Donohoe preaches financial prudence

While donning the cape of prudence, Paschal Donohoe yesterday said EUR3.4 billion will be spent in the October budget, even if EUR2.6 billion has already been allocated to measures such as public sector pay.

Such is the manner in which the Minister for Finance is attempting to shape his budget - the last of the confidence and supply deal - he risks doing himself political damage if he abandons his cautious mantra as budget day approaches.

Donohoe is clearly aware of this, and the political calculation behind yesterday’s document was to blame anyone - Fianna Fail or his Government colleagues - who push him to be more profligate for increasing the deficit.

Fianna Fail has long thought Donohoe was trying to lay a political trap ahead of what is likely to be a pre-election budget, by squeezing the parameters to such an extent that it would be forced to ask for more spending.

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However, since the first stirrings of this strategy emerged earlier this year, Fianna Fail has decided to go along - in public at any rate - with what Donohoe says.

That continued yesterday, with Michael McGrath and Barry Cowen, the party's finance and public spending spokesmen, broadly agreeing with Donohoe's approach, even though they said the Minister missed some of his fiscal targets.

Some in Fine Gael believe the pugnacious Cowen has been sent in by Micheal Martin to blow up the whole budgetary process, reinforcing a belief that prudence is the best policy.

But, privately, some senior Fianna Fail figures say Donohoe has no option but to stop borrowing and aim for a surplus. In an analysis piece, Cliff Taylor agrees.

Recent statements from Fianna Fail - from weekend interviews with Micheal Martin, and even yesterday’s statement from McGrath and Cowen - indicate the party is ready to play by Donohoe’s rules and will not fall into his trap.

Martin, McGrath and Cowen all spoke of Fianna Fail providing the Government with much needed stability by agreeing the confidence and supply deal in the first place. On one level, it is clearly an attempt to blunt accusations, if the deal is not renewed, that the party caused instability.

But for that argument to hold, the next budget will have to be passed. Fianna Fail, it seems, has made its choice on that front, no matter what the negotiations between here and October bring.