Donohoe seeks to keep a lid on expenditure ahead of tight budget

Minister for Finance has €800m for new spending and tax cuts

The publication of expenditure reports gives Minister for Finance Paschal Donohoe ammunition when he sits down to listen to Ministers demanding more money for their departments. Photograph: Nick Bradshaw/The Irish Times

The publication of expenditure reports gives Minister for Finance Paschal Donohoe ammunition when he sits down to listen to Ministers demanding more money for their departments. Photograph: Nick Bradshaw/The Irish Times

 

With strong economic growth and a general election in the mid-distance fuelling expectations around the Cabinet table, as well as among interest groups and the public generally, Minister for Finance Paschal Donohoe faces a more trying budget season than usual.

At yesterday’s launch of the Government’s mid-year expenditure report, Donohoe laid out the numbers pretty clearly. His budget package will be €3.4 billion, returning a deficit of 0.1 per cent of GDP for next year – an almost balanced budget. Of that €3.4 billion, some €2.6 billion is already allocated, through capital spending plans, carryover costs from measures in last year’s budget, public sector pay increases (€400 million) already promised and the cost of demographic pressures (more children, more older people).

That leaves him €800 million for new spending and tax cuts. Anything further will have to be paid for on budget day through new taxes.

That wouldn’t be a surprise – Donohoe did it last year with a hike in stamp duty on commercial property transactions. But even if he generates some more resources, the numbers will be tight.

That’s why the control of expenditure is being given such a priority. It’s also why the Government now routinely publishes its reports on aspects of its spending reviews.

The purpose is two-fold – to strengthen the hand of central government when it comes to keeping a lid on expenditure, but also to give Donohoe ammunition when he sits down with Ministers demanding more money for their departments. Budget-making comes down at some point to face-to-face negotiations.

“Oh you’re looking for more money are you: what about this?”

The reports show a catalogue of expenditure concerns throughout the public service – but also an institutional pressure to control them in the Departments of Finance and Public Expenditure, where much of the power in Government resides.

Health concerns

The chief concern, as ever, is overspending in the health budget. While the expenditure report says health spending is €168 million ahead of target at mid-year, the real fear in Government is that it is on course to bust the budget by more than €600 million by the end of the year.

Donohoe concedes that he will have to ask the Dáil to approve additional cash for health later this year to meet the bill; the only question is the size of the overshoot.

One consequence of this is that the prospect of a special allocation of resources to the Department of Health for the proposed Sláintecare reforms has been torpedoed in recent weeks. The message has been: don’t ask for more money when you’re already asking for more money.

There won’t be cuts to services, Donohoe insisted. He will find extra money to fill the gap.

But the report makes pointed comments about increased levels of accountability for expenditure by senior HSE management. Government sources say that a new board and chief executive later this year will ensure this accountability.

But they don’t say it with much confidence.