Business Budget 2019

Wednesday 22 May 2019

Burton told: deliver welfare cuts to win €2.5bn Budget deal

Squeeze on Social Protection Minister to find €440m saving

Minister for Social Protection Joan Burton
Minister for Social Protection Joan Burton

CLASS sizes, garda numbers and proposed free GP care for children under five will be in the firing line in next week's Budget, unless major cuts in social welfare are delivered, the Irish Independent can reveal.

Social Protection Minister Joan Burton is coming under intense pressure to deliver a raft of social welfare reforms – or jeopardise a coalition deal on a reduced €2.5bn Budget.

In a compromise between Fine Gael and the Labour Party, the package of spending cuts and tax cuts in Budget 2014 will now be "close to €2.5bn" – down from the original €3.1bn.

The overall adjustment will still be €3.1bn, with the remainder of the funding coming from a variety of once-off sources other than taxes and cuts.

But Fine Gael is issuing a stark ultimatum to Labour to force Ms Burton to implement the bulk of her cuts of €440m.

Fine Gael is saying the savings in the Budget will be used for job creation – and not to prevent cuts in the Department of Social Protection.

Senior party figures believe Ms Burton is exploiting Labour's opinion poll woes to ramp up pressure on Tanaiste Eamon Gilmore to reduce the agreed level of cuts.

Sources close to the Budget negotiations say there is a fear among Fine Gael ministers that the internal dynamic in Labour is resulting in a lack of tough decisions being taken in social welfare.

The shape of the Budget is now agreed, but informed sources say "battle lines have been drawn" over who benefits from the extra wriggle room.

Fine Gael is willing to give Ms Burton some leeway in coming up with cuts.

But source say the party will not allow her to "take the lion's share of the extra flexibility so she can avoid politically difficult cuts in social welfare spending".

"This would mean that Justice, Health and Education meet their original savings targets, requiring, among other things, an increase in the pupil teacher ratio, reducing garda strength from 13,000 to 12,500 and the shelving of free GP care for the under fives," a senior source said.

The combined figure of taxes and cuts to be agreed by ministers at a cabinet meeting in Government Buildings this morning is now expected to be between €2.5bn and €2.6bn.

The breakdown will remain at a ratio of 2:1 cuts to taxes, meaning both figures will come down under the reduced total.

The Coalition will bring in up to €600m to make up the balance of the adjustment from some once-off sources:

* Funding from the sell-off of Bord Gais and ESB power stations.

* Savings on the cost of debt repayments.

* Savings from lower unemployment levels.

* Not giving more funding to Health and Education to deal with population pressures.

The compromise agreement means the Labour Party gets its demand to bring the tax and cuts package down to €2.5bn.

DEFICIT

And Fine Gael will still beat its deficit reduction target next year, bringing it down to 4.8pc or 4.9pc of GDP, rather than 5.1pc of GDP.

It is understood the troika has signed off on a reduced Budget adjustment provided the total package brings the general government deficit down to the new level.

However, the final deal on the Budget is also being held up because Health Minister James Reilly can't estimate his spending for next year. "Health has the capacity to shake everything up again," a source said.

Taoiseach Enda Kenny yesterday stressed the importance of the Budget, saying the Government had been very consistent about the need to achieve its targets while any flexibilities "that may arise" would be used to help with job creation.

By Fionnan Sheahan Political Editor

Irish Independent

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