€1.8 billion spending flexibility for budget, based on last year’s figures – Donohoe

Minister for Finance tells Dáil he expects full employment ‘later in the year’

Paschal Donohoe, Minister for Public Exepnditure & Reform. Photograph: Cyril Byrne / THE IRISH TIMES

Paschal Donohoe, Minister for Public Exepnditure & Reform. Photograph: Cyril Byrne / THE IRISH TIMES

 

The Government has spending flexibility or “fiscal space” of €1.8 billion for this year’s budget but Minister for Finance Paschal Donohoe stressed it was based on last year’s figures.

Mr Donohoe, who expects the economy to hit full employment “later in the year”, told the Dáil on Wednesday that figure included the €500 million for the first year of the “rainy day fund” he proposed to establish.

The Minister pointed out that there was pre-committed expenditure of €2.6 billion for next year.

He told Sinn Féin finance spokesman Pearse Doherty and Fianna Fáil finance spokesman Michael McGrath that this includes €1.5 billion for the national development plan, €400 million for public sector pay, €400 million for demographic costs, and €300 million to provide for carryover costs next year of measures introduced in the budget this year.

This meant a deficit of 0.1 per cent of GDP is projected for next year, he added.

Mr Donohoe said it was “hugely important” that budget policy recognises that “the prospect of full employment is within reach”.

Mr Doherty said that the legal parameters showed that the available “fiscal space” was €3.2 billion.

“Government decisions on whether to use all the fiscal space are a separate matter” and “we are mindful that this could change and that the summer economic statement could increase or indeed decrease that sum”.

But when he said that there was €1.8 billion available for discretionary spending if €1.4 billion was pre-committed, Mr Donohoe agreed.

“However, I emphasise that this is on the basis of last year’s figures,” he said. He planned for Budget 2019 to be like the previous two.

“I want a budget which makes steady and affordable progress on the issues our country faces, whether they be the huge issues within our society or the economic challenges we have to confront.”

Mr Doherty said the Minister had given the impression “deliberately in my view, to dampen expectations in the run up to the budget. The impression is that most if not all of this money has already been committed.”

But Mr McGrath said “the numbers keep changing. It is hard to have confidence in what the Minister is saying.”

The Fianna Fáil spokesman pointed out that last year the €3.2 billion was after demographic costs had been accounted for.

Mr Donohoe said the €400 million in demographic costs was accounted for in moving from gross to net fiscal space. “It is the same €400 million that was outline in the stability programme update this year.”

Later the Minister told People Before Profit TD Richard Boyd Barrett that he hoped the economy would reach “full employment later in the year”.

Mr Boyd Barrett had called for the Minister to deal with the “myriad loopholes benefiting corporations” and tax reliefs not properly scrutinised.

But Mr Donohoe said “a deduction is not the same as a loophole”.

Companies were entitled to and able to reduce some tax liabilities. He added that on the other side of the balance sheet were jobs created and investment in Ireland.

“All of this is playing a role in our bringing our economy to full employment later in the year.”