Paschal Donohoe to cut hundreds of millions from budget plans

The Minister for Finance is to restrict the room for extra budget spending even further than previously flagged with Fianna Fáil, whose support is needed to pass the October budget.

Paschal Donohoe is expected to tell Fianna Fáil that at least €800 million it had understood would be available will now not be included in the calculations for next year's budget, the final of the confidence and supply deal.

Michael McGrath, the Fianna Fáil finance spokesman, has said this money would normally already be accounted for and would not need to come out of the budget spending package.

Fianna Fáil sources have accused the Government of attempting to trap the party into a position where it can be accused of making unrealistic spending commitments as an anticipated general election approaches.

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“They are trying to lay traps for us but we are not going to allow that to happen,” said one frontbencher.

Recent weeks have seen Taoiseach Leo Varadkar claim Fianna Fáil would "bankrupt" the country, leading Mr McGrath to accuse him of "political mudslinging".

Mr Donohoe recently said that €2.6 billion, out of what was initially expected to be a €3.2 billion package, had already been accounted for, but Fianna Fáil has pressed him on these figures.

Mr McGrath has specifically asked about €800 million to cover population changes and public sector pay.

Breakdown of funds

The issue of the exact breakdown of funds available to the Government was discussed at a private meeting of the Oireachtas budgetary oversight committee last week. "It's fudged," said one source. "We don't know."

Mr McGrath said the Minister for Finance should fully outline the “facts” of what money is available. He said it had been established practice up to now that the cost of population changes and existing public sector pay commitments were not taken out of proposed new money.

“We need to know from Government if there has been a change or if there are new costs,” he said. “If there is a change, it will be a change from the Government side.”

A spokeswoman for Mr Donohoe said the amount of money available for spending next year would be set out in the summer economic statement. She said the recent stability programme update outlined pre-committed expenditure commitments, including the €800 million on pay and demographics, but this has been queried by Mr McGrath.

It comes as Fianna Fáil will this week announce a €10 billion policy to provide 50,000 affordable homes over a five-year term of office.

One senior Government source accused Fianna Fáil of “riding two horses” on budgetary matters and claimed the party “will come unstuck”.

“They are riding two horses. In government and out of government – prudent and responsible McGrath versus promises O’Dea and Byrne.”

This is in a reference to Fianna Fáil social protection spokesman Willie O'Dea and education spokesman Thomas Byrne.

However, some within Fianna Fáil believe the Government is deliberately trying to provoke a row in advance of expiration of the confidence and supply deal.