New government may have extra €200m to spend

Prospect of more money becoming available may ease the task of forming a government

Minister for Finance Michael Noonan arriving for talks on government formation, at Trinity College Dublin, yesterday. The prospect of more money becoming available may ease the task of forming a government. Photograph: Aidan Crawley

Minister for Finance Michael Noonan arriving for talks on government formation, at Trinity College Dublin, yesterday. The prospect of more money becoming available may ease the task of forming a government. Photograph: Aidan Crawley

 

A new Department of Finance forecast finds the next government may have some €700 million at its disposal for tax and spending measures in 2017, which is about €200 million more than foreseen previously.

Exactly two months after the election, the prospect of more money becoming available may ease the task of forming a government.

The development comes as health service spending runs ahead of target, compromising potential for tax measures unless more money is set aside for the budget.

Three separate forces are working in the State’s favour, meaning key fiscal targets may be met even as additional money is spent. The 2016 budget assumed €500 million would be available next year, a figure deployed in most election manifestoes. According to an informed source, another €200 million is now in prospect. This flows from increased economic growth, tax returns and favourable rulings on EU fiscal guidelines.

At the same time, politicians and officials acknowledge that a decision by British voters to leave the EU in the June referendum could affect the State.

Under Europe’s reinforced budget surveillance, all member states are under legal obligation to send new forecasts from their finance ministries to Brussels by the end of this week.

However, senior figures in the outgoing Coalition believe it has no authority to endorse any document for execution in coming months.

Stability update

The document, known formally as the stability programme update, is all but ready for consideration by the Cabinet at its meeting today. In political circles, however, there was speculation that ministers would opt to delay approval and leave it for the next government to endorse.

Saying the preparation of the forecast was still in train yesterday, the Department declined comment on its conclusions. “It’s been worked on by the Department. Nobody has pulled the document,” said the Department’s spokesman. The stability programme update, which is largely a technical document, is an annual filing to the EU authorities in which the government adopts new forecasts and sets out the opening fiscal position for the budget process.

The filing comes six months after the October budget, providing a midway perspective on the performance of the economy and the public finances as preparations start for the following year’s budget.