Finance Minister Paschal Donohoe will today deliver his election budget and announce up to €1.5bn in new spending, almost double what he previously said he would spend.
The Government, now on borrowed time, was nearly torn apart yesterday amid bitter internal disputes over the giveaway budget.
The additional spending will be divided up on a 4:1 basis between €1.2bn in new spending measures and €300m in tax cuts, as opposed to the 2:1 split agreed with Fianna Fáil.
A hospitality Vat hike, a 50c rise in the price of a pack of cigarettes, and a doubling of the betting tax have allowed Mr Donohoe to significantly increase the scope for spending measures.
An 11th-hour backlash from Fine Gael backbenchers forced Finance Minister Paschal Donohoe to abandon planned hikes in excise on diesel and alcohol.
Fine Gael ministers have lost patience with the Independent Alliance, especially Transport Minister Shane Ross, for bringing forward “endless” last-minute demands. They are now prepared to go to the polls as early as November if it comes to it.
“This budget process has been very, very difficult, not from Fianna Fáil but from the Independent Alliance,” said one minister.
Mr Donohoe will today deliver the final of three budgets under the ‘confidence and supply’ agreement with Fianna Fáil.
Taoiseach Leo Varadkar is set to reach out to Fianna Fáil leader Micheal Martin within days to seek an extension of the deal.
“Leo will be knocking on their door before the end of the week,” said one senior minister.
A spokesman for the Taoiseach said the invitation to talks issued to Mr Martin over the summer still stands.
Asked whether Fianna Fáil had put forward any timeframe for entering such talks, the spokesman said: “There is no indication at the moment.”
Mr Donohoe will begin his budget speech at 1pm today and will announce:
- A full return to the 13.5% Vat rate for the hospitality sector;
- The back-to-school allowance will increase by €25 while the qualified child allowance payment will rise by €2.20 a week for under-11s and €3 for over-12s;
- The budget for Housing Assistance Payment will increase by €120, largely to meet growing demand;
- The health budget will increase from €15.2bn to €17.2bn next year;
- An extra 100,000 free GP cards through a €25 increase in the access threshold, €55m for mental health funding, and €75m for the National Treatment Purchase Fund waiting list reform system;
- A review of the local property tax which will be limited to vulnerable and older people, a situation that means the squeezed middle will lose out on any reforms;
- An increase in homelessness funding;
- A €25 increase of the back to school allowance;
- A €2.20 a week rise of the qualified child allowance for those under the age of 11 and a €3 rise for those over the age of 12;
- A 20c increase of the minimum wage, to €9.80;
- And a “loosening” of means test subsidised support rules for families with children aged between three and 15 in need of financial help, a move that will cost €90m and will take up most of the €130m department’s budget rise.
Last night, Mr Donohoe finalised meetings with both the Independent Alliance and Fianna Fáil.
Alliance sources expressed anger and frustration at Fine Gael attacks on them, saying they were “unhappy with the carry on” of the party.
The Irish Examiner understands that Mr Ross has been at odds with Fine Gael colleagues over the Vat reversal.
Mr Ross is said to be most unhappy that his sector, tourism, will be hit for a significant tax increase, worth in excess of €500m, when, as he sees it, no other sector is being hit as hard.
By Daniel McConnell,Elaine Loughlin,and Fiachra Ó Cionnaith – Irish Examiner