‘Scope for tax cuts wiped out by public pay deal’
Budget leaves just €300m
PUBLIC sector pay bills look set to wipe out the chance of any major tax cuts or spending increases in the next Budget, Finance Minister Paschal Donohoe has indicated.
Launching the Summer Economic Statement yesterday, the minister confirmed that about €500million would be spent on projects next year.
However, public pay deals could eat up €200million of that figure, leaving only €300million in wiggle room for the Budget.
And if the Government’s commitment to a two-to-one split in favour of spending over tax cuts applies to the remaining €300million, that could leave just €100million for tax cuts.
Labour leader Brendan Howlin took aim at Mr Donohoe, predicting that the Government will shelve plans for tax cuts as it finds money to meet the cost of the new public sector pay deal.
‘It remains to be seen whether the figures published today will bear any resemblance to reality on Budget Day, but for now, the odds of this Government passing a Budget at all seem slim,’ Mr Howlin said last night.
In yesterday’s statement, Mr Donohoe also laid out plans for an additional €1.5billion spend between 2019 and 2021. He said this would be used on projects to improve competitiveness and the economy’s resilience. The move was criticised by the Construction Industry Federation, which warned that deferring investment would slow economic growth over the next decade.
‘If it’s a good idea to invest in 2019 to improve the economy and address the housing issue, lack of broadband and creaking road and rail infrastructure, why not start today?’ said CIF director general Tom Parlon.
The Government statement forecasts 55,000 new jobs and economic growth of 3.7% next year, and economic growth of 3.1% in 2019. However, it warned that Brexit has meant forecasts on the economy are subject to ‘considerable uncertainty’.
In relation to this, Mr Donohoe said the so-called ‘rainy day’ fund will also be established in 2019 with €500million pumped into the pot each year to help in a future economic crisis.
This was half the amount previously planned by Michael Noonan who had proposed that about €1billion a year would be put into the savings plan.
Fianna Fáil spokesman on finance Michael McGrath last night welcomed the inclusion of a ‘rainy day’ fund, thereby defusing a possible budget row between the two largest parties.
‘The essential purpose of the “rainy day” fund is to avoid a scenario where, at the next economic downturn, the government of the day will have to immediately raise taxes and cut public spending on vital public services,’ he said.
‘It makes sense to have a cushion in place to protect the economy in such a situation and I am pleased that the Confidence and Supply commitment to establish a rainy day fund is being honoured.’
Outlining the spending, Mr Donohoe claimed that seven out of ten jobs lost since the recession have been recouped.
‘The economy is growing at a healthy pace and generating jobs-rich growth. Indeed, we are now approaching a situation in which jobs are available for all those who want them,’ he said.
‘Now is the time to build on the gains of recent years, to improve the resilience of the economy and to address the capacity constraints that are emerging.’
The Government has not put any specifics on what the Budget money will be spent on.
Mr Donohoe also revealed he is in talks with the European Commission to get a once-off payment for water refunds this year.
Earlier this week, the Irish Daily Mail revealed how the Government has promised that homeowners will get refunds this year after Taoiseach Leo Varadkar previously said he wanted to see the money refunded as soon as possible.
‘Why not start investing today?’