Economy

FG spending pledges may prove to be wishful thinking

Political promises from Coalition continue to pile up despite little clarity on funding

Fine Gael leader Leo Varadkar made spending commitments at the party ardfheis last weekend. Photograph: Douglas O’Connor

Tue Jun 22 2021 - 05:43

Shortly after saying he hoped to deliver a tax package in the budget this October, Tánaiste Leo Varadkar was out at the Fine Gael Ardfheis at the weekend cranking up the spending commitments in areas like health and housing.

On health, he promised to maintain the extra spending during the pandemic, while on housing he said Fine Gael policy would plan to build 40,000 new homes a year. How exactly this might be achieved is not clear – and there appears to be a lot of pressure in Government to outline a new housing strategy in a document due next month.

But we really don't know the budget framework for any of this.This partly relates to the pandemic uncertainties, of course. The Department of Finance set out some forecasts in its stability programme update sent to Brussels in April, but said the pandemic made firmer predictions impossible. However, according to the Irish Fiscal Advisory Council (Ifac), the Government is not being clear about how it will meet likely spending pressures in a whole variety of areas in the years ahead – which go way beyond the pandemic. And now the promises are piling up.

Ifac has called on the Government to provide a target for reducing the debt ratio, a commitment to set any temporary receipts aside and limits on the level of normal spending increases.

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Asked about this in the Dáil recently by Labour finance spokesman Jed Nash, Minister for Finance Paschal Donohoe did not directly answer most of the Ifac points . But he did say he agreed with their recommendation of a " fiscal anchor", a commitment, probably related to debt or spending that would provide a framework for the decisions that lie ahead. And he said this would be set down in the Summer Economic Statement, due around the end of this month.

But will the Cabinet sign up to this, at a time of intense political pressure to continue to spend? If the Summer Economic Statement is just a repeat of the stability programme update, with no attempt to put a proper basis on costings for the years ahead and no fiscal framework for decisions, then it will be of little value.

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