A series of crucial pre-budget meetings to decide on spending increases and a multibillion cost-of-living package will begin this week.
Bilateral talks between Minister for Public Expenditure Michael McGrath and Cabinet colleagues look set to see sharp divisions as Ministers push for big spending increases.
The Department of Public Expenditure and the Department of Finance, however, will seek to limit any extra funding commitments to be announced on September 27th and retain as much of the €6 billion exchequer surplus as possible.
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Mr McGrath warned Ministers last week that their bids, submitted to his department in recent weeks, were unrealistic and would have to be moderated substantially. Sources said that some departments have sought spending increases of more than 20 per cent for next year.
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However, there is growing pressure to provide the public with significant budgetary and cost-of-living supports, which are due to be announced on the same day. Insiders expect there will be significant tensions on this issue within the Government over the next fortnight.
Energy and welfare
Keeping to the previously agreed budget spending ceilings is considered by insiders to be a red line for Mr Donohoe and Mr McGrath, though they will sanction a multibillion package of once-off measures, which are not counted as part of the budget figures as they do not form part of next year’s spending plans.
These are likely to be paid over the coming months and will involve further energy credits and potentially additional welfare payments. Reports over the weekend suggested that electricity credits of €200-€250 could be paid to consumers this year and next, but sources said no decisions had been made on the level or timing of any credits yet. The three Coalition party leaders are likely to discuss budgetary details when they meet this week.
The Government will face additional scrutiny in the run-up to the budget from this week, with the Dáil returning on Wednesday after the summer recess. Sinn Féin said on Sunday that it would table a Dáil motion seeking to cap electricity bills at 2021 prices, though such motions are not binding on the Government.
The series of budget meetings will intensify throughout the week and into next week, as Ministers seek to agree their departments’ annual allocations.
The Coalition must also decide on a package of tax measures, totalling some €1 billion. Fine Gael sources said that there was strong support at the party’s think-in for a measure mooted by Tánaiste Leo Varadkar which would see a third income tax rate of 30 per cent introduced for middle-income earners, though others in the Coalition remain sceptical. The cost of extending a Vat cut on electricity and gas will also come out of the €1 billion set aside for tax reductions.
