Fine Gael, Fianna Fáil and Greens informed of €30bn deficit amid Covid-19 fallout

The three parties aiming to form a government have been given an overview of the scale of the financial challenge which will face them in the coming years.
Fine Gael, Fianna Fáil and Greens informed of €30bn deficit amid Covid-19 fallout

Additional reporting Juno McEnroe

The three parties aiming to form a government have been given an overview of the scale of the financial challenge which will face them in the coming years.

Fine Gael, Fianna Fáil and the Green Party were today appraised of the €30 billion deficit facing the country next year as the fallout from the Covid-19 outbreak hits home by the Secretary General of the Department of Public Expenditure Robert Watt.

The tenor of the briefing was said by sources to be "detailed but realistic".

Mr Watt laid out a number of spending scenarios for TDs depending on which policy proposals were enacted. TDs had earlier spoken about Brexit and the North, with all three parties broadly believed to be in line with one another.

Sources say that the talks will continue for at least the next two weeks, with the aim of having a programme for government ready by the end of May, with a government in place by mid June.

The talks will continue without the Labour Party, as Alan Kelly wrote to Michéal Martin and Leo Varadkar to inform them that he would be recommending his parliamentary party not join the talks.

The Fine Gael and Fianna Fáil leaders had earlier this week written to Mr Kelly to assure him that they would honour the public sector pay deal if Labour was in government.

However, Mr Kelly's letter says that the two larger parties' commitment not to raise income taxes is at the heart of Labour's reluctance to join a government.

"It is hard to see how we can rebuild and improve public services without some change in taxation and more extensive borrowing to maintain demand and capital investment in the economy until at least the end of 2021.

"As there are now detailed negotiations underway on government formation between yourselves and the Green Party, I recommended to our Parliamentary Party today that at this time we would not take part in formal discussions on a Programme for Government.

"It was our united view that your talks with the Green Party should now be given the space and time to reach a conclusion as if successful, such a government would command a majority in the Dáil."

Mr Kelly did say that if the other parties change their minds on taxation, he would "look forward to hearing" from them.

However, speaking at Government Buildings, Taoiseach Leo Varadkar left the door open on tax hikes in the next government.

Mr Varadkar said he was "disappointed" Mr Kelly's party would not join the coalition effort and said talks with Fianna Fail and the Greens were "going well":

"I'm still confident it will be possible to negotiate a programme for government, ideally before the end of the month, and then put it to our various parties for ratification and be in a position to form a new government by the middle of June.

"But I don't think anyone can be under any illusions. It's not going to be an easy time to be in government. The economic consequences of this emergency are going to be very severe, in terms of jobs lost, in terms of businesses that won't reopen again.

"The impact on the public finances, we can borrow very cheaply now but it will be a foolish person to assume that will always be the case in the next five years. So it's not going to be an easy time to be in government."

Mr Varadkar said none of the three parties had ruled out tax increases, saying Fine Gael favoured not increasing the 12.5% corporation tax, or increasing income tax or USC.

"This recession will turn into a depression. If we're in a position where we get back to cutting people's pay or cutting welfare, or increasing income taxes. we've been very firm about wanting to avoid that."

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