He spends his life saying no to a lot of people. And around budget time, most of what he says to people is no. Behind closed doors,Finance Minister Paschal Donohoe has been laying down the law to his fellow ministers.
In one-on-one meetings, he has been making clear the pot of money for Budget 2020 is really small so lower your expectations. He also made clear to them his own views. “Any kites flown will be shot down hard,” he said time and time again.
With budget day upon us, Donohoe’s last budget of this term is probably his most important for various reasons. He needs to re-establish his credentials for prudence and, as such, has limited the potential pot of money for new measures to just €700m.
But he has a major dilemma. On one hand, Ireland could be facing a no-deal Brexit in three weeks and the potential impact of that could see a negative swing of up to €6bn in the country’s finances. However, just as likely, a deal could be struck before then — or Britain may seek another extension, negating much of his contingency plans.
Correctly, Donohoe has chosen the cautious approach and based his budget on a no-deal basis. Any change is on the upside. Since the summer economic statement, Donohoe has been clear on managing expectations. He did it again last month when signalling there would be no tax cuts and minimal welfare hikes.
Such management has meant the run into today has been somewhat low key. That was until the weekend. Kevin Boxer Moran, the unconventional but highly effective OPW minister, went to war with his boss, Donohoe, when they met on Sunday night.
Boxer, like many rural TDs, was irate that the proposed increase in carbon tax, believed to be €6 per tonne, would unfairly penalise those living in the country, who have to use their car to get around.
Boxer, while paying tribute to Paschal’s tough job, stuck it to him. But it is clear Donohoe got stuck in right back.
A source said:
Paschal was not for budging and he gave Boxer as good as he got. It was not personal but it was certainly heated
Despite it being flagged for a full year, it is amazing that many rural TDs are now only kicking up about the potential impact, giving Donohoe a headache he could well do without.
With a pot of just €700m to divy up for new spending, Donohoe’s options are limited and frustration among his colleagues about his inflexibility has been palpable.
Overall, it is expected the country will run a modest surplus of 0.2% of GDP or about €600m this year, but this will slide into a deficit in 2020 should all the Brexit measures be needed.
There will be a welfare package of between €140m-€160m but there will be no across-the-board increases to welfare benefits.
Instead, we will see some targeted increases in supports for vulnerable children and older persons. So expect to see increases in the qualified children’s allowance and the living alone allowance.
Around 56,000 more people will receive medical cards after it was agreed the Government will pump €30m into giving those over 70 who are currently just above the current limit a medical card.
Even though it is the last budget before a general election, Donohoe has ruled out any major tax cuts, even though there was big pressure to do so. Minor tweaks are the most we can expect.
Certainly, he has regained control to some degree of the economic narrative which eluded him earlier in the year. Even though it is an impossible ask, Donohoe will have delivered his fourth budget and the sky has not fallen in.