State to breach EU deadline for filing key budget update

Key budget filings which must be sent to Brussels this month are set to be delayed due to prolonged wrangling over the formation of the next government.

The likely breach of the legal deadline for the submission of a “stability programme update” to the European Commission comes amid a growing backlog in official business in the interregnum since the February election.

The document, known as “the SPU”, is an annual filing to the European authorities in which the government adopts a new economic forecast and sets out the opening fiscal position for the budget process.

The October budget is six months away but the State is required under EU law to submit the SPU “preferably by mid-April and not later than” April 30th.

Senior figures in the outgoing Fine Gael-Labour Government believe the cabinet cannot endorse a new SPU as it will fall to the next administration to execute the plan.

Economic growth

The document is politically sensitive as it sets out the first official forecast for economic growth in 2017, a figure which helps determine the scope for any tax cuts or spending increases next year.

One issue is Britain’s referendum on EU membership, which could bring a big economic shock.

Last year, the coalition published the SPU simultaneously with its spring economic statement, which set out broad fiscal parameters for Budget 2016 underpinned by projections in the SPU. The aim is to facilitate tougher EU scrutiny of the budget process under new oversight rules.

Brexit uncertainty

Writing in

The Irish Times

on Tuesday, however, acting Minister for Public Expenditure Brendan Howlin points to the likely “failure” to submit the SPU on time. The Minister suggests this would put uncertainty over “Brexit” referendum into context and says financial markets would take note that the deadline was breached.

A spokesman for the Department of Finance said officials were working on the SPU. He also cited a reply from acting Minister for Finance Michael Noonan to a parliamentary question from Fianna Fáil TD Michael McGrath.

“Ireland’s 2016 stability programme update must be submitted to the European Commission no later than the end of April. It is normally published at the same time,” Mr Noonan said.

“The stability programme update must, of course, be approved by the Government before it is submitted to the commission.”