Tuesday 15 October 2019

Budget 2020 black hole: Missing millions forces Minister to dramatically scale back plans

  • Four ministers to get €450m end-of-year bailout as Rainy Day Fund is cut
  • Row breaks out between FF and FG over changes to Help-to-buy scheme
  • 50c cut to prescription charges for over 70s
  • Drugs payment threshold drops by €10
Minister for Finance Paschal Donohoe (Niall Carson/PA)
Minister for Finance Paschal Donohoe (Niall Carson/PA)

Kevin Doyle, Philip Ryan and Eilish O'Regan

Finance Minister Paschal Donohoe is struggling to fill a gaping hole in the country’s finances ahead of next week’s ‘Brexit Budget’.

A combination of overspending by ministers, miscalculated funding promises and the threat of a no-deal Brexit has forced the minister to dramatically scale back his plans. Fianna Fáil has claimed figures presented to it during the Budget negotiations paint a “very different” picture from Mr Donohoe’s public assertion that he has €700m for new spending and tax cuts.

Please log in or register with Independent.ie for free access to this article.

Log In

The departments of Health, Justice, Education and Social Welfare will require bailouts amounting to €450m before the end of this year. And plans to put €500m in a Rainy Day Fund have been abandoned on the grounds that we would have to borrow the money.

The Department of Finance last night released its annual pre-budget White Paper which showed the Exchequer is expected to run a €1bn deficit this year – but when other State incomes are accounted for this is reversed into a €600m surplus.

However, Mr Donohoe still intends to announce a series of ‘family friendly’ initiatives on Tuesday. These will include a €10 reduction to the maximum amount payable under the Drugs Payment Scheme, while the prescription charge for older people is also to be reduced by 50c, to €1.

As negotiations go down to the wire, a major row has broken out between Fine Gael and Fianna Fáil over the survival of the Help-to-Buy scheme.

Fianna Fáil is insisting the first-time buyers grant should be extended and retained in its current form. But Fine Gael believes the scheme is too expensive and is seeking significant changes.

READ MORE: Kevin Doyle: 'Finding out days before Budget 2020 that the sums are way off raises questions'

The scheme provides a tax rebate of up to 5pc on the cost of a newly built property, up to a limit of €20,000. Currently, first-time buyers can claim the rebate on new homes worth as much as €600,000, which Fine Gael wants to reduce.

Fianna Fáil housing spokesperson Darragh O'Brien said Fine Gael "remains to be convinced" that the grant should be retained and called on Housing Minister Eoghan Murphy to "stand up" to officials in his department.

POLL:

"The minister should not allow himself be bullied by the Department of Finance and stand up for first-time buyers," he added. A source close to Mr Murphy said negotiations surrounding the scheme had not been completed.

A separate debate is under way over the handling of carbon tax hikes. Fianna Fáil is insisting home-heating products cannot be targeted until measures are in place to address fuel poverty. An increase of €2 per week to the fuel allowance has been suggested.

Although Mr Donohoe will present his plans on Tuesday, the Budget is far from finalised. Fianna Fáil's finance spokesman Michael McGrath said there was "frustration on our part that the pace of progress has been very slow".

It was expected the broad shape of Budget 2020 would be agreed by now - but Mr McGrath said there were still many big decisions to be taken. He hit out at ministers for miscalculating how much it would cost to maintain the current level of service next year.

undefined
Michael McGrath

"On the assumption of the information given today to date, you were looking at an overall budget of around €2.8bn, of which €2.1bn was pre-committed, leaving headroom of about €700m for a package of budgetary decisions. But it seems to us that when the Minister for Finance gets into discussions with the various line departments, the picture is very different."

He said the amount of money needed to "stand still" next year would be "far greater" than €2.1bn.

Mr McGrath claimed the Government had underestimated the cost of demographics, falling far short of what is actually needed to provide for the growing number of pensioners and the extra demands on the health service.

The Irish Independent understands that among the issues was a failure to make a €22m provision for parental leave for public-sector workers.

READ MORE: Budget 2020: Finance Minister decides not to put long-promised €500m into Rainy Day Fund

Mr Donohoe yesterday insisted he would still have €700m in 'unallocated' funds when he stands up in the Dáil next Tuesday. He argued he would approach Brexit "on the back of an economy that continues to perform very, very strongly", including an overall Budget surplus of 0.25pc this year, amounting to in excess of €600m.

The Irish Independent has learned details of a number of measures he hopes will win over families and older voters. They include:

:: The maximum amount payable under the Drugs Payment Scheme will be reduced by €10 a month to €114;

:: Prescription charges for over 70s to be cut by 50c to €1;

:: Free GP care for under eights;

:: Free dental care for under sixes;

:: Extra home-help hours;

:: New funds for the National Treatment Purchase Fund.

Irish Independent

Also in Business