Cantillon: To spend or not to spend – FF seem to want it both ways

It was always said that Opposition politicians could have it every way. And even in their strange state – propping up the Government via a confidence and supply arrangement – Fianna Fáil is quite happy to continue this honourable trend.

Fianna Fáil ministers were prominent before the election in calling for a range of concessions: more spending on education and on pensions, in particular, as well as trying to influence the shape of the tax and USC package. However, this has not stopped party finance spokesman Michael McGrath from calling on the Government to exercise greater caution in future.

“Given the deep uncertainty and the major external challenges we face, the Government will need to exercise greater caution going forward,” McGrath said in a statement on Monday. Indeed. But why did his party not then call for a more prudent route on budget day itself, or in the run-up to it?

The background to this was a warning given by the Department of Finance on the publication of the October exchequer returns, which was that tax would have to come in on target in November and December, if cash was to come in to pay for some €850 million of additional spending which the Government had committed to this year.

The department left open the question of what would happen if the tax targets were not met – some one quarter of all tax revenues are collected in November and December, a heavy period for income tax and corporation tax in particular. However, Minister for Finance Michael Noonan said in a parliamentary reply to a question from McGrath that if taxes did not hit target, then the budget deficit would come in above target. This may seem a statement of the obvious, though there is an alternative: trimming spending.

It all indicates that the long period when taxes continually overshot targets may be coming to an end. The targets for this year may just be met, but borrowing will not come in way below target, and next year could be an interesting one for the exchequer. In response, how will Fianna Fáil line up as the public sector unions come looking for early pay rises?