Government to defend Budget 2019 plans

The Government will justify an expected decision not to spend all the money available to it in the October budget by claiming alternatives to its approach will increase the deficit and risk economic growth.

The move from Minister for Finance Paschal Donohoe, expected to be outlined in the coming weeks, will be seen as an effort to challenge Fianna Fáil to detail how much money it feels can be spent in the final budget of the confidence and supply deal.

Mr Donohoe is expected to outline how different levels of public spending will affect the budget deficit, as well as potentially overheating the economy.

He is due to publish the Summer Economic Statement ahead of the Dáil recess in mid-July, which will lay out the amount of money available in the budget, as well as the “economic and fiscal consequences of different levels of expenditure and taxation”, according to his spokeswoman.

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It is expected that, as the year progresses, Mr Donohoe will choose not to spend all the money available, with one source saying it is then “up to others to show what they will do”.

Fianna Fáil figures believe the Government is trying to lay a political trap to accuse the main Opposition party of wanting to spend too much.

Fianna Fáil finance spokesman Michael McGrath said he agreed with the “overall principle” of the Government approach. He agreed “with the view that you don’t have to use up all of the fiscal space”. However, decisions on how much should be spent were a “judgment” for later in the year when complete budgetary figures were available.

Fianna Fáil, he said, would not be advocating anything that would “expose the country to unnecessary risk”.

Negotiations

Mr Donohoe recently restricted the scope for spending in October by €800 million more than had been expected by Fianna Fáil, whose acquiescence is needed to pass the budget.

It comes as Fianna Fáil repeated that it would not open negotiations on a successor confidence and supply deal until after the October budget, after Taoiseach Leo Varadkar said he would like to see another deal in place before budget day.

Mr Varadkar this week said he would speak to Fianna Fáil leader Micheál Martin in due course on an extension to the deal, and his spokesman said “any further discussions should take place at the appropriate time”.

Fianna Fáil has consistently said, however, that the confidence and supply deal allows for a review after the third budget and not until then.

Mr Donohoe recently indicated to the Oireachtas budgetary oversight committee that €1.3 billion would be available on budget day for new tax cuts and spending increases. However, he says these figures are out of date and will be updated later in the year.

The Minister will outline what those in Government are casting as the economic consequences of spending more than what Mr Donohoe intends to, an amount he is calling the “budgetary stance”.

Changed course

The Government had previously toyed with the idea of not even outlining how much money would be available in the budget, but is understood to have changed course after recent forceful interventions from Mr McGrath in particular.

A spokesman for Mr Donohoe said: “The Summer Economic Statement will identify a fiscal space framework, as has been the case with previous years.

“Within this framework it will identify the economic and fiscal consequences of different levels of expenditure and taxation. This will shape the decision being made by Government on what the appropriate budgetary stance for the country is in 2019.”