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Inside ‘the weirdest budget ever’: Climate bust-ups, a mortgage surprise and the Stephen Donnelly saga

Government insiders fear ‘flat’ Budget 2024 will not move the dial as internal tensions within the Coalition rise

When Ministers entered Paschal Donohoe’s office to lay out some of their Budget 2024 demands, they were led to a circular table in front of a sash window on which 22 bobbleheads were carefully laid out.

The miniature figures, part of Donohoe’s ever-expanding collection of Dr Who and Star Wars characters, have oversized heads and were in Cabinet members’ line of vision. While the conversations may initially have been easy, the similarly oversized demands made by Ministers over the last three weeks were resolutely shot down.

“It’s all very friendly at first, Paschal will talk and talk and then he will lean back and put his hands behind his head and say: ‘Well anyway, that’s it, that’s all you’re getting, that’s the best I can get for you,” one source said.

Another put it like this: “Expectations were built up over the summer about massive surpluses. Then the Ministers went in with these big wishlists to Michael McGrath and Paschal Donohoe, and they were just ground down by them and the civil servants.”

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Everyone from secretary generals to advisers have vented their frustrations in recent days at the get-tough attitude they say they encountered behind closed doors. Those close to both Donohoe and McGrath, Minister for Finance, say Ministers shouldn’t be surprised: if they had given everyone what they wanted, the budget would have been four times bigger.

Nowhere have the tensions been more publicly apparent than with Minister for Health Stephen Donnelly, who has been the talk of political circles.

“You have to be seen to be cutting your cloth to measure. But there was not a lot of evidence of that,” a Coalition figure said.

One source said Donnelly arrived into negotiations with no clear plan about how to rein in health spending, with a massive unexpected bill for this year and similar demands for last year.

Donnelly received a funding package of €800 million for next year at a time when he was looking for more than €2 billion.

The weekend before the budget was announced, word went around Ministers that they were being lowballed by the finance Ministers and that health had “wrecked it for everyone”, as one Minister put it.

This is understood to have angered Donnelly, who made it clear in talks that there was an understanding in place since late last year that significant extra cash would be required in 2023 because of inflation and pent-up demand. The idea being put forward that Donnelly did not have a savings plan, either, is described as “totally false” by those close to him.

It is understood he detailed a plan involving about €600 million in “efficiencies” and savings next year, focusing on hospitals. In negotiations, he also outlined a new system that is capable of showing which hospital teams and consultants are underperforming. Donnelly told colleagues that while he believed a smaller part of this year’s overspend could not be defended, most it was already flagged in advance with similar funding needed next year.

In the end, he was said to be “pissed off” and told officials that the money provided for the health service next year is simply not enough.

Despite the tension in the room, the talks ended professionally, although they went down to the wire.

It was a last-minute affair in housing too, as divisions over the new mortgage interest relief scheme lasted right up to the weekend before the budget. It is understood that Minister for Housing Darragh O’Brien only learned how much the relief would be worth – €1,250 – hours before it was announced, and that he has privately expressed a belief that this should have been higher.

Another element of the budget that the Coalition managed to keep under wraps was the growing unease between Fianna Fáil and Fine Gael.

Fianna Fáil sources say that Fine Gael “stonewalled” the mortgage scheme and “ran a million miles” from it at first – something that Fine Gael denied this week. The package for renters and landlords was less controversial, as the bones of it were already agreed upon months ago when the eviction ban was lifted.

There is a growing suspicion in Fianna Fáil that Fine Gael could be deliberately putting the squeeze on the health and housing departments as they seek to burnish their own credentials ahead of an election year.

This anxiety was further stoked after a letter sent by Taoiseach Leo Varadkar to his constituents.

Varadkar told them 10 positive things they could expect from the budget, from tax to childcare to business supports. There was no mention of housing or health.

On the flipside, Fine Gael is anxious about a rising Fianna Fáil. There is a sense that it has McGrath at the helm in finance, preaching financial prudence and rebuilding the Fianna Fáil brand, and that the party is returning to its “table thumping” days, stealing the thunder with universal social charge (USC) cuts.

McGrath is well-liked across the Coalition, however. One person directly involved in negotiations said it was “clear he had done his homework over the summer – he could spot immediately if he was being spun a yarn”.

The spinning of yarns was a topic that was exercising those close to Minister for Enterprise Simon Coveney.

Three sources told The Irish Times that Coveney had very difficult talks with Donohoe and that there was a bust-up after Coveney objected to a smaller-than-expected funding pot for his €250 million business grant scheme. A spokesman for Coveney said these rumours were “completely untrue” and that “Paschal Donohoe has been supportive of this scheme throughout”.

While much of the focus has been on the larger two parties, all is not rosy in the Green Party garden either.

The junior Coalition party this week trumpeted a number of measures as being evidence of a vital Green influence in Government.

One of these is the 25 per cent average cut to childcare which will only kick in from next September. While there have been grumblings, most TDs feel they can justify it as the cuts will kick in at the start of a new term.

The main issue is around the much-heralded €3 billion climate fund which will only begin to be funded from 2025 surpluses. The Green Party actually wanted more than double that amount, some €6.5 billion, but was rebuffed. Green Party leader Eamon Ryan also wanted a longer time frame for investment, out to 2033.

The Department of Finance believed the initial ploy was neither realistic nor desirable.

At this week’s Green Party parliamentary party meeting, TDs were left with the impression that there had been a significant row over the climate pot. Some in the party are sceptical about its future.

“It won’t be funded until after the election, and sure if Sinn Féin are in, then that’s the end of that – it’ll be turned to dust,” one TD said privately.

Sinn Féin was also on the minds of politicians in the Fine Gael weekly parliamentary party, after the Opposition landed stinging attacks on Budget 2024 by labelling it a budget for landlords and not renters.

“Sinn Féin say they want change? Yeah, less change in your pocket,” Fine Gael TD Frank Feighan told the private meeting on Wednesday night, a meeting that was also described as an uninspiring “meh” by another person present with very little post-budget glow evident.

But the focus on Sinn Féin belies a deeper fear in the Coalition that Budget 2024 will not go far enough to move the dial and lure floating voters back. This is despite some very positive legacy aspects such as free schoolbooks for junior cycle students and more hot meals in schools.

One Minister, asked if it will be enough, sighed and said: “I’m really not sure. Probably not.”

Another Coalition figure said it had been the “weirdest budget ever”. Despite there being billions of euro in once-off goodies and a bumper social protection package, the whole atmosphere was “flat” and nearly everyone in the Dáil chamber on budget day looked “jaded”.

With tensions on the rise and a massive savings plan due for hospitals next year, the outlook is rocky.