Ireland

Surging business tax receipts trigger bitter Government dispute over capital spending

Paschal Donohoe’s department says spending bids ‘exceed’ funding

Paschal Donohoe is under pressure from Cabinet colleagues to allocate more funds to boost the National Development Plan. Photograph: Simon Wohlfahrt/Bloomberg

Arthur Beesley
Fri Mar 8 2024 - 06:00

Surging business tax receipts have triggered a bitter Government dispute over money as Minister for Public Expenditure Paschal Donohoe spurns Cabinet demands to boost the National Development Plan by more than €17 billion.

Mr Donohoe has set aside €2.25 billion from “windfall” corporate tax gains to fund new capital spending in 2024-2026 but his Cabinet colleagues have made demands for about seven times that amount.

The talks have been deadlocked for weeks, with a cascade of demands from ministers to fund a long list of new projects as the Coalition faces into a general election in the next year.

Although some submissions reflect inflation pressure on the cost of ongoing projects, the Department of Public Expenditure said bids for “additionality” in the development plan were “the biggest factor”.

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They include demands from Green leader and Minister for Transport Eamon Ryan for a big rise in money for the BusConnects programme, prompting sharp questions from some of his Cabinet colleagues about future road funding.

Minister for Education Norma Foley wants to bridge a “significant funding gap” in school building programme, some of which is stalled or paused.

But virtually all Cabinet members are said to have submitted big bids, with Minister for Housing Darragh O’Brien pushing to accelerate building and Minister for Arts Catherine Martin seeking money to “reconfigure” the Abbey Theatre in its current site.

In response to questions, Mr Donohoe’s department said: “As would be expected, demands across all sectors will exceed the available funding and the negotiations are focusing on reaching agreement with each of the sectors to allow key priority projects and programmes to be commenced and completed within the 2024 to 2026 period.”

After intensive meetings this week with ministers, Mr Donohoe is pressing to wrap up the negotiation by Easter.

But the talks have been described in Government circles as “quite difficult”, with one participant saying Mr Donohoe has maintained a hard line “against expansionism” in the development plan.

There is little sign of Cabinet members yielding as they seek to line up new capital projects for inclusion in the next phase of the national plan, which is likely to be a central strand in the election campaigns of each Coalition party.

“There’s multiples of billions more being sought than is available,” one Minister said.

At issue for 2024 is a €250 million allocation from “windfall” taxes in addition to the €13 billion the Government is already spending this year on schools, hospitals and transport under the development plan. Another €750 million is in the frame for 2025 and €1.25 billion for 2026.

The 2024-2026 negotiation is made more complicated because any deal will have an impact on separate Government talks, scheduled for early summer, on National Development Plan projects for the rest of the decade.

The looming election means ministers want to secure money now to start new long-term projects in 2024-2026 to ensure they go into the revised development plan for the years to 2030.

As tax revenues boom, capital funding is at an all-time high. In the final year of the Coalition’s term, deciding where the money goes next is contentious because of conflicting demands for investment on health, housing, education, transport and numerous other areas.

“Getting the national development stuff together is very sensitive because it sets the fiscal baseline for the Opposition to react to as well,” said one Coalition figure who is involved in the talks.

Citing capacity constraints in the economy, the Department of Public Expenditure said money “will be targeted at projects” which are the appropriate stage for advancement in 2025 and 2026.

“This would include the consideration of which sectors have been able to utilise existing National Development Plan allocations in recent years and who have a good track record of delivery.”

Arthur Beesley

Arthur Beesley

Arthur Beesley is Current Affairs Editor of The Irish Times

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