A package of €14bn will be revealed on Tuesday. But will it be enough to meet the many challenges we face?
For over a decade Pearse Doherty has used budget day as an opportunity to loudly and passionately excoriate the government of the day for their fiscal choices. Over the last 11 years he has shadowed three administrations but only two finance ministers, Michael Noonan and Paschal Donohoe.
On Tuesday, the Donegal TD will respond to his 12th budget as Sinn Féin finance spokesperson and most likely Donohoe’s last as finance minister — at least in this government. While his rhetorical approach has not changed much in that time there is evidence to indicate Sinn Féin’s policies have moved closer to the centre than Doherty might be prepared to admit.
In its budget 2012 submission Sinn Féin proposed a third rate of income tax at 48pc on individuals earning over €100,000. Eleven years later the party now proposes a 3pc solidarity tax on incomes over €140,000 and Doherty is keen to stress that high earners and corporate behemoths have nothing to fear if he replaced Donohoe in the Department of Finance. They know, Doherty says, that the party is “solid” on issues like the State’s corporation tax rate. This is all part of the dance of preparing for government.
“Multinationals are very familiar with what we’re proposing. For example the effective tax rate we’re proposing on somebody earning above €170,000 would be about half a percentage more than it was nine years ago. So it’s not a huge jump,” he told the Sunday Independent last Friday.
Still there is much that divides Doherty and Donohoe. On Friday, Sinn Féin proposed a €1.6bn plan to cap energy bills at 2021 levels. Yesterday, at a Fine Gael business conference in Limerick, Donohoe all but ruled it out by saying it carried too much “risk” before lashing the opposition party’s wish to spend corporate tax revenues on policies he claimed would put that very same revenue at risk. “Sinn Féin are riding two horses at the same time in a very dangerous way,” Donohoe said.
Expect more of the same on Tuesday in the Dáil and subsequent interviews and debates. Before then, Donohoe and his Coalition colleague in Public Expenditure, Michael McGrath will be engaged in intense deliberations over the final shape of the Budget package. Meetings were ongoing yesterday to finalise a plan to be presented to the three Coalition leaders at a meeting this afternoon. Last minute talks and tweaks are expected to continue into Monday and quite possibly the early hours of Tuesday.
The cost-of-living package will be the centrepiece of Tuesday’s announcement with the pledge of money in people’s pockets within weeks if not days. Some ministers now believe it will exceed €3bn and Friday’s Budget white paper showing a surplus of over €4.4bn for this year bolsters that argument. But a source centrally involved in the budgetary talks argued otherwise yesterday: “Just because the surplus is bigger we're not looking for more measures to add to it.”
In meetings over recent weeks, officials in the Department of Public Expenditure and Reform (DPER) have set out two criteria for ministers and their departments to access cost-of-living funds: any measure has to be operationalised quickly i.e. within the final three months of 2022, and it has to either put money in people’s pockets or stop it going out.
As this newspaper revealed a fortnight ago, a €600 energy credit is set to form part of the package. This is likely to be applied to household electricity bills in three instalments over the next six months at a cost to the Exchequer of €1.2bn.
A double weekly welfare payment, at a cost of €350m, paid out in November is also likely to feature, but there is still some deliberation over the proposal for a double child benefit payment in November, which would cost €180m.
Fine Gael and Social Protection Minister Heather Humphreys are pushing to recast this as a “cost-of-living family payment” that could be more than the value of a double child benefit payment and could be paid in one lump sum in November or else in two instalments across the winter. There were still
deliberations ongoing yesterday on a €100 fuel allowance lump sum (€40m) and a double week of the working family payment (€25m).
The other big ticket item in the cost-of-living package will be the business energy support scheme (BESS), which will be a Revenue-administered scheme to help retail, hospitality, manufacturing and other high energy users with their utility bills this winter.
It will be broad-based and tens of thousands of businesses will qualify. But devising the eligibility for the scheme is proving problematic given the huge variation in how much energy businesses use. A senior coalition source said yesterday there were “a lot of holes” in the current proposal for which there is no overall figure agreed.
“Revenue know everyone's turnover but Revenue don't know people's energy bills,” a second source said, noting that some businesses are locked into negotiated rates and have not seen a rise in their energy costs whereas others are being hit hard. Some businesses can pass on their increased costs to customers, while others can’t. For some the energy crisis is affecting profitability but not their viability.
Tánaiste Leo Varadkar told an audience in Limerick yesterday that the scheme would be focused on SMEs rather than multinationals, but even defining an SME — do you base it on staff numbers or turnover — will be a challenge.
The largesse available for a series of immediate one-off supports to households this winter stands in contrast to what is available to fund permanent spending commitments next year and beyond.
A succession of ministers and officials who have been in to see Michael McGrath and his DPER team have encountered stony resistance to many of their expensive demands. “Not willing to negotiate,” says one insider, while another describes them as “jittery.”
A third person says it has been “rough”, adding: “If you are in a non cost-of-living department it's tougher than it may have been in previous years.”
Meanwhile, one minister concluded: “I don't think you're going to have lots of shiny new things to announce for 2023.”
For some ministers it is a case of seeking more money to enhance existing commitments or programmes. Justice Minister Helen McEntee wants funding to help recruit 200 trainee gardaí into Templemore every three months as well as improve Garda ICT and fund domestic violence services.
Education Minister Norma Foley has secured money to address the school bus crisis by prioritising both eligible students and concessionary students who previously availed of the now oversubscribed service. This issue has become a political landmine for the Coalition with Fine Gael TDs and Senators levelling the blame on Ms Foley at a private party meeting last week.
The Fianna Fáil minister is also likely to announce a social inclusion package of upwards of €6m to keep children off the streets and in schools, as well as more funding to recruit an extra 1,194 special needs assistants, 686 special education teachers, and more NEPS psychologists. A summer works scheme will also feature in the Budget package and will include an eye-catching plan to install solar panels on the roof of every school in the country, though this will be funded by Environment Minister Eamon Ryan’s department.
While the haggling over Budget money for big spending departments like Social Protection, Health and Children continued yesterday, there was some clarity emerging for ministers with smaller portfolios.
Sports and Gaeltacht Minister Jack Chambers has been negotiating with McGrath to treble start-up grants for Gaeltacht families or Tuismitheoirí na Gaeltachta from €2,000 to €6,000 while there will be a 10pc increase in the subsidy paid per child in existing Gaeltacht households.
On the sports side of his brief there is set to be an up to €6m increase in the Budget for the sport action plan and the high performance coaching unit ahead of the Paris Olympics in 2024.
Meanwhile, Land Use and Biodiversity Minister Pippa Hackett is hoping to secure extra funding for organic farming and enhanced cash payments to farmers who plant trees. “There is a feeling many farmers are holding back on forestry waiting on the Budget and new rates before committing,” a source said.
Higher Education Minister Simon Harris is said to have secured a reduction in the student registration fee of €500, which it is intended to apply retrospectively this year, along with improvement to SUSI grants. Though, a source close to the minister said the Coalition leaders would agree on the final figures.
The perennial row over the health budget emerged in the pages of the Irish Independent and Irish Times yesterday. Health Minister Stephen Donnelly argues that the €1.1bn in new funding offered by DPER will only cover existing spending commitments with no money left for the introduction of new measures.
Donnelly wants to abolish hospital charges, reduce prescription fees, expand free GP care, extend the free contraception to women over 25, and begin to provide publicly funded IVF.
Not all of these programmes are likely to receive the money Donnelly wants to give them while some in Government have noted that last year’s budget announcement extending free GP care to children up to the age of 7 still hasn’t been operationalised.
Elsewhere, the popular temporary 20pc reduction in public transport fares will be extended, but a suggestion that bus, rail and tram fares could be reduced further has been ruled out.
Before he headed back to Dublin for more talks yesterday afternoon, Donohoe made clear that money would be set aside for a further response if necessary next year. “We cannot be sure how long this will go on for,” he said. “This is why we want to ensure that we have the ability to continue to respond back throughout 2023 if things get more challenging or if we have to deal with new risks.”
At least €500m and possibly more will be siphoned into a new fund that one cabinet source said is no longer going to be called the rainy day fund. “It's a phrase that suggests people aren't struggling now, which they are,” they said. Another source said that it was likely to be rebranded simply as “the reserve fund”.
In total between the cost-of-living package of close to €3bn, the Budget 2023 measures, including existing spending commitments, totalling €6.7bn and €4.5bn set aside to cover, if necessary, post-Covid recovery and resilience spending, the response to the Ukraine crisis and the ongoing Brexit mitigation measures means a package across the rest of this year and next of over €14bn will be announced by Donohoe and McGrath on Tuesday.
The Government will insist it is an appropriate response to a crisis that is riddled with uncertainty, the opposition will insist that the three governing parties made the wrong choices. But it will be the public’s response to the package that will be the true test of the Coalition’s durability this winter.