Summer economic statement delayed by divisions at top of Government

Division between Fianna Fáil and Minister for Finance over house funding and deficit

Divisions on economic policy at the highest level of Government have delayed the approval of the summer economic statement, one of the most important budgetary documents of the year.

The statement was due to have been approved by the Cabinet on Tuesday but was not brought forward by Minister for Finance Paschal Donohoe because he has not yet reached agreement on its contents with Taoiseach Micheál Martin, Green leader Eamon Ryan and Minister for Public Expenditure Michael McGrath.

It is understood that talks between officials were continuing on Tuesday night in a bid to reach agreement in time to present the statement to a second Cabinet meeting either on Wednesday or Thursday morning. Senior officials insisted that it will be published this week.

However, there is understood to be significant division, with Fianna Fáil pressing for a substantial increase in capital funding for housing which will be included in the Government’s new housing plan next week, while Mr Donohoe wants to enshrine a commitment to deficit reduction in the document.



It is understood that there was a brief discussion on the issue at the conclusion of Tuesday’s Cabinet meeting in which Mr Donohoe expressed his concern about the fiscal credibility of the Government if it could not resolve the issue and produce a robust economic statement. Sources said that the Taoiseach intervened and said he agreed with Mr Donohoe but that the Government had to sort out the housing issue.

It is expected that the “Housing for All” plan, a new housing strategy to be published by Minister for Housing Darragh O’Brien next week, will see a big increase in the amount of public money committed to build public housing.

But there are growing concerns in the Department of Finance about the level of spending commitments in Government, and Mr Donohoe has pointed on a number of occasions in recent weeks to the need to reduce the deficit and control borrowing.

The row goes to the heart of one of the biggest issues facing the Government – the adjustment in public spending from pandemic levels to more normal post-pandemic levels.

Mr Donohoe is known to be keen to set a budgetary framework for the coming years that would see a gradual reduction in the budget deficit and the level of borrowing reduced and ultimately eliminated for current spending.

While there is general agreement in Government on this goal, there are significant divisions about the pace of the adjustment. Mr Donohoe is said by colleagues to be determined that the State will not be running a large current deficit in 2023, meaning that adjustments will have to begin next year, and be included in next October’s budget. The summer economic statement sets the framework for the October budget, thus igniting the row this week.

Mr Donohoe is also understood to have told colleagues that he will not agree to a statement that is effectively undermined next week by large spending commitments that are not provided for in this week’s document. Meetings between Ministers and officials will continue on Wednesday.

Pat Leahy

Pat Leahy

Pat Leahy is Political Editor of The Irish Times