Taoiseach Leo Varadkar has advised against “excessive caution” in the coming years as he finalises plans for Budget 2024. He was speaking at an event at Grant Thornton’s offices in Dublin to mark the opening of the professional services firm’s new Mobius workspace.
He said in the 12 years he has served in government there have been three major external shocks – the global banking crisis, Brexit and the pandemic. “On all three occasions we bounced back more quickly and strongly than anyone thought would be the case.”
He said “one of the biggest risks I think in policy-making is an excess of caution. You will always have civil servants advising caution.”
He cited previous examples when the housing budget was cut in recessionary times. “There’s a cost to that,” he said.
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The Fine Gael leader also defended the Government against criticisms made by bodies such as the Irish Fiscal Advisory Council, who have warned about cutting taxes.
“I disagree with them on two counts. They are saying that the Government is being procyclical and not countercyclical. I don’t think taking €10 billion out of the economy this year and next year is procyclical. It wasn’t just a figure that we made up.
“It was based on inflation being around 2 per cent, and then 3 per cent to take account of demographics and the fact that every year we want to do a little more to improve services. But inflation isn’t 2 per cent, it is running at 5 per cent. So sticking to that rule doesn’t make sense in the current environment.”
He said his three main budget priorities are addressing the cost of living, delivering a package for small business and addressing child poverty.
He said the Government would put some of its projected surpluses into debt reduction and the rest into two funds. One would be a fund to meet future pension needs.
Asked if Fine Gael will be in government in the next downturn, after he warned it would eventually happen, he said: “I do hope if it isn’t me, it is people who think like me who are there at the time. I would fear the decisions that others might make if they were genuinely faced with dealing with a crisis, given their history.”
