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1.5bn for tax cuts and services

Published 28/04/2015

Finance minister in the Republic, Michael Noonan
Finance minister in the Republic, Michael Noonan

Up to 1.5 billion euros will be available for tax reductions and investment in public services next year and budgets are set to expand until 2020, the finance minister said.

Michael Noonan pledged no return to boom and bust politics and said people were beginning to have more confidence in the future.

Ireland's economy is growing at the fastest rate in Europe - predicted at 4% this year - while the deficit is falling, the Fine Gael member of the governing coalition in Dublin said.

Mr Noonan said: "Putting more money into people's pockets has boosted consumer confidence and demand in the domestic economy. It will also encourage young Irish people who are working overseas in good jobs to return home, confident that they will be able to find well-paid jobs in Ireland.

"The Government will continue to follow this policy in the next budget and in future budgets if the Government is re-elected."

The deficit will fall below 3% from next year onwards, according to Mr Noonan, providing a "new anchor" for budgetary policy.

He said: "It is designed to ensure that the days of 'If I have it, I will spend it' are over and this new approach will protect the Irish people from the boom and bust of the past."

Ireland's economy overheated in the previous decade, fuelled largely by a buoyant property market and loans from foreign institutions.

The Government gave the Irish banks a blanket guarantee at the height of the 2008 financial crisis to stop them collapsing following a sudden dip in the economy.

Ireland required a bailout worth 85 billion euros from a troika of international financial institutions.

Austerity imposed after that deal led to slashed public spending, loss of economic sovereignty in the eyes of critics and many job losses.

Mr Noonan said: "The Government will be in a position to introduce our second expansionary budget in October. Fiscal space of the order of 1.2 billion euros and up to 1.5 billion euros will be available for tax reductions and investment in public services."

He added: "The partners in Government have also agreed that the agreed space will be split 50:50 between tax cuts and expenditure increases and the actual measures will be announced in Budget 2016.

"Current indications are that a similar amount of space will be available in later years, while at the same time ensuring the achievement of a balanced budget before the end of the decade.

"The budgetary strategy we are pursuing will ensure that our debt levels continue to fall and we are well positioned to withstand any shocks that may occur in Ireland, in Europe or in the global economy."

During the financial crisis the Government bailed out the country's banks with billions of euros rather than risk their collapse.

The minister said the value of the investment in AIB, Bank of Ireland and Permanent TSB continued to rise.

"It is not the state's intention to remain a holder of its banking investments in the long term. The exit strategy is about recovery of the full cost of the taxpayer's investment in these institutions and using the proceeds to further reduce the debt."

The sale of a quarter of PTSB concluded yesterday.

Mr Noonan added: "I am now confident that all the taxpayer's money invested in AIB, BOI and PTSB will be fully recovered."

Key points in his spring economic statement included:

:: Shrinking of the population through net emigration is expected to cease next year with a return to growth by 2017

:: 95,000 jobs have been added since a low point in 2012

:: From 2011 to 2015 the deficit reduced from 15 billion euros to 4.5 billion euros

:: The public finances are under control with the deficit falling below 3% this year and debt levels are set to move down towards the European average in the next few years

The minister said: "As a result we will be in a position to implement another expansionary budget this year and every year out to 2020, if this is deemed prudent and appropriate.

"We will meet our medium-term objective of a balanced budget in structural terms over the forecast horizon."

He added: "The economy is growing at the fastest rate in Europe - by 4.8% in 2014 and my department is forecasting growth of 4% this year.

"Steady, stable economic growth of 3.25% on average is forecast for the remainder of the decade."

Mr Noonan said his department was forecasting the employment level would exceed two million people by next year.

He said the economy would replace all jobs lost during the downturn by 2018 and, by 2020, 200,000 posts would be created.

Mr Noonan said the Government was considering a range of options to strengthen the system for tackling mortgage arrears to ensure families in long-term difficulties could find a solution. He added the number of cases was falling but there were still 37,000 accounts in arrears for over two years.

He said the 12.5% corporation tax rate would stay, a "red line" for his government designed to attract foreign direct investment.

Jimmy Kelly, secretary of Unite the union, said: "The Government appears set for a rerun of the Fianna Fail policy prior to the crash, reducing tax revenue to unsustainable levels at the expense of investment both in the productive economy and in the vital services on which we all rely.

"The next round of austerity will be below the radar but no less destructive. Spending increases will be kept below inflation, thus cutting their value.

"Like Fianna Fail, the Government is set to cut taxes in advance of the next election - but the fact is that tax cuts will not provide affordable childcare, remove the 1.5 million suffering deprivation, reduce public transport costs, guarantee adequate pension income or provide the necessary services to the disabled."

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