Cantillon: Minister urged to balance the books

You don't have to read too far between the lines of the latest report from the Department of Finance on the national debt to see that officials want a cautious budget – more than currently indicated by the Government.

In an interesting response to report, Minister Paschal Donohoe gave no indication that he accepted its central point, which is that the exchequer finances should, at this stage of the economic cycle, be in surplus. At it is, the exchequer continues to borrow, albeit that the deficit has now fallen to a low level.

The report pointedly says on a number of occasions that continuing to run budget deficits while we have a high stock of debt – just over €200 billion– increases our vulnerability to any kind of economic shock. Our debt has fallen rapidly in recent years as a percentage of national income,

But the improvement has been due to the rising economy. Unlike other small EU economies, we have not – it points out – used the opportunity of putting the national finances back into surplus. State cash balances and the bank shareholdings do lower the burden a bit, but on any criteria our debt pile is still onerous.

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The Minister kept his powder dry in his official response to the report, saying that "it is crucial that we continue to stabilise the level of debt in Ireland and, subsequently, put it on a downward trajectory ".

Small deficit

At the moment, borrowing – using the EU measure – is not due to go into surplus until 2020, with a small deficit planned next year.

It is possible that strong growth this year may allow a balanced position to be targeted for next year. But already the pressure, particularly on spending, is intense, with the delicate Dáil arithmetic even forcing Donohoe and Taoiseach Leo Varadkar to pretend that they are taking the Shane Ross idea of a grant for grandparents minding children seriously.

While the report does not spell it out, the imminent risk for 2019 is that of a chaotic no deal Brexit. Nobody really knows what impact this would have on growth or the public finances, but surely better for the Government to leave as much leeway as possible.