PENDR Minister Paschal Donohoe TD: ‘It’s always pressure’
Ciarán Galway speaks with Minister for Public Expenditure, NDP Delivery and Reform, and Eurogroup President, Paschal Donohoe TD, about his portfolio, Budget 2025, ambitions, and the approaching general election.
Discussing the priorities of his portfolio, Donohoe identifies three:
1. determining how to “continue to deliver the spending plans that the Government has agreed to inside the parameters that were agreed as part of Budget 2024”;
2. working to deliver the National Development Plan; and
3. identifying the role of technology in better delivering public services.
In April 2024, Tánaiste and Minister for Foreign Affairs, Micheál Martin TD, suggested that some ministerial portfolios are “overloaded” with too many responsibilities.
Donohoe denies that this is a critique that can be applied to the Department of Public Expenditure, NDP Delivery and Reform. “I think the portfolio and work of the Department of Public Expenditure is nearly perfectly apportioned,” he suggests, adding: “Our job is to focus in on spending and public service reform. It is our sole mandate, and it is an essential cog in how the machinery of government turns.”
Better Public Services
One year on from the publication of Better Public Services, the new transformation strategy for the public service, the Minister indicates that he is most excited about “the progress that I think we are about to make in our Digital Wallet, in how we can bundle public services together and bundle that important information people have about their lives as citizens in a single place”.
“Corporate tax receipts are not falling; they are just not rising with the speed they used to.”
Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe TD
“This is going to be a really, really good change,” he predicts.
NDP delivery
Speaking with eolas Magazine earlier in 2024, the Minister said that “the overall level of capital funding is now at an all-time high. In 2024, €13 billion will be made available for investment”. Likewise, he recently indicated that the updated Project Ireland 2040 Progress Tracker and the updated MyProjectIreland interactive map “demonstrate the many successes we have had in the delivery of the NDP”.
However, in May 2024, comments made by the chair of the National Competitiveness and Productivity Council, Frances Ruane, cast doubt on this progress. “To be globally competitive, your domestic infrastructure must be high quality, well delivered, and predictable… So we need to be globally competitive. And actually, quite frankly, we’re not,” she said, adding: “To me a real worry is the government has signed up to things and they are not delivering. The delivery of the NDP and the speed of the delivery of the NDP is a real problem.”
Asked to respond to these comments, the Minister acknowledges that the views of the National Competitiveness Council “are always listened to and I always find them very helpful”.
“But we are an economy at full employment, we are an economy that has capacity constraints, and that is a pretty significant factor in the challenges that we have had in the pace of delivering the NDP. That is a challenge which is very difficult for any government to try to quickly change,” he adds.
Asked how government intends to address the challenges highlighted by Ruane, Donohoe indicates that there are two particular pieces of work.
“The first one is the changes that the Oversight Board of the National Development Plan have made, changes that we have made in relation to the Public Spending Code, changes that we have made in terms of looking at the resourcing that is available to organisations like An Bord Pleanála.
“The second significant change that we have made is the allocation out of €2.25 billion for this year [2024], and the next two years, to ensure that government departments have adequate funding in place to deal with the impact that higher levels of inflation have had on important capital projects,” he says.
Stability Programme Update
In April 2024, Donohoe published Stability Programme Update (SPU) 2024 alongside Minister for Finance, Michael McGrath TD. Asked what role the SPU plays in the budgetary calendar; the Minister indicates that it establishes the baseline for the forthcoming budget.
“It says that if no further decisions were to be made, what is the starting point for Budget 2025 – and of course we are going to make further changes. That is why we will have a Summer Economic Statement and it says that this is the starting point in the journey for delivering next year’s [2025] budget,” he explains.
Commenting on the SPU’s projections, Minister McGrath said: “Available evidence suggests the economy is in reasonably good shape.” Asked to outline his own assessment, Donohoe remarks that he has “a very similar assessment”.
“What it means positively is that we have never had more people at work in Ireland. What it means in a positive way too is the rate of inflation is quickly falling. The difficulties that are there are the challenges that small and medium sized businesses are facing at the moment and the challenges that many employers face in getting the right numbers of people with the right skill level to do work that is important in our economy and our society.
“So, we are in a reasonable condition, but with everything that is going on in the world at the moment, we are in reasonably good shape.”
Anticipating external headwinds
In relation to government’s anticipation of the impact of external headwinds – such as the continuing Russian invasion of Ukraine – on budgeting for public expenditure, Donohoe emphasises the additional funding being allocated to the NDP, and the Government’s establishment of the Future Ireland Fund – to help deal with future recognised expenditure pressures – and the Infrastructure, Climate and Nature Fund – to deal with the pro-cyclicality of capital spending.
These national reserve funds are, the Minister says, intended to “ensure that we have the safety nets in place” so that “if and when shocks begin to intensify” the State can “bounce back again”.
Though the Minister for Finance is leading on the Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill 2024, Donohoe indicates that he expects the legislation to be enacted “by the summer [recess]”.
Exchequer figures
Upon publication of Exchequer figures to end-April 2024, the PENDR Minister suggested that current expenditure risks are emerging. Indeed, end-April 2024, current expenditure was at €30.1 billion, or 12.1 per cent (>€3 billion) ahead of the first four months of 2023.
Donohoe acknowledges that “as we began the year [2024], public spending was significantly ahead of what we had planned it to be”. However, addressing the potential challenge for public services, he emphasises that by April, the “positive and good news” is that many government departments had “taken the actions required to bring public spending back into line with our plans”.
“We still have a number of government departments in which we have further work to do, which we will do as the year goes on,” he concedes, adding: “In terms of the challenge that means, the further we are ahead of our budget day plans in any given year, the more difficult it is to do a budget for the following year.
“It means we end up with a smaller surplus. It means we have less money available for new policy decisions next year. I do not want to see either happen and that is why I am working closely with all colleagues in government.”
Corporation tax receipts
Amid potentially reduced corporation tax revenues, following a significant dip in March 2024, departmental spending over profile, and a coming general election, it could be suggested that Donohoe’s control of current spending is under pressure.
“It’s always pressure. It is just the nature of the pressure that changes,” he observes, elaborating: “Corporate tax receipts are not falling; they are just not rising with the speed they used to. They are actually fully in line with our expectations.
“Yes, of course, there is a general election coming up. The people of Ireland will evaluate the performance of this government over the five budgets we have done, not just one. I will be keeping that in mind when doing the budget. We took a sensible approach to the last four budgets, and I am sure we will do the same for the next.”
Capital underspend
A total of €532 million in capital spending was carried over into Budget 2024 from 2023 across 15 government departments and state bodies, particularly in housing, transport, and health. Asked to account for this, the Minister insists that there is “no underspend anymore”.
“All government departments are ahead of what they spent last year [2023] and will be on profile for this year. Virtually nobody last year – very few government departments – handed back [capital allocations]. The days of big capital underspends are now in the past.”
Budget 2025
In April 2024, Taoiseach Simon Harris TD used his first leader’s speech at the Fine Gael ard fheis to restate his belief that nobody earning below €50,000 should pay the higher rate of income tax. “Everybody knows that Fine Gael stands for lowering the tax burden,” he proclaimed.
Meanwhile, both the Taoiseach and the Minister’s party colleague, Senator Maria Byrne, Fine Gael’s Seanad Spokesperson on Finance, wryly commented: “It is most welcome to see other Government parties are finally accepting that tax cuts and more money back in people’s pockets is the correct way forward.”
Unfazed by the – relatively early – discourse, Donohoe assesses that “is a regular feature of budgets that there is always lots of speculation. It has just happened slightly earlier in the year than normal”.
Pushed on what citizens can expect in terms from the coalition parties in terms of tax cuts in Budget 2025, the Minister insists that they will “be collaboratively preparing a budget together”.
“It is an inevitable feature, before a budget is done, that there is speculation regarding what is going to be in it. It has been a feature of every single budget that has happened in Ireland that I can remember, and I do not expect it to change this year,” he responds coyly.
Ambitions
Asked about his personal ambitions for the remaining lifetime of this government, Donohoe is more forthcoming.
“For the final budget to be a sensible budget that gets the balance right between meeting the needs of today and not creating risks tomorrow. If I have learned anything in politics now, it is that we never know what is around the corner.
“What is around the corner is not always a bad thing, it can sometimes be an opportunity we never considered, and the way to deal with the risks and make the most of the opportunities is to have public finances that are in good condition,” he asserts.
Donohoe’s ambitions beyond the lifetime of this government have been the subject of much speculation. Speaking with schoolchildren in the week before this interview, the Minister had indicated that “earlier in my youth I wanted to be a writer”.
“I have a few books in me,” he says, qualifying: “But I think it will be some time before I get to writing them.”
General election
At the recent Fine Gael ard fheis, former Taoiseach and party leader, Enda Kenny suggested that the coming general election would be “the mother and father of elections”. Discussing the prospect and the durability of his famously positive relationship with Fianna Fáil cabinet colleague, Michael McGrath TD, the Minister speaks with confidence.
“My relationship with Michael McGrath is far deeper than congeniality and I am certain that it will be able to deal with the challenges that later on in the year will bring us.
“This is going to be probably the most important election in my political lifetime, and we will be putting our best foot forward, going into the contest with confidence, and looking forward to making the case. It is still some time away though, and we have plenty to do before we get there,” he says.
Commenting on whether he will stand for re-election, Donohoe responds abruptly: “Yes.”
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Excerpts from Minister Donohoe’s speech at Public Services Conference 2024 On Better Public Services: On digital government: “One of our flagship projects to drive access to innovative digital public services under Better Public Services is the life events programme and the government digital wallet… In collaboration with partners across the public service, this will be further tested and rolled out this year [2024] and I look forward to providing further updates on the launch and roll out.” On a design-led approach to public service delivery: “My department is leading on work to embed design and other innovative methods to support policy and service development working closely with colleagues across government departments and the wider public service to ensure we use the best available approaches, evidence, research and data to support transformation.” On artificial intelligence: “The prevalence of AI across a variety of sectors provides an inflection point that allows the public service to take stock, review and reimagine the workforce of the future; one in which technology can become a core delivery partner in transforming and providing better public services for the people of Ireland. Our ability to use AI to its full potential, also relies on the availability and quality of our data.” Summary: |
