It's a tale of two cities, London and Dublin, as both capitals introduced government budgets with widely different results.
While not exactly the best of times, Irish citizens have at least been promised some relief from growing economic pressures. In the U.K., on the other hand, it certainly was the worst of times with financial markets tanking in the wake of their new budget and interest rates soaring.
One of the few winners in these scenarios are U.S. citizens and businesses, with the cost of travelling to or doing business in Europe dropping as the dollar strengthens against the pound and the euro.
Mind you, the Irish government has many reasons to be thankful for American business – €10 billion, to be exact, as that is the amount of euros that corporation tax brought into our coffers and was used to pay for the budget. This amount was mainly from U.S. companies such as Microsoft, Apple, Google and Pfizer.
How it is spent, though, is down to the Irish. And boy did they spend in what was the greatest giveaway budget ever in the history of the state when it was unveiled last week.
In Dublin, the phrase coined by the Clinton campaign in 1992 – “It's the economy stupid” – might have been on the Irish government’s mind as they announced the budget for the coming year. That mantra referred to the need to focus voters’ attention on economic matters at a time when recession and inflation were rife, and now 30 years later financial uncertainty is once again hitting the headlines.
The jury is out as to whether they took note of Bill Clinton’s advice and set out a plan to protect and grow Ireland’s economy, or if they instead followed the words of Britain’s most famous lottery winner Viv Nicholson whose refrain was “spend, spend, spend!”
The unprecedented multi-billion Irish budget package was put in place to help households and businesses tackle the soaring cost of living. The main concern is the possibility of a cold winter placing an undue burden on the poorest.
Opposition parties, though, found it difficult initially to find a focus for attack, so much so that the intended Dáil debate was prematurely brought to an end as they struggled to criticise the measures which included a cut to childcare costs, rises in welfare payments, supports for renters and energy credits for households.
By week’s end, the main bone of contention was a tax on cement which, contrary to stated policy, will have the effect of pushing up the price of new house builds.
The support was front-loaded, with significant help for people coming this side of Christmas. Disappointingly for the parties in power, an immediate opinion poll showed no increase in support for them.
They have countered by saying that political benefits will accrue once hard-pressed consumers receive cash in their pockets. In that case, the real test will be in the new year when in another well-known political truism, “eaten bread will be soon forgotten.”
In normal times such largesse would be considered a prelude to an election, but with a change of taoiseach due in December, a run to the polls is considered unlikely. Unless, of course, there are hidden banana skins.
In London, by contrast, there were banana skins aplenty, scattered by both the new Prime Minister Liz Truss and her chancellor as this dynamic duo put together their first budget. It really couldn’t have gone down worse.
The pound collapsed, Britain’s housing market was rocked as lenders withdrew, interest rates rocketed and confidence in His Majesty’s government collapsed. A plan to borrow billions to fund a tax cut was derided by all and sundry.
Perhaps they should have taken Charles Dickens’ advice: “Annual income 20 pounds, annual expenditure 19 19 and six, result happiness. Annual income 20 pounds, annual expenditure 20 pounds ought and six, result misery.”
The British were not helped by weekend reports that the chancellor, on the same day as London’s financial district the City figuratively burned, was quaffing champagne with financial buddies clearly indicating that he, at least, was on the side of the monied classes.
Politically the Conservative Party are now 33 points behind Labour in the opinion polls, a position from which no government has ever recovered.
Caught in the glare of national and international political and financial scrutiny, Truss’ defence was that it was everyone else who was wrong. A line that didn’t last long as she made a humiliating reversal of her tax plans on Monday of this week.
While there is a certain Schadenfreude at the auld enemy’s mistakes, the truth is that they can have a serious effect on our economy. A falling pound makes Ireland’s exports less competitive, and the U.K. is still our biggest trading partner. The pound’s rebound by week’s end against both the dollar and the euro was a welcome development.
However, the lack of competence by the British government and loss of confidence in its leaders gives the U.K. less bandwidth to fight economic battles on other fronts. In that respect, the U.K. would surely benefit from mending relations with the EU.
There is no doubt the temperature has been dialled down over the Northern Ireland Brexit Protocol, with face-to-face meetings and inter-governmental correspondence replacing megaphone diplomacy.
A straw in the wind was that at this week’s Tory Party annual conference, a Northern Ireland minister in the London government apologized over his previous hardline stand on Brexit, saying that “relations with Ireland are not where they should be and we all need to work extremely hard to improve that.”
How this is going down with the intransigent Democratic Unionist Party (DUP) is hard to know, as any potential solution to be successful must encourage Northern Ireland’s DUP back into the governing Executive.
We are in for an uncertain few months, with politics, economics and the weather about to shape our immediate future.
Perhaps the best place to be at present is on the opposite side of the Atlantic Ocean looking on, especially if planning a trip to Europe. For U.S. travellers, heading to Ireland, the current strength of the dollar is a blessing.
Compared to this time last year tourists can get 20 per cent extra euros to the dollar, a significant incentive to travel. Early indications are that bookings from North America for the 2023 holiday season have shown significant increases on previous years.
It’s not all rosy in the garden and there are still concerns about excessive pricing in the tourism sectors, especially among restaurateurs and hoteliers. However, given that the U.S. is the largest tourism market by revenue for Ireland, it may just be the case that at the end of a turbulent week, with economic storm clouds on the horizon, there is a silver lining for one segment of the economy at least.
*This column first appeared in the October 5 edition of the weekly Irish Voice newspaper, sister publication to IrishCentral. Michael O'Dowd is brothers with Niall O'Dowd, founder of the Irish Voice and IrishCentral.