Health spending rise may limit budget tax cuts

Demand for extra money for the health sector may restrict the amount of new cash available to cut taxes and increase spending in the budget, Minister for Finance Paschal Donohoe has told the Cabinet.

It comes as TDs were told in a private meeting yesterday that the health overspend this year is estimated to be €600 million. However, some sources familiar with the area say the overspending could be significantly greater.

Mr Donohoe has €800 million to allocate to new measures in the October 9th budget, although he is expected to raise some taxes to bring his budget day package above €1 billion.

It is understood that he told his Cabinet colleagues that demands for more money for the health sector could reduce the sum available for other measures.

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Other figures in Government said Mr Donohoe may have to raise more money than initially envisaged because of the health pressures.

The removal of a special 9 per cent VAT rate for the hospitality industry, for some areas of the sector at least, and hikes in carbon taxes are seen as the most likely moves.

Other ideas, such as increased betting taxes, have also been mooted, and Minister of State Finian McGrath suggested at yesterday’s meeting that Airbnb lettings could be taxed.

“There are very serious warnings across government about the room to manoeuvre this year,” one Minister said.

Oversight committee

The issue of the health spending was also discussed at a meeting of the Oireachtas budgetary oversight committee, where Fianna Fáil’s public spending spokesman Barry Cowen pressed officials on the overspend.

Mr Cowen is understood to have been told by officials from the Parliamentary Budget Office that the overspend could be up to €600 million, and that this may not be covered by other Government departments not spending all the money that is available to them.

“They were giving warnings in certain areas,” said a source present.

Mr Donohoe again stressed to Ministers that while Government finances would allow for a budget day package of €3.4 billion – mostly in spending increases, but also some tax cuts – some €2.6 billion of this had already been accounted for in capital spending commitments as well as additional spending to meet the cost of demographic changes and public-sector pay increases. This would leave just €800 million for new measures on budget day.

Mr Donohoe and Taoiseach Leo Varadkar have said there will be a package of welfare increases and tax cuts. However, the level of overspending in the health budget, Mr Donohoe warned, would restrict the scope for manoeuvre elsewhere.