Budget 2018: Donohoe holds last-minute meetings to agree final details

Minister for Finance Paschal Donohoe is holding last-minute Budget negotiations with fellow Cabinet members, Fianna Fáil and Independent Alliance members ahead of his speech tomorrow.

An early afternoon meeting with Fianna Fáil’s public expenditure spokesman Dara Calleary will follow talks with Minister for Social Protection Regina Doherty, who is already being heralded as one of the Budget day “winners”.

The discussions represent a delicate dance between Mr Donohoe and his various political partners, who are continuing to seek small adjustments on the composition of the income tax package and spending measures to be announced on Tuesday.

The confidence and supply arrangement between political “frenemies” Fine Gael and Fianna Fáil, combined with the relatively small amounts of money at Mr Donohoe’s disposal, mean Tuesday’s budgetary announcements are unlikely to be dramatic.

However, the Independent Alliance Ministers are doing their best to inject some late tension into the negotiations, with Minister of State with responsibility for disabilities Finian McGrath currently threatening to resign unless his demands are met.

His concerns apparently centre on €3.4 million of funding to give effect to Ireland’s ratification of the UN Convention on the Rights of Persons with Disabilities.

Fianna Fáil is highly sceptical about the Independent Alliance stance on this issue.

Fianna Fáil perspective

Of more concern to this party is how it convinces voters of its own imprint on what has been widely flagged as a “modest” budget.

From the Fianna Fáil perspective, the confidence and supply arrangement signed in 2016 was based on achieving progress in priority areas over three budgets, subject to review at the end of 2018.

The party’s request for a €5 increase in almost all welfare payments appears to have taken hold in the public consciousness to some extent. But the amount and, crucially, the timing of any increases have yet to be tied down.

Fianna Fáil also wants to be able to point to successes in the areas of pupil/teacher ratios and post-graduate grants.

Measures aimed particularly at lone-parent families are expected, as are further reductions to prescription charges and a partial restoration of the bereavement grant.

Mr Donohoe is expected to outline a package of new tax cuts and spending increases of between €900 million and €1 billion, split on a 2:1 basis in favour of spending, although Fianna Fáil would prefer a greater spend on services.

At the conclusion of Monday’s discussions, Mr Donohoe will also have decided on his preferred method of reducing the universal social charge (USC).

The 5 per cent rate, which applies on income between €18,800 and €70,000, may drop by 0.5 per cent. Otherwise, the 5 per cent rate and the 2.5 per cent rate, which applies on income between €12,000 and €18,800, will be reduced by 0.25 per cent each.

There will be much focus on the threshold at which the higher rate of income tax kicks in.

Brussels-based Fine Gael MEP Brian Hayes' warning in a statement released on Monday that Budget 2018 "should not stray an inch from the EU fiscal rules" highlighted the constraints Mr Donohoe is operating under.

“What many fail to realise is that if we reach a balanced budget by next year, then we will have reached our Medium Term Objective under the fiscal rules,” Mr Hayes said.

“With a balanced budget, we have a great deal of flexibility to spend and ramp up capital investment. But removing our deficit by 2018 has to be the key priority.”