Donohoe rebuilds his reputation for prudence

Ministers took time to realise Donohoe was serious about tightening expenditure

Minister for Finance Paschal Donohoe with Budget 2020 at Government Buildings. Photograph: Gareth Chaney/Collins

Minister for Finance Paschal Donohoe with Budget 2020 at Government Buildings. Photograph: Gareth Chaney/Collins

 

Budget 2020 has broken the assumption built up over recent years of continuous, generous increases in funding for Government departments; of across-the-board welfare rises and tax cuts.

Each of the four budgets before Tuesday included significant welfare rises and tax cuts, with increases of €5 in weekly welfare rates as demanded by Fianna Fáil’s Willie O’Dea met in all three confidence and supply budgets agreed between his party and Fine Gael.

Until yesterday, that is.

O’Dea again demanded the same €5 increase and while some of his colleagues in Fianna Fáil supported him in public, they privately came to believe it was time the Limerick TD was left disappointed.

O’Dea’s request typified the steady pattern of budgets in recent years. Relatively modest measures incrementally moved policy forward each year – and almost came to be taken as a given.

The fact that the prospect no increases this year – even against a backdrop of the potential economic shock of a no-deal Brexit – attracted attention in the weeks before the budget underlined just how much such measures were being taken for granted.

Insiders say the Government system got used to year-on-year increases. The Department of Health came to casually assume any spending overrun would be covered, mostly through higher than expected corporation tax receipts.

An overrun occurred again in 2019, but Minister for Finance Paschal Donohoe has repeatedly said the €315 million supplementary estimate is roughly half of what was required to plug the gap in health spending last year.

He has promised improvements will be made again next year, although others expect the health service will need a bailout once again.

According to sources, Ministers and their officials took time to realise that Donohoe was serious about tightening expenditure this year. Speaking privately over the past few weeks, Ministers confirmed that Donohoe was tougher this time out, and was squeezing harder than before.

Conscious too of the risks of the economy overheating if there is an orderly Brexit, the departments of finance and public expenditure were unlikely to pass up on the opportunity to restrain spending increases as best they could.

Crisis

A crisis – or a potential crisis – in the shape of a no-deal Brexit would not be wasted, particularly when Donohoe wanted to rebuild his reputation for prudence, which had been damaged by overspending on the national children’s hospital and national broadband plan.

For those inside Government, the recent budgetary patterns, if left unchecked, showed just how “quickly we could lose the run of ourselves again”.

And, despite Fine Gael’s public goading of Fianna Fáil as “reckless”, a solid understanding has built between the two parties over these past four budgets.

Government figures describe Fianna Fáil as “responsible” and believe a grand coalition is the most desirable outcome of the next election. Fianna Fáilers dismiss such talk, but readily compliment Donohoe as a straight operator.

Frustration, according to sources, only really crept in when some Independents engaged in public grandstanding in the days leading up to the budget.

Or, as one source characterised demands from Shane Ross, Finian McGrath, Kevin “Boxer” Moran and John Halligan: “The f**king Independent Alliance coming in on a Sunday and making a merry dance.”

Despite the relative modesty of the measures unveiled by Donohoe on Tuesday, a budget-day package of €3 billion is certainly not an austerity budget.

Yet it may serve as important corrective to what was becoming a well-established pattern.

The question that will remain unanswered until next year is whether Budget 2020 caused lasting disruption, or was only a pause before normal service resumed.

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