Budget 2019: Donohoe pressed on Vat, carbon tax during post-budget radio grilling

Paschal Donohoe insists he focused on investment in domestic economy

Minister for Finance Paschal Donohoe  in RTÉ Radio for the Today with Seán O’Rourke show. Photograph: Collins

Minister for Finance Paschal Donohoe in RTÉ Radio for the Today with Seán O’Rourke show. Photograph: Collins

 

Minister for Finance Paschal Donohoe faced questions in the traditional post-Budget radio interview on Wednesday insisting he was increasing investment in the domestic economy and defending his decision to increase the tourism Vat rate. 

“I’m increasing investment in domestic economy to give more buffers against events such as Brexit,” Mr Donohoe said during his interview on RTÉ’s Today With Seán O’Rourke show.

He said the Government was “investing to generate resources for our future” and he was showing his “commitment to put things on a steadier footing”

However, he conceded the health service needed to really tackle accountability.

“I’m not satisfied, neither is Simon Harris, we can’t normalise this (health spending over run), we need to make sure next year is different,” he added.

The first members of the public to fire questions at the minister challenged him on the decision to reinstate the 13.5per cent Vat rate for the tourism and hospitality sector that will affect restaurants, cinemas, hairdressers, theatres and other businesses. The rate was reduced during the recession to boost the sector.

Mr Donohoe said he appreciated the change would be difficult for businesses but pointed out that “it was only meant to be a temporary measure”.

He said the sector had recovered, adding: “Margins in restaurant sector have increased by 50 per cent in last five years.

“If I can’t change rates at a time like this I lose ability to respond like this in the future.

He said he was trying to strike overall balance. Responding to questions from Cork restaurant owner Michael Ryan who asked if the minister looked outside Dublin and why the increase not staggered. Mr Donohoe said Vat is a national issue and the “law doesn’t allow me to do that”.

Aidan Bailey, a Kildare home-owner queried the 100 per cent rate of relief on rental income for landlords claiming it was “not fair”.

A Social Democratic budget?

Mr Donohoe said the cost is €8 million to €11 million and is a “tightly concentrated” measure. He said the reason for taking this move was that landlords were leaving the sector, causing rents to go up.

The Government was looking to treat private landlords in same way as other businesses to encourage them to stay in rental market. “We want to get to a point where companies will be coming here, institutional investors, to have greater diversity, to lead to greater continuity of rental supply,” he said.

He added that small landlords were equally important to sector and the Government wanted to allow some expenses to be allowed against a landlord’s tax bill.

A caller called Orla said she was on a low income of 32,000, and got €4 per month extra in the budget. “Where does that leave me?” she asked.

Mr Donohoe said “You are right, the cumulative effect of this single Budget yields a modest change in any one year, but what I am trying to do is, Budget by Budget to make a difference.

He said he had announced changes in prescription charges and had reduced USC. “To cut taxes any more costs a gigantic amount of money

“We will use funding to try to make a difference in other costs of living.

“We have made other changes.”

On Carbon tax a caller from Donegal queried the decision not to introduce a carbon tax. “The Brexit risk is a pivotal factor to the choice I made in relation to carbon tax, transit questions remain unresolved, I made other decisions in relation to investment in our future,” Mr Donohoe said.

Government talks

Earlier Fianna Fáil leader Micheál Martin said he “doesn’t do red lines” when it comes to negotiations with Fine Gael about the Confidence and Supply Agreement.

“If that was the case, we’d never have constructive engagement,” he told RTÉ’s Morning Ireland.

“We’ve acted in the best interests of the people. We committed the three Budgets and we honour our words.

“Fine Gael should take our bona fides on board here,” he added.

Taoiseach Leo Varadkar and Mr Martin have signalled they will begin talks on extending the confidence and supply agreement after the third and final budget under the arrangement was agreed and presented to the Dáil on Tuesday.

As the political focus moved on quickly from the budget, the two men spoke last night and have agreed that their officials will begin the process of reviewing the current agreement and examining the potential for a new deal.

Mr Martin said Fianna Fáil was committed to supporting the Government until the Finance Bill was passed on December 11th. Mr Varadkar said last night he expected the two parties would engage “without preconditions” but he put a much tighter timeframe on the talks – suggesting they could be concluded by early November.

Mr Martin said on Wednesday he was not setting preconditions for his talk with Mr Varadkar. There will have to be a detailed review of the agreement when the talks commence.

A review is needed “to understand why certain things happen.” Talks are not about the Taoiseach alone, he said. “Fine Gael don’t get to command what happens in Dáil Éireann.”

Mr Martin said that the fundamental problem with the housing crisis is the delivery of homes and he asked why local authorities cannot build social homes themselves and avoid bureaucratic log jams.

He also said that the health issue has to be reviewed and wants to meet with the HSE to determine where Sláintecare stands.