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The government will move the Budget announcement to October 14 this year, in a sharp break with tradition.

Why did they do it?

My first thoughts on the decision were to forestall any more bad news coming from Q4 this year. The Q3 figures are scary enough. The second thought was the move timed to aid a massive bailout of the construction sector, which is highly leveraged through loans which, if foreclosed upon, would tank some of the banks, and send the economy into a free fall.

How will the government achieve the bailout? Mostly I'd say through the use of the National Development Plan. It is pure Keynesian demand management, building public works when the economy slows down, financed by borrowing. Expect more road projects to be put forward.

This is not a good thing at all.

Though I'm loathe to comment on the housing market, as my colleagues have that covered and covered again, my ten cents would be that house prices need to fall further, but first time buyers need a helping hand to stop the total collapse of the housing market and a drop in overall welfare. I've written about how to slow this down before.

What does it mean for the budget?

What is most likely going to happen is a freeze on stamp duty, which isn't making the government any money anyway these days as no one is buying, and new house starts are down 70%, apparently. The freeze in duty, followed by an increase in public projects, only helps sellers of houses, not the buyers, the people on the lower rungs of the social ladder we want to be helping. By calling for more capital projects, the government will achieve some of its goals in development, at the expense of shoring up other crumbling public services like health and education. So it is a double whammy---money goes to those who don't need the most, and gets taken away from those who have a genuine need.

The next prediction I would make is a sharp increase in children's allowance, financed by borrowing. The children's allowance represents a basic income supplement for every family in the nation, so to keep children's allowance above the rate of inflation will be a crowd pleaser.

Next, the government has to do something about VAT. VAT revenues were significantly down in the last quarter, which means people weren't buying. It's a bad sign. The government should freeze VAT on basic goods, and increase it on the usual staples of drink and cigarettes, all in the name of public health, of course. This would stimulate consumption and help poorer people's budgets. If they put up the price of petrol, I predict gunfire in the Dail. It's not going to happen.

Expect a large-ish spending shortfall to be paid for with borrowings from abroad, so the public sector borrowing requirement will go up quite a lot. Ancillary projects, such as the nursing home redevelopment scheme already on hold, which are not tied to capital development will be shelved until 2009/10.

Finally, expect some odd projects here and there regarding taxation schemes and other income tax incentives. The government can't lower taxes in this climate---they might go up at the 41% end, but it's unlikely---but it can mess around at the edges to squeeze a few more euros into the coffers.

Not good news at all.

(I'll come back to this post on October 15, and see how I scored.)