Budget Day 2019: VAT for hospitality and cuts for USC

When Paschal Donohoe rises to his feet at 1pm today he will be delivering only his second Budget as Minister for Finance and Public Expenditure.

But so exhaustively has the content of his annual star-turn been rehearsed in the media over the past few weeks it will all seem as familiar as a Broadway show entering its third year.

At this stage, the whole media pack know the chorus off by heart:

Return to 13.5 per cent VAT for hospitality; €300 million for housing affordability; cuts in USC and income tax; 100,000 new health cards, so relax.

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There is always a surprise or too but it’s Paschal Donohoe, not Charlie McCreevy, so we are not expecting any dramatic major plot twists.

Donohoe himself keeps it all fairly tight. But given that it’s a relatively broad coalition – Fianna Fáil and the Independent Alliance are in the circle of trust – it’s proved impossible to keep it all under wraps.

Last night Donohoe tweeted: “Tomorrow’s #Budget19 will balance the books for the 1st time since 2007, better positioning Ireland for the yrs ahead. We will invest in schools, hospitals, homes, healthcare&transport & will make sure we’re Brexit-ready. Above all we’ll continue to manage your money responsibly.”

Thank you Paschal, but tell us something we didn’t already know.

We did manage to discover new details in the main lead this morning, as we disclosed a plan to extend free GP care to 100,000 more people.

Our colleagues Ronan McGreevy and Fiona Reddan have assembled all the evidence and produced a list of all the changes we might expect to see in today's Budget: What to expect.

Fiach Kelly has also looked at likely revenue-raising measures, including that increase in VAT for the hospitality sector.

There is also an outline of how we will cover the Budget throughout the day.

How it all adds up politically

As a political spectacle, Budget Day is probably the biggest set-piece of the year. As Donohoe delivers his speech, reporters and analysts are poring over the documents. They pay particular attention to the supplements, to see if there are any new favourable tax incentives to encourage foreign investment, or changes that look technical but are significant.

The money involved is significant. It’s a €3.4 billion package but €2.6 billion had already been committed for items such as pay restoration and long term investment. That left €800 nominally. But through a series of revenue-raising measures, principally VAT increases, Donohoe has given himself a spending space of approximately €1.5 million

The political maths of the Budget

The politics of it are always interesting, both before the event and afterwards. In the lead-up, there was a tug-of-war between the VAT restoration versus increases in the price of diesel and fuel. VAT was the loser, despite junior Coalition partners the Independent Alliance lobbying for the lower rate to be retained.

Fianna Fáil had demands for affordable housing, flagged since September (that’s a a €300 million package) and some Independent Alliance requests including the granny flat allowance have also made their way in.

Is it an election budget? There’s more spending than we anticipated and there will be cuts in income tax and the USC take. €1.5 billion is a fair amount but not enough to tip the balance in favour of an election in the near future. “Fianna Fáil looks like it is on board for another year,” said one experienced Government insider to me over the weekend.

Even with the main opposition party abstaining, the numbers will be tight. Fianna Fáil spokespeople Michael McGrath and Barry Cowen need to tread a careful line in their responses (of course they essentially support the Budget). Sinn Féin’s Pearse Doherty and others will have no such constraints.

The vote will be tight but it always is for this minority government. It will be interesting to see if Peter Fitzpatrick, in his new status as an Independent will vote with the Government, on the excise measures (the only Budget day votes). It would be hard to see him vote against the anticipated increases for tobacco.

Best Reads

The Irish Times has an interview with the President Michael D Higgins.

Another presidential candidate Gavin Duffy has called for the Government not to sell AIB which he says is the State's biggest cash cow.

Denis Staunton and Simon Carswell report that the language coming from the EU and the UK suggests no imminent breakthrough in Brexit negotiations.

Former DCU lecturer on communications Colum Kenny has an interesting and contrarian view on the forthcoming Blasphemy referendum, which will be held on the same day as the Presidential election.

Playbook

13.00: Budget 2019 Statements by Deputy Pascal Donohoe, Minister for Finance Public Expenditure (1 hour).

Statements by Fianna Fáil, Sinn Féin, the Labour Party, Solidarity-People Before Profit, Independents 4 Change, the Rural Independent Group, and the Social Democrats-Green.

21.30: Financial Resolutions

23.59: Dáil adjourns

Seanad

15.30: Motion regarding the Technological Universities Act 2018. Also motion regarding Merger Thresholds SI 388 of 2018. Also Motion regarding a Reasoned Opinion for a Regulation of the European Parliament and of the Council on establishing a framework for inoperability between EU information systems.

16.45: Statements on Budget 2019

Committee

No public committee meetings today.