s fair to say there were storm clouds on the horizon. It wasn’t full panic stations yet, that came the following year, but there was certainly trouble brewing.

Budget 2008 was Finance Minister Brian Cowen’s final budget and came about six month before Taoiseach Bertie Ahern stepped down.

Timely, you might say.

BUDGET 2008

90098726_90098726 Brian Cowen with his wife and daughters on the day of his fourth budget. Source: Leon Farrell/RollingNews.ie

In his opening statement, Cowen sounded some gentle alarm bells and made it clear that this was the first budget he’s presented where the garden was not so rosy.

“Today, I present my fourth Budget and this government’s first one against a challenging economic backdrop,” he began, before saying they’ve managed to keep the economy growing “for much longer than expected”.

Cowen went to detail problems both domestic and international that, looking back in hindsight, were far more serious than was grasped at the time.

“The global economy is beset by uncertainties, financial markets are highly volatile and the construction sector domestically is experiencing a slowdown,” Cowen said.

However, we must not lose sight of the fact that the fundamentals of the economy are still good – a point often lost by some.

Even though there was clearly economic trouble ahead, Ireland’s economy was still predicted to grow modestly and the Budget allocated for current expenditure of €51 billion (a €2.3 billion increase) and capital investment of €8.6 billion.

As in turned out, GDP ended up falling by 4.4% in 2008 amid the banking collapse.

But what was the extra money spent on? 

100, 000 jobs threatened Source: PA Archive/PA Images

The housing market was already showing signs of change in late 2007 with Cowen noting “a natural and welcome slowdown in property price”.

But the government was to make a significant change to the market with a reduction in stamp duty.

The major change was on properties of up to €1 million, the vast majority of properties. These properties would now pay no stamp duty on the first €125,000 and then 7% on the balance.

On the social welfare side there was a €12 increase on a whole range of payments including Jobseeker’s Benefit and the Widow’s Pension.

The State (Contributory) Pension increased by €14 to €223.30 and the State (Non-Contributory) Pension increased by to €212 per week.

In total, the social welfare spend grew by €957 million in Budget 2008.

90098794_90098794 Televisions in Arnotts showing the Budget 2008 speech. Source: Mark Stedman/RollingNews.ie

In his introduction, Cowen said that any government goals must not conflict with aims to “make Ireland more environmentally friendly”.

In the Budget that year, the government made one significant announcement in the area of environmental sustainability.

From the following year, road tax (VRT) would be linked to CO2 emissions and not engine size.

Cowen called it “the most fundamental reform of VRT since its inception” and “an opportunity to make choices to help the environment”.

Read: What’s forecast for 2018: More jobs, more spending and higher wages >

Read: Labour wants banks to pay double their levy but says tax cuts would be ‘foolish’ >

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About the author:

Rónán Duffy

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