Capital expenditure to be clear focus of budget, says Donohoe

Minister outlines Republic’s Brexit concerns in talks with German counterpart Schäuble

The Minister for Finance Paschal Donohoe has said capital expenditure – on housing, transport, education and health – is emerging as the clear focus of Budget 2018.

After Berlin talks with his German counterpart, Wolfgang Schäuble, Mr Donohoe welcomed British proposals on post-Brexit customs arrangements but said Ireland would hold out for "a trading position as close to what we have now".

Mr Donohoe said that, studying departmental budget submissions in recent weeks, a common thread was big-ticket spending requests.

“The focus on capital expenditure is high now,” he said. “It is a point of difference in where I have been in other budget negotiations where the focus was on current spending.”

To prioritise capital spending projects, his department will publish two studies in early September.

“We will publish an assessment of the current level of capital investment within the economy overall,” he said. “Then we are going to publish an assessment of the demand on that level of capital investment. I will then use that as the basis for discussions we will have within Government.”

Reasons for the growing focus on capital spending, he said, included the prospect of full employment and Brexit concerns that did not exist two years ago.

Trade disruption

In his talks on Brexit with Dr Schäuble, Mr Donohoe stressed the Republic’s concerns over possible trade disruption, particularly for the agricultural sector, and explained the deep integration of supply chains on the island of Ireland and with Britain.

“I think it would be fair to say, he definitely has an understanding of the issues that Ireland faces,” he said. “He asked me lots of questions about supply chains and understands the consequences of any kind of Border for our peace process.”

Mr Donohoe refused to be drawn on Tuesday’s British customs proposals, saying the Government would issue an opinion after studying London’s Brexit paper to be released on Wednesday.

“We are now getting a better understanding of the thinking of the British government in matters – and that is to be welcomed,” he said.

In talks with Dr Schäuble, Mr Donohoe made clear ongoing Irish support for European integration. But, given Franco-German noises on a euro zone finance minister, he said Dublin’s priority was first to complete banking union and other projects first.

“I made clear I think we have to have the sequencing of all these things right,” he said.

After more than an hour of talks with Dr Schäuble, Mr Donohoe described his German counterpart as an "incredibly sensible and direct politician whose guiding principle is the development of Europe and the development of a sustainable and robust Germany within it".

As budget talks loom, Mr Donohoe said he was watching the ongoing Dieselgate scandal closely, given tax losses because of emissions manipulation.

“It is clear that the car-testing methods for dealing with this issue needs to be strengthened in light of what we now know,” he said. “I have asked my officials to provide an assessment to me of the tax code in light of our country’s need to respond back to our climate change obligations.”