Major decisions on public spending will be taken by the Government in the coming fortnight, with budget Ministers Jack Chambers and Paschal Donohoe said to be resisting pressure from colleagues for major spending increases on capital and current budgets.
The summer economic statement – a key marker for the October budget – which is normally published in the first or second week of July, will not be agreed until next week at the earliest, according to several people involved in the process.
It is being held up by the need to agree a revised National Development Plan (NDP), and also by a Government desire to see the outcome of the trade talks between the EU and the United States, with US president Donald Trump’s deadline for a deal due to expire on Wednesday.
Failure to agree a deal by then could spark a trade war between the EU and the US, with severe consequences for the Irish economy.
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Sources with knowledge of the issues confirmed that Government Ministers have made requests for substantial extra capital spending in the revised NDP, which is provisionally scheduled to be published on July 22nd, amounting to “tens of billion” above the existing €165 billion plan, bringing it to just under €200 billion. The plan lays out capital projects until 2030.
Ministers are also pushing for significant increases in current spending next year, despite signals from the budget Ministers and party leaders that the sort of increases seen in recent years cannot be repeated this year.
Taoiseach Micheál Martin said last week that it was “not sustainable” to increase expenditure at the levels of recent years.
It is understood that both Mr Donohoe and Mr Chambers have made clear to colleagues that they will not agree to increases in public expenditure which far outstrip the rate of economic growth.
Sources confirmed that Government ministers have made requests for substantial extra capital spending in the revised National Development Plan
The two Ministers met their party leaders at Government Buildings a fortnight ago, and these meetings, sources say, saw the key decision-makers agree that they will not repeat the cost-of-living packages that were a feature of the last three budgets.
Last week’s controversy over possible increases in third-level fees, however, unnerved many in Government by demonstrating how politically difficult it will be to scrap benefits to which people have become accustomed.
On Wednesday, the deadline imposed by Mr Trump for agreement of a trade deal between the EU and US expires and the EU faces the possibility of 20 per cent tariffs – imposed by Mr Trump on April 2nd, but delayed until July 9th – being placed on EU imports.
If that happens, the EU is likely to respond with its own tariffs on US imports, which could trigger further retaliation from Washington – raising the prospect of a transatlantic trade war.
