Another finance minister, another scolding report from the State’s independent budgetary watchdog, the Irish Fiscal Advisory Council (Ifac), about the Government’s financial planning.
Simon Harris scrambled to deal with the fallout on Wednesday after the report was released. He told RTÉ that his “number one priority” in the new gig was to produce the medium-term economic plan that Ifac has hauled political leaders over the coals for failing to deliver.
Harris and his Coalition partners may or may not meet their newly self-imposed deadline of the end of 2025.
But at least as troubling as the fact that the Government is “flying blind”, as Ifac said, in the absence of this plan are some of the themes that have emerged in recent budgets.
Ifac said it does not take views on the appropriateness of specific policy measures, such as the expensive – and, as Cantillon has highlighted, economically questionable – cut in the rate of VAT for the hospitality sector announced in October’s budget. This was the largest tax measure announced in what would turn out to be “prudent” Paschal Donohoe’s swansong as finance minister, costing in excess of an estimated €232 million next year.
And that is because the measure will only be in place from July next year. The cost to the exchequer will rise to €681 million in 2027. This and other commitments mean that a “sizeable tax package is already implicit for 2027″.
So, in a nutshell, while the Government doesn’t actually have a plan or forecasts in place for 2027, it already has several politically-charged spending promises to keep.
Harris committed to the hospitality sector VAT cut on the campaign trail last year after a very public campaign by lobbyists. This was at a time when the Government parties were, relative to their current numbers, riding high in the opinion polls after a giveaway budget in October.
It’s too early to say what sort of a finance minister Harris is going to be. But if polling numbers keep trending in the same direction for the Government parties, one worries what sort of budgetary choices the Fine Gael leader may end up committing to.
