Paul Hosford: US tariffs take shine off summer economic statement

Irish Examiner

4 days ago

Tariffs. They are the prince to the hamlet of global economic conversation, the dark cloud blotting out the sun of economic prosperity; they are omnipresent.
On Tuesday, in Government Buildings, their prospect hung low as the Government announced its summer economic statement and National Development Plan.
In a two-and-a-half-hour session of back-to-back press briefings, government leaders stressed the need to "recalibrate" economic plans in the face of the Trump administration's threats of a trade war with the EU.
While Tánaiste Simon Harris has said that a 10% scenario is "baked in", the summer economic statement was based on a zero-tariff scenario. This, both finance minister Paschal Donohoe and public expenditure minister Jack Chambers, said would see the plans for the budget change if tariffs aren't avoided after August 1.
In the document, the tax package available will amount to €1.5bn. The spending package will be €7.9bn, an increase of 7.3% on the revised 2025 general expenditure ceiling, but there are caveats.
The most notable is that the Government isn't sure how much of that €7.9bn is spoken for. In previous summer economic statements, the existing levels of service has been outlined to break the available money down between extra spending and tax cuts.
However, Mr Chambers said on Tuesday he was going to "engage with government partners" on just what their spending for this year will actually be. So, as of now, there is no clarity on just how much money Mr Chambers has to play with when ministers come banging on the door looking for their spending envelopes in September.
Of course, Mr Chambers later said that this year's spending ceiling of €105.4bn will be overrun by €3.3bn, meaning that some departments will receive supplementary budgets.
Uncertainty reigns
The document itself is much more limited than previous ones, not featuring projections for future years, a sign that uncertainty reigns.
"Our budget day decisions could change depending on the economic environment we find ourselves in during the summer and beyond," Mr Donohoe said, rejecting the idea that the statement was a wasted exercise given that much of the economic outlook will be decided after the EU and US decide what the future of their relationship will look like.
It's very clear that we're at a moment of significant transition
That level of transition is weighing heavily on Irish policymakers but, as they preach prudence on one hand, government leaders had taken to the same stage just minutes previously to talk about record amounts of money which would be unleashed to build houses, infrastructure, and safeguard future finances.
The revised National Development Plan was touted as "transformational" and would "overcome pinch points that are holding back investment", but its announcement was a lot less prescriptive than in previous years.
Whereas plans in the past were effectively a shopping list of projects it would aim to deliver from roads to mega projects in water, electricity, and transport, this version is more a statement of intent.
With billions set to be deployed, categories for spending were remarkably vague.
Much of the investment will go towards housing, with a total allocation of €36bn in the next five years. Some €7.68bn of this will go to water. This does not include another €4.5bn in 'equity injections', which brings the total for housing and water to €40bn. Some €22.3bn will be spent on transport, with €2bn for the Dublin Metrolink.
Sea change in Irish policy
For the public who are hearing that belts need to be tightened and day-to-day spending is to be "moderated", they may look at the billions heading towards projects aimed at other parts of the country and wonder where all of the money is going. In truth, we don't know yet.
The plan is merely a way for the Government to ringfence funding that can be argued for when individual departments work out what they can deliver and when. Pumping money into infrastructure is both necessary and overdue, but the watchword here will be delivery.
For something which is being touted as a sea change in Irish policy, it doesn't feel like it
This is largely down to two factors: A lack of detail on projects, and even less detail on how delivery of infrastructure is going to change pace in Ireland all of a sudden.
The ringfencing of €2bn for the Metrolink in Dublin was hailed as a show of commitment, but the project has been on the political agenda for a decade — after a decade and a half of planning before that.
I, personally, have been to two launches. At what point was it not committed to?
The plan is a war chest the likes of which has never been seen. It has the potential to genuinely transform Ireland. However, its lack of a detailed timeline or plan of how this will be achieved will leave much to be desired from a public that is facing the reality of an economic downturn head-on.
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