Pity the poor officials in the Department of Finance finalising their budget sums. The guidance they have given is that there will be €1 billion to “give away” in in tax cuts and spending increases. As the Fiscal Council has pointed out, the real additional spending next year will be a good deal more, given the extra boost to spending agreed in the middle of this year. However Government officials will still need to sign off on the room for manoeuvre on budget day itself.
On the face of it, they may be able to increase the figure – a bit, anyway. Taxes remain well ahead of target. The feared Brexit impact on the UK economy has yet to emerge. And there has been a strong flow of recent job announcements from IDA companies and the possibility of more to come as some financial companies look to Dublin for a post-Brexit base.
No doubt the politicians would like €1 billion to turn into something more like €1.5 billion. Already the shopping list is going to cost a lot more than what is available. And a scheduled appearance on Tuesday by the Finance Minister and the Revenue Commissioner’s chairman in front of the Budget Oversight Committee to discuss new revenue-raising measures in the budget will highlight just how politically difficult finding new sources of cash will be.
We will have, no doubt, some extra excise duties on tobacco and fuel – particularly diesel. And it has long been signalled that tax bands and allowances will not be adjusted for inflation – meaning a bit extra from any pay rises will be taken in tax, effectively a stealth tax. But elsewhere there are few enough options.
This brings us back to the room-to-manoeuvre – the so-called fiscal space. There may be some additional leeway. But with tax returns decidedly mixed in the last couple of months and the Brexit threat remaining, any adjustment in forecasts is likely to be modest enough.
Enda Kenny and Michael Noonan have been warning about a “ Brexit-proof” budget for one reason – they know that the real room for giveaways is severely limited and are trying to make a virtue out of necessity.
