In the next few weeks Taoiseach Enda Kenny needs to make the big decision on whether he will call an election before Christmas or leave it until the early spring. Getting that right could play a major part in whether he gets to make history and become the first Fine Gael taoiseach to return for a second term.
Recent polls here show that Fine Gael and the Labour Party are recovering in popularity, although they are still some way short of being in a position to get back into government, even with the support of some independents. But they now have a real chance of doing it, despite the pasting they have received on water charges and other issues, and that makes the upcoming Budget critically important for them.
The election has to be held before next April when the term of the government reaches its end, so the fast approaching budget on October 13 will be the last before the vote, whether the election is held before or after Christmas. Kenny has repeatedly said that he wants the government to run close to its full term, which would mean an election in the spring. But opinion in both government parties is divided on what the best timing is.
Many people in both Fine Gael and Labour feel that the longer the vote is put off the better, because that will give more time for the improving economy to make itself felt in people's pockets. The problem with this is that if some issue were to emerge in the spring which causes a nosedive in support for the government, there would be no time left for a recovery. It's the last minute banana skin danger.
Other figures in the government parties think there is already a sense out there that things are getting better and that the recovery in the economy is strongly underway, even if people don't feel it yet. Their belief is that voters will not want to put that at risk and will therefore stick with the government and vote them back in to finish the job.
One way or the other the budget for 2016, which will be presented to the Dail in less than three weeks, will be the government's last chance to make a big impression on voters. Already there are accusations from opposition parties that the government will try to buy its way back into power with a giveaway budget that the country cannot afford and that could put the recovery at risk.
In a speech last week to business leaders, Kenny said this was nonsense. There will be no spending spree, he said. The policy will be aimed at stability and steady growth.
There will be no return to the boom and bust behavior of the past. But there will be room in the budget for some reward for the public which has put up with the cutbacks and extra taxes of the austerity program over the past few years.
That program, imposed on us under the EU/IMF bailout regime, requires us to get the deficit down to below three percent this year. Thanks to the strong economic growth here recently and the resulting surge in tax revenue, we are well ahead of where we need to be to achieve this.
Which means there is enough elbow room to have a €1.5 billion package in the budget to ease austerity and still be well under the three percent deficit target at the end of the year. In fact the figures for last month show that we are now €1.9 billion ahead of target for the year.
Both the taoiseach and Minister for Finance Michael Noonan have said that the government will not go beyond a €1.5 billion adjustment. Even so, the advice from some economists and from some European Central Bank heavyweights is that instead of spending this money we should use all of it to get closer to eliminating the deficit altogether.
This is dismissed by the government, which says that people need to be encouraged and need some easing in the burden they have been forced to carry. They also say that with economic growth predicted to reach six percent here this year, the highest in Europe, the outlook is positive and tax revenue should remain strong. In other words, there is room for a modest pay back.
We will come back to whether this is a good idea or not in a moment. But the reality is we are in the run up to the election so the extra money is going to be given back to voters one way or another.
How might the €1.5 billion be used? The government has already made it clear that half will be used for extra spending and the other half will be used to ease taxes.
On the tax side, Noonan has already indicated that the budget will reduce the much-hated Universal Social Charge, an emergency extra income tax introduced a few years ago as the austerity regime began. That will cost a few hundred million a year.
There is also a promise to reduce the amount of extra tax that self-employed people pay in comparison with employees, a move which will cost another few hundred million. And there are indications that the government will reduce inheritance tax which hits some families hard in places like Dublin where property prices are soaring again. So even a few badly needed changes in taxation like this will quickly eat up the available funds.
On the spending side, the reality is just as limited. Close to half of what is available will be used to reverse most of the cuts in pay for state workers (police, teachers, nurses, etc.) since the bust. This has already been promised by the government which expects that it will translate directly into votes at the election.
But it will be deeply resented by workers in the private sector (the real economy), many of whom had similar pay cuts and have yet to get their money back up to what it was.
There will also be extra funding for health, where the spending this year is way over budget as usual. No one is suggesting this is not needed. Or some extra spending that the government is already committed to in other departments where state services are under severe pressure.
But the result overall is that most people, particularly in the private sector, will see little difference in their pockets, apart from a few goodies that the government has already indicated are on the way in the budget.
The two main ones are likely to be the restoration of the double payment at Christmas time for pensioners and a modest increase in the child benefit payment which goes to every family with children in the country regardless of income.
The paucity of the changes in the budget will more than likely be camouflaged by an announcement of a major program of investment in infrastructure worth around €5 billion to be carried out over the next five to ten years. This will be done using "off balance sheet funding" to avoid EU rules and could include things like a rail link from Dublin airport to the city center, an extension of the Dart and Luas light rail services in the city, a new runway at Dublin Airport, an extra lane on the overcrowded M50 beltway around Dublin, plus a lot of money for badly needed housing, as well as many other projects around the country.
Whether all this is believable – or even a good idea – depends very much on the prospects for the Irish economy because much of it is predicated on continuing high growth, producing strong tax revenue. As mentioned above, Ireland is now the fastest growing economy in Europe, and possibly in the western world. But that is heavily dependent on how the world economy does, because we are a very open economy reliant on exports.
Irish dairy farmers this year learned how suddenly things can go wrong as world demand for our milk powder and other dairy products collapsed. This was due to the embargo imposed by the Russians on imports from Europe, on cutbacks in imports into China, and weakness in other markets.
Having been encouraged to expand over the past year as the EU lifted milk production quotas, Irish farmers are now back where they started, producing far more but getting far less for it.
This is only one sector, of course, but it shows how quickly things can change in the global market. And as we know, there are many uncertainties ahead in many sectors and in many parts of the world. Without strong growth elsewhere, Ireland will not find the future as rosy as some Irish politicians in search of votes may be predicting in the next few weeks.
That won't stop both the government and the opposition parties here making all kinds of promises about extra spending in the future, of course, in spite of all their pious pronouncements about being responsible. There's an election to be won, after all, and it could happen sooner rather than later.