Gap in budget requires an extra €1bn to meet rising demand for frontline services
This added demand will have to be dealt with before any tax cuts or spending rises can be considered, senior Government sources have said.
This means that the total additional spending to be announced in October’s budget will have to top €1.7bn, rather than the €600m previously stated by the Government.
The news comes as the Government denounced Sinn Féin claims that it would need to increase property tax by 600% were it to scrap the Universal Social Charge this year.
Yesterday, the Department of Finance said the paper on which the claims were made by Sinn Féin finance spokesman Pearse Doherty predated the Programme for Partnership Government agreed by Fine Gael and Independent TDs.
A Department of Finance spokesman said there were no plans to abolish the USC overnight.
It is understood that central to Mr Donohoe’s plan is ensuring funding will be in place to ensure adequate numbers of teachers, nurses and other frontline staff.
Population increases, as well our ageing population, means there is a yearly increase in demand for schools, hospitals, childcare, and transport, and Mr Donohoe has to find the additional €1bn in “order to stand still”, it is understood.
“We need more doctors, nurses and teachers simply to stay apace with demand, driven by our expanding population,” a senior Government source told the
“This is before any additional spending or tax cuts are looked at. We reckon at this stage that demand will cost €1bn.”
Mr Donohoe has made it clear to fellow ministers and his officials that demands for additional spending will have to be “evidence-based”.
However, he has made it clear he has some scope to deal with requests if it can be proved they will help address the demand for frontline services for young children and elderly people in particular.
Despite the uncertainty caused by June’s Brexit vote, Mr Donohoe is confident the amount of so-called fiscal space or additional spending will remain unaffected this year. But it has been confirmed that Government spending will increase by €1.7bn or 3% in the budget.
The fiscal projections show an increase of just over €1.7bn, or 3%, in the gross voted expenditure amount for 2017, according to documents.
“In the order of €1bn is available to provide additional expenditure increases and taxation reductions,” the documents state. “This amount is what remains after providing for key demographic pressures, the Lansdowne Road agreement, capital plans and other pre-committed policies.
“Allowance is made for specific key nondiscretionary drivers of expenditure such as projected expenditure pressures in Health, Education and Social Protection arising from demographics and the additional pay costs arising from the Lansdowne Road agreement with public service unions.”
It is expected that, despite any unforeseen economic shocks, total Government spending will increase by €6.75bn by 2021 to €67.6bn.
Labour’s finance spokeswoman, Joan Burton, said she is “very concerned” that funding to deal with the additional pressures is lagging behind demand.
Fianna Fáil said the Government must prioritise the provision of services ahead of tax cuts, which it says the country cannot yet afford.
The party’s finance spokesman in the Seanad, Gerry Horkan, said cutting taxes while we are borrowing doesn’t make sense.
“People will argue that there is room to cut taxes, whereas simply there isn’t,” said Mr Horkan. “We are still borrowing significant sums so any money should be directed first into better schools, better hospitals and better roads.”
