Leo Varadkar warns against 'overly cautious' budget

Taoiseach Leo Varadkar at the National Economic Dialogue conference in Dublin Castle yesterday, where he said a cautious budget could push more people into poverty and financial distress. Picture: Damien Storan/PA

Taoiseach Leo Varadkar has warned that a cautious budget could push more people into poverty and financial distress, in comments that appear at odds with other senior Government ministers.

On the same day that Tánaiste Micheál Martin and Finance Minister Michael McGrath suggested that the forthcoming budget must be “prudent”, Mr Varadkar said an overly cautious approach is not something that he would be able to stand over.

Tensions have been mounting in the Coalition in recent weeks after three Fine Gael junior ministers called for a €1,000 income tax reduction in the budget, which sparked fury in Fianna Fáil.

One Government source last night accused the Taoiseach of “classic distraction tactics” after Mr Varadkar said the Government has “a responsibility to take decisive action” on behalf of citizens, adding that an “overly cautious approach could push more people into poverty or financial distress”.

Another Cabinet source said the comments were “unhelpful”, but added that Mr Varadkar is “clearly under pressure”, referring to reports that members of Fine Gael are becoming increasingly unhappy with their leader.

“There is going to be an awful lot of this because Michael [McGrath] will be the main man and it’s the first time since 2010 that Fine Gael will not be presenting the budget,” said a separate Fianna Fáil source. 

They are going to become more and more desperate as the budget nears.”

Mr Varadkar told a National Economic Dialogue meeting in Dublin Castle: “If the Government takes an overly cautious approach in dealing with the cost-of-living crisis and the climate crisis, it is making a conscious decision to reduce living standards and to do less. And that’s not something we should stand over given our fiscal position.

“Having said that, we have never, nor will we, use temporary revenues to fund permanent or occurring day-to-day spending. We have to be careful not to do that.”

Central Bank advice

The Taoiseach’s comments come after the Central Bank advised that the Government needs to be careful that budgetary policy does not fuel inflation.

Also speaking at the event, Mr McGrath said the forthcoming budget will be “prudent” but he said workers can expect changes to the entry point to pay the higher rate of tax.

This was echoed by Mr Martin.

“I think we have to be sensible or cautious, prudent — all those words are bandied about,” said Mr Martin. “The bottom line is we have to be sensible and sustainable, and we have to protect the economy. 

"We have to also be alert for shocks and we’ve had a fair few shocks in the last couple of years, from Brexit to the war in Ukraine to covid-19.”

Asked about the Taoiseach’s comments, Mr Martin said he does not believe anyone would consciously reduce living standards.

Meanwhile, Green Party leader Eamon Ryan said he will be pushing for a “significant increase” in the number of public servants in the context of the budget. It is understood that he believes the number needs to increase by between 20,000 and 30,000 people in the coming years.

'Bigger State'

“We do need a bigger State and we have a difficult budget task here because we need a bigger State but we need to make sure we don’t push inflation,” said Mr Ryan. “So that’s the balance of the next three or four months in the run-up to the budget that we need to get right.”

He said the private sector has increased its workforce by 1m in recent years, but the lack of staff across the civil service and local and central government is the “biggest stress” facing workers.

“We need to build up the resources to deliver what the people of this country want, which is housing, good effective health service, and make an economy that is secure for the future.”