The government seems to be making room in its timetable for a prospective November electoral process. A number of departmental chiefs have reported being prompted to bring forward their budget submissions ahead of schedule.
On the previous Monday, the National Economic Dialogue (NED) event was organised at Dublin Castle, nearly three weeks earlier than in years past. The precise timing for the forthcoming Summer Economic Statement (SES)—which will establish the financial boundaries for the budget—is as yet undecided; however, it might likely be moved up by a week also.
The intent could be to bring forward the budget to the end of September or the start of October, as opposed to its typical timing on the second Tuesday of October. A high-ranking source mentions that the optimal timeframe for elections—as widely preferred within the government—falls after the Budget.
However, there arise complications with such a schedule, considering that the government will need to approve the finance and welfare bills—which legally establish the budget amendments—which takes several weeks. All legislative actions in progress are effectively stopped once the Dáil adjourns for elections.
The government is contemplating a proposition to announce elections directly post-budget, leaving the finance and welfare bills for late November or early December approval under the purview of the subsequent government.
The government’s approach would ostensibly be persuading voters that if they wish for the implementation of measures divulged in the budget—including an extensive income tax package promised by Finance Minister Michael McGrath—then they should re-elect the current administration.
This high-risk strategy could create an election centring around the budget—an idea well-received by few, mainly due to the resources available from unexpected tax earnings. Nevertheless, a more plausible plan may be to expedite the budget and the bills as far as possible, creating room for a condensed three-week campaign and a November election.
Cabinet ministers and government TDs are reportedly eager to evade a January or February election (officially, the government has until next March to conduct the voting), which typically comes amidst post-Christmas expenses and increasing winter energy costs. Government sentiment (and subsequently, consumer sentiments) often drops at the beginning of the year.
The current administration wishes to shape the election along the lines of the economy, and having a recent and feasibly generous budget in voters’ memories could potentially assist in accomplishing this.
Statements from the Government have played down the accelerated storyline, indicating that the timing of recent happenings has been determined by the European and Local elections as well as the Taoiseach’s schedule. The general election was anticipated as a direct contest between the Coalition and Sinn Féin on the issue of housing.
However, recent fluctuations in Sinn Féin’s popularity in the polls, attributed by many to immigration matters, have caused some political turmoil. Predicting the electoral consequences of these ongoing shifts in political landscape proves challenging.
At one point, Sinn Féin commanded a lead of 16-18 points against Fine Gael and Fianna Fáil, a considerable advantage that has since disappeared. Prospects of a Sinn Féin-headed Government, once considered likely two years back, or a Sinn Féin-Fianna Fáil coalition Government, have seemingly reduced if we are to believe the polling data.
The Government may choose to wait out Sinn Féin’s declining popularity for a few more months, instead of taking the Rishi Sunak strategy of announcing a sudden election, particularly when the economy is on a course of disinflation and nearing full employment. The British Prime Minister is attempting to contain potential electoral repercussions from what many perceive as a stretch of Conservative mismanagement.
The election’s scheduling provides insight into the Government’s fiscal expectations. If the economy is set to expand with inflation expected to continue easing over the next six months, await becomes a favourable strategy for the Coalition. However, should the economic climate worsen, this game of patience could prove to be an ill-judged risk.
For the first time this year, inflation within the Eurozone increased in May, reaching 2.6 per cent. This unexpected increase may influence the forthcoming discussions of the European Central Bank (ECB) when deciding interest rates for the bloc. Prior to May, inflation had been steadily decreasing, moving towards the ECB’s 2% target with policymakers hinting at rate cuts in the future. The question remains whether the spike in May’s inflation is a singular incident or a sign of enduring price growth and a lengthier period of high interest rates.
At the moment, the expectation is that there will be a reduction of 57 basis points in the ECB rates in 2024, along with a forecast of a 25 basis point decrease in June and one more prior to the end of the coming year. Even though none of the Irish economic predictors foresee any worsening, the unexpected increase in inflation and a less optimistic perspective on interest rates show the high living expenses continue to persist.