Budget 2022: A bigger spending package would have been ‘too risky’, Donohoe says

Ramped-up spending to cover social welfare, housing, health, education and easing tax burden

Jack Horgan Jones of The Irish Times speaks to Finance Minister Paschal Donohoe TD and Michael McGrath TD, Minister for Public Expenditure and Reform, following their presentation of Budget 2022 to Dáil Éireann. Video: Bryan O’Brien

 

The Government has unveiled a giveaway €4.7 billion budget, increasing spending across a range of areas including social welfare, housing, health and education while also providing for an easing of the tax burden on workers.

An unexpectedly rapid recovery of the economy in recent months will cut public borrowing, but budget minsters Paschal Donohoe and Michael McGrath resisted pressures from within Government to expand their spending allocations and stuck to targets set down in the summer.

In a statement last night the Irish Fiscal Advisory Council (Ifac), the independent budgetary watchdog, said that by sticking to its spending plans despite increased revenues, “the Government has the economy on a more prudent path that will reduce borrowing and the debt ratio in the years ahead”. Ifac had previously raised concerns about the Government’s tax-and-spending plans.

The budget documents show that the public finances are now expected to recover more quickly, returning to near equilibrium by 2024, and with the debt ratio falling steadily.

Main points

But the package was rejected by Opposition parties as insufficient to deal with many pressing social issues. And last night Government TDs fretted that the gains for people from welfare increases and tax changes would be swallowed up by increases in the cost of living in the coming months.

Some Sinn Féin and Independent TDs were especially critical of the increase in the carbon tax, which will add to the cost of petrol, diesel, domestic fuel and home heating oil. The Government insisted that those vulnerable to price increases would be compensated by increases in the winter fuel allowance, which came into operation at midnight and other welfare changes.

The budget drew a mixed reaction from lobby groups. Business and employers group Ibec praised the package, but the Irish Congress of Trade Unions was critical of several aspects, with general secretary Patricia King citing concern for low-paid workers and criticising the Government for devoting €500 million to tax reductions.

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Sinn Féin finance spokesman Pearse Doherty savaged the budget in his Dáil contribution, saying that “never has so much been spent to achieve so little – no answers, no urgency and no leadership”.

Labour’s Ged Nash said it was “anaemic” and “directionless”. Instead of a “new deal for a fairer Ireland”, he said, the Government is “tinkering around the edges” with a “few euro thinly spread here and there”.

Social Democrats co-leader Róisín Shortall said it was a “a budget that is full of smoke and mirrors, which tinkers around the edges, making minor changes, but no substantive differences”.

“Where is the ambition? Where is the vision? Where are the bold ideas?” she asked.

What about the national debt?

Ministers defended the budget measures. At their press conference in Government Buildings last night Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath defended their decision to stick to the previously announced spending ceilings.

“To go beyond €4.7 billion would be too risky,” said Mr Donohoe.

“If we can close the deficit faster and stop adding to the national debt, that’s a good thing for our country,” said Mr McGrath. He stressed the need for spending discipline but noted investments in public services, including more gardaí, teachers and resources for the health service. “These are the changes that make a real difference to people’s lives,” he said.

Tánaiste Leo Varadkar said the introduction of a zoned land tax would lead to more land being available for housing.

“The message is very clear to anyone who has zoned land, who is hoarding it, whether it’s an individual land owner or company – we’re coming to tax you and you need to start developing that land,” he said.

“You need to apply for planning permission if you haven’t. If you have applied for planning permission you need to start building on it. And that’s the way you’ll avoid this tax because if you don’t do that you will face a tax.”

Last night the Government won the only budget vote of the night – to approve a price rise of 50 cent per pack of cigarettes – comfortably by 87 votes to 47.

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