Budget 2024: McGrath and Donohoe set to resist demands for increased spending

Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe are set to resist demands from colleagues for spending increases and one-off Budget 2024 giveaways matching last year’s levels, as budget negotiations within Government move up a gear.

Most government departments have finalised their initial budget bids, but officials from the Department of Public Expenditure have pushed back against a series of proposed spending increases which, if granted, would burst existing budget ceilings.

Initial exchanges have taken place, including a meeting between the Department of Health and public expenditure officials last Friday. There is significant concern in the Department of Public Expenditure about overruns on the health budget this year, and about the cost of maintaining the existing level of service next year.

Decisive bilateral meetings involving the relevant Ministers will not commence until the second half of this month. But senior finance and public expenditure sources played down media reports over the weekend that the budget package would be as large as last year’s, with one figure involved in the process insisting that the one-off measures would be less than last year.

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Mr McGrath and Mr Donohoe announced a budget package of €6.4 billion during the summer, consisting of €5.25 billion in spending increases and €1.15 in tax reductions. In addition, a large package of one-off measures is expected, intended as a response to increases in the cost of living. Last year, there was more than €4 billion in one-off measures, including energy credits and welfare payments.

A source said the package of one-off giveaways – so-called because they do not automatically happen on an annual basis – would not be decided until the weekend before the budget, which takes place on Tuesday, October 10th.

“By then we will have the Q3 exchequer returns and a better sense of whether recent weakness in tax returns is a blip or possibly a turning point,” the source said.

But the two budget Ministers – who have bluntly told their colleagues that the level of spending increases sought is not compatible with the limits agreed by the Government during the summer – face the political reality that this may be the last budget before an election and consequently the demands for spending are even more intense than usual. Large surpluses only add to the pressure. The attitude of the party leaders to budget questions is expected to be crucial.

Further pressure on the spending limits will be felt from any new public-sector pay deal agreed this autumn. The existing deal expires in October and it had been expected that the Government and unions would seek to agree a successor deal before the existing agreement expired. However, it is understood there has been little substantive engagement between the sides.

Last year’s pay deal saw unions accept a 6.5 per cent pay rise over last year and this year, with 3 per cent backdated to February 2022. They received 2 per cent last March and are due to get the final 1.5 per cent in October.