Cantillon: Summer economic statement should enlighten us

The word from Government circles is that Ministers want to keep their heads down as much as possible for the next few months, feeling that the last thing people want is to hear them again after the seemingly endless election campaign and the talks that followed.

Still, sometimes politicians can’t help but look for a bit of publicity and it will be interesting to see how next Tuesday’s summer economic statement is handled.

This, of course, is the document formally known as the spring economic statement and published alongside the official return of updated forecasts to the EU Commission, which must be made in April.

This year the returns to Brussels came as talks were continuing on government formation, and so the political document – renamed for the seasonal change – comes a couple of months later.

With the Brexit vote a couple of days later, a cautious enough tone may be taken in the statement. There will be some updating of figures to reflect tax trends in the interim, but the change will not be fundamental.

The scope for new measures will still be well below the €1.5 billion in the 2016 package, particularly when you consider that a similar amount was added to 2015 spending late last year in a series of supplementary estimates, which had the effect of giving some extra leeway in 2016 as well.

Brexit could still upset the sums, of course. If not, then Ministers Michael Noonan and Paschal Donohoe will have some leeway, but not a lot. Given that they will want to unveil some new measures, the challenge will be to find some extra revenues or savings to pay for this. The summer statement may give us the first clue of where these might come.

It is also likely to underline the areas where extra cash will be focused. With Fine Gael in government, we can expect the USC to be one of the targets for cuts, with the likelihood of a further cut in the main rate, which was cut from 7 per cent to 5.5 per cent last year.

There will again be measures to claw back gains from the better off. Politics may demand that most of the budget largesse goes on higher spending, but Fine Gael will not give up on its USC promise.