Paschal Donohoe 'acknowledges risk' of his fiscal policy but rejects Fiscal Council criticism

Minister for Finance Paschal Donohoe has defended his fiscal policies and rejected criticism by the Irish Fiscal Advisory Council (IFAC) which said in a report that the Government’s medium-term projections for the public finances are “not credible”.

The Irish Fiscal Advisory Council said the projections – laid out in the Stability Programme Update 2019 – show Exchequer surpluses increasing each year based on expenditure forecasts that were not probable.

They said there is no credible medium-term plan for the economy.

“They imply an implausible slowdown in spending growth based on technical assumptions, which do not reflect either likely future policies or the future cost of meeting existing commitments,” IFAC said.

Mr Donohoe told RTE radio’s News at One that there were always risks when one had responsibility for a small, open economy.

He said he will take the advice of the Council on board, but pointed out that there are more people at work now than in the past decade, along with a more balanced economy.

The council also said the Government should not rely on unsteady Corporation Tax receipts to increase spending in the budget.

“I have always acknowledged the potential risk of over-reliance on Corporation Tax, that’s why I increased VAT for the hospitality sector which will bring in €600m more. That’s the kind of base broadening that we need to do.

“Yes, I acknowledge the risk and there was too much reliance in the past on one sector – construction.

"Now there are 2.16 million working in our economy not relevant to the construction sector.”

Careful management of the economy had resulted in a 0.2% surplus this year, he said. But there are “constant demands for increases in expenditure.”

The challenge now will be how he “pulls this together in the face of constant demands.”

Mr Donohoe pointed out that Fianna Fáil has a motion before the Dáil this evening seeking a higher rate of pay for the Defence Forces. He said while he values the contribution of people in the Defence Forces, there is a collective pay agreement and “despite what Fianna Fáil says about being careful they are going into the Dáil this evening looking for money.”

The Public Service Pay Commission will deal with the issue shortly, he added. “Fianna Fáil decided to take advantage of that. We will stick to the collective agreement that treats all public servants equally.”

In relation to the Local Property Tax he said he wants to ensure that most people will pay the same and that those who will have to pay more will find it affordable.

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