Harris warns of ‘dark cloud on the horizon’ amid US tariff threat

There are “dark clouds on the horizon” the Tanaiste warned, as looming US tariffs influenced discussions between ministers and key budgetary stakeholders on Monday.

Simon Harris was among attendees at the National Economic Dialogue at Dublin Castle, regarded as one of the first steps of the Budgetary process, where Finance Minister Paschal Donohoe also told those gathered that the “near-term outlook is clouded in uncertainty”.

He made the comments before speaking with EU Commissioner Maros Sefcovic, who said there had been “positive momentum” in EU-US trade negotiations.

While ministers express reluctance to openly engage in Budget speculation at this stage of the year, Mr Donohoe appeared to indicate that cuts to hospitality VAT are more likely to be a feature than income tax measures.

He said that “choices have to be made”, while also taking a less severe stance on the possibility of tax breaks for developers.

In his speech to the conference, Mr Donohoe said the headline Budgetary surplus “masks considerable vulnerabilities” as it arises from a handful of corporation tax receipts from large multinationals.

He warned: “The mood-music is changing. It is not appropriate – indeed it could be dangerous – to plan on the basis of these receipts being permanent.”

Asked if the potential lack of an income tax cut in the Budget would mean his party had misled the public in the run-up to the general election, Mr Donohoe told reporters he had made “very clear” during the campaign that “choices have to be made”.

“I am confident that if we are in a position of stability within our public finances in the time ahead, the commitment that we have laid out in the Programme for Government, that we can deliver them.”

Asked if lowering the VAT rate for hospitality was more pressing, the Finance Minister said that was a shared priority across Government.

“What we want to look at together is what are the decisions that will keep and grow jobs, keep our country safe and help us invest in the future?”

His Fine Gael party leader, Mr Harris, told reporters that no decision had yet been made but acknowledged the Government had given a “solemn” commitment around VAT cuts for hospitality.

“It’s not about a tax cut for businesses, it’s about recognising that in every town, in every village, there are small businesses creating employment that want to be able to keep going and need to be supported.”

He said ensuring people have employment is the “best way” to help with the cost of living.

The comment was criticised as “unbelievable” by Sinn Fein leader Mary Lou McDonald.

Reacting in a social media video, she said: “Newsflash Simon, people already have jobs and they still can’t afford the basics.

“This crisis is being driven by runaway prices and a government that refuses to act. Families need help now.”

Ms McDonald also called on members of the public to participate in a protest outside Leinster House which is focused around housing policy.

In that area earlier this year, Mr Donohoe criticised broad tax reliefs for developers as a policy which previously did “such harm” to the Irish economy that should not be reintroduced.

Asked on Monday if he still opposed tax cuts for developers, Mr Donohoe said: “How we support and deliver more infrastructure in our country, and particularly how we work more homes, is going to be key feature of the budget.

“What I just want to ensure is that any decisions that we do make are ones that are affordable and well designed.”

Pressed on whether his stance had changed, he said he had outlined his views in the past and was now focused on working with Mr Chambers and party leaders on the Budget.

Also asked about a potential tax break for developers, the Taoiseach said he did not want to speculate on taxation measures but added that “very significant priority” was being given to housing under the national development plan.

Micheal Martin said creating a certainty of policy “is going to be crucial”.

Mr Martin also identified two other priority areas for the budget including targeted measures on child poverty as well as investment for those with disabilities, including income support, respite services, transport and in-school therapy.

Asked if this included different levels of children’s allowance or a means-tested support, he said “nothing’s off the table”.

He added: “Child benefit remains, I’m saying we’re looking at more targeted responses on the childhood poverty issue.”

However, the Fianna Fail leader noted that a second, targeted tier of child benefit – which was listed as something to be explored under the programme for Government – would require “very significant expenditure”.

Mr Martin told reporters that ending the means test for the carers allowance will also “come under consideration” but said the Budget was not being decided at the event.

Asked what impact US tariffs on Europe would have on the Budget, Mr Martin said any decisions taken would have to consider ongoing effects, which will impact the medium-term outlook.

“Until it’s resolved and until certainty can be restored, then it will be challenging in terms of designing a new Budget.”

On Monday evening, Mr Harris spoke with EU commissioner for trade and economic security Maros Sefcovic and was told there had been “positive momentum” in EU-US trade negotiations.

“This evening I was updated on the ongoing EU-US trade talks by Commissioner Sefcovic,” Mr Harris said after the call.

“He reported that there has been positive momentum in recent weeks and that he is hopeful that negotiations will continue in this direction.

“It is clear that the EU will continue to push for a mutually beneficial agreement, which is also the message I gave to the US trade representative Jamieson Greer when I spoke with him last week.”

Mr Harris said they also discussed “possible EU rebalancing measures”.

“As I have always said, tariffs are damaging to both sides, but the EU has maintained restraint.

“This dispute can only end with negotiation. I assured the commissioner that Ireland will always be a constructive voice at the table. We must engage in comprehensive and substantive dialogue with the US.

“The goal is a mutually beneficial agreement that works for everyone. At the same time, we must protect Irish and EU interests. I have no doubt that Commissioner Sefcovic understands and is working hard to achieve this.”