Plans to spend an extra €9.4 billion on public services, tax cuts and building projects next year will be reconsidered if the US imposes tariffs on EU imports, Minister for Finance Paschal Donohoe and Minister for Public Expenditure Jack Chambers said on Tuesday.
But they, along with Taoiseach Micheál Martin and Tánaiste Simon Harris, pledged that if there is pressure on spending plans, they would protect infrastructure budgets and cut growth in current spending on public services, welfare and tax cuts to realise the necessary savings.
The Coalition leaders launched a review of the National Development Plan (NDP), promising to spend €100 billion between now and 2030 – a €30 billion increase over what was planned – to improve water, energy, transport and housing infrastructure.
The ambitious plans were overshadowed by the threat of a trade war between the European Union and United States that Mr Donohoe and Mr Chambers admitted could compel them to revise plans published on Tuesday for a budget day package of €9.4 billion in October.
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In the event of high tariffs, the Government would “recalibrate its fiscal strategy” and reduce the budget package to keep public finances stable, said Mr Donohoe.
Already, the plans for October’s Budget 2026 envisage growth in public spending being trimmed from 8-9 per cent of recent years to 6.4 per cent next year.
Mr Donohoe said there would be a package of tax cuts of some €1.5 billion. But he added that the cost of cutting VAT on hospitality – a Fine Gael election promise included in the programme for government – would amount to nearly €1 billion in a full year, meaning the scope for any tax adjustments to rates and bands would be reduced significantly.
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“It would not be right to grow the scale of our tax package,” said Mr Donohoe.
The Coalition published the amended NDP and summer economic statement at Government Buildings on Tuesday.
The NDP promises expenditure of €25 billion on capital projects in 2026, with the amount increasing every year and peaking at €28 billion in 2029. The total is set to reach more than €100 billion by 2030.
The plan was immediately criticised for not identifying individual projects, though the Government did point to a small number of “megaprojects”, including the Dublin Metro and two big water schemes: the Shannon to Dublin water supply project and Greater Dublin Area drainage initiative.
Social Democrats spokesman on public expenditure Cian O’Callaghan said the plan is “so vague it doesn’t even rise to the level of wish list”.
Sinn Féin’s health spokesman, David Cullinane, said the allocation for health falls “far short of what is needed” over the next five years.
Labour’s Marie Sherlock, meanwhile, has said the €2 billion allocated for the MetroLink is “hardly a vote of confidence that the project will be substantively progressed in this decade”.
The summer economic statement, normally a key document in the preparation of the October budget, was considerably shorter and less detailed than usual. It contained several warnings, however, about threats to the State’s public finances from several sources.
[ NDP shows Government about to bet big on capital expenditureOpens in new window ]
“Even before the full impact of tariffs takes hold, it is increasingly evident that heightened levels of uncertainty have prompted firms to delay investment plans and households to step up precautionary savings. These headwinds are set to slow the pace of economic expansion,” it said.
The document also warned that the “headline surplus is now likely to be considerably lower than set out in the spring”.
It flagged that spending pressures in several Government departments will require additional funding above their agreed allocations, prompting Mr Chambers to warn of the need for spending discipline and an end to bailouts in the second half of the year – a now familiar necessity in some departments.
