Donohoe dampens hopes of cost-of-living giveaway budget
Cost-of-living budget measures may not go as far as many want as other demands must be factored into the €1.5bn available. Picture: Press Association
The finance minister has dialled down public expectations of a cost-of-living giveaway budget, warning that the measures must not become "part of the problem".
Cost-of-living budget measures may not go as far as many want as other demands, including the need to address hospital waiting lists; the housing crisis; and increases to public sector pay will also have to be factored into the €1.5bn available.
Weighing up these competing demands as part of Budget 2023 will be "complex and challenging" and, faced with increasing interest rates, Paschal Donohoe has said he will be focusing on "the lowest level of borrowing".
Mr Donohoe said pumping too much State money into the economy through supports could actually drive up inflation further.
"In other words, budgetary policy itself must not become part of the problem," Mr Donohoe told the Economic and Social Research Institute’s (ESRI’s) annual budget conference.
It is expected that a package to bring down the cost of childcare and funding to reduce third-level fees will be among the central elements of budget negotiations.
But with public-sector pay talks due to commence early next week, any agreement reached to increase wages will also be a significant drain on the funds available in the coming years.
"Depending on the settlement and the type of numbers involved, that will be plugged into the budget arithmetic and will have influence," said a Government source.
"Expectations have to be realistic as to what the Government can do."
A medium-term forecast last year set out a €1.5bn package available for new measures in the upcoming budget, which would give the Government €1bn to spend on public expenditure measures and €500m on the tax side.
Government sources do not expect the Summer Economic Statement, due to be published in the coming weeks, to vary greatly from that figure.
However, Mr Donohoe yesterday stressed these estimates were framed in an inflationary environment that was "far more benign than today", pointing to the fact that this time last year, inflation was running at around 2%, compared with just over 8% now.
In this context, one minister said a "sensible" and "prudent" approach will be taken to budget measures.
"The Government will have to assess what the economic parameters are, what the income is, what the expenditure is, and be prudent in what it does and then try and support people as best it can within that," they said.
Opposition parties have been calling for immediate measures and a mini-budget to help those struggling with rising costs. However, Mr Donohoe said the focus is on "what help we can give at budget time".
“There are limits to what Government can do," he said.
"The Government has already put in place a set of measures to help households and businesses that are having to deal with so many challenges at the moment.
"We have already put in place a set of measures for this year alone that are worth well over €1bn and my focus and the focus of Minister [Michael] McGrath is now on preparing the budget and at budget time putting in place the measures that we know will be needed to help many with the rising cost of living," he added.
Mr Donohoe said he would also have to "limit the exposure of the public finances to rising borrowing costs" when putting together the budget.
“Let me emphasise that the days of cheap funding are going," he said.
