Tension builds between Fine Gael and Labour over cuts to health and social welfare in budget

Tension is building between Fine Gael and Labour over the size of cuts to be applied in next Tuesday's budget to health and welfare spending. While the adoption of a lower retrenchment target for Budget 2014 has eased some of the strain on the Coalition, there is no settlement as to where the benefit should be taken.

Talks tomorrow at the Economic Management Council – comprising Taoiseach Enda Kenny, Tánaiste Eamon Gilmore and Ministers Michael Noonan and Brendan Howlin – are seen as a crucial step. But the real decision may not come until an expected Cabinet meeting on Sunday. A deal before then is unlikely. Fine Gael Ministers are in Limerick tomorrow for the party's conference, which continues on Saturday.

The battle lines are clear. Fine Gael wants Labour deputy leader Joan Burton to extract more from her declining welfare budget. Similarly, Labour wants Fine Gael deputy leader James Reilly to prise more from his health budget.

But it is not as simple as that . There is also plenty of criticism of both Burton and Reilly within their own parties. Each has an unrivalled capacity to antagonise their own.

Burton’s conflict with Gilmore still simmers.

At the recent Fine Gael parliamentary party “think-in”, Reilly’s disclosure of a likely health spending overrun was not quite in keeping with Kenny’s recovery message. “The Mujahideen were not impressed,” said a Government source of the Taoiseach’s top team.

Agreement will be reached eventually. Yet with hundreds of millions of euro at stake in pared-back services, this is an especially difficult negotiation.

The main argument on the Fine Gael side is that a greater reform effort by Burton earlier would have eased her task now. She was originally asked for a €440 million cut and is now battling for a target below €300 million.

Live Register
On the Fine Gael side, questions are promptly raised as to why more was not done to allow people coming off the Live Register to retain some element of rent supplement. Further questions centre on the absence of firm proposals to reduce child-benefit entitlements in wealthy families. Similarly, there is scepticism over the claims that "activation" policies to bring unemployed people back to work are bearing fruit.

“There is room for more urgency on the matter,” said a senior Fine Gael source.

While it is acknowledged within Fine Gael that there is no easy way to to set about cutting welfare, the party is more concerned to protect frontline services in areas like health, education and justice.

On the Labour side, meanwhile, the chief complaint about Reilly is that the exact state of the parlous finances in the health services is still uncertain.

Spending overrun
With the spending overrun possibly exceeding €150 million this year, Labour fears the entire fiscal picture is far too tentative at this late stage. Such money would have to come off next year's health budget because the Coalition is adamant Reilly will not receive a supplementary budget this year.

If the worst of budget speculation has all the reliability of quicksand, there is no doubt that these areas are where the biggest divisions lie right now.