The Government will have just €360 million available for tax cuts in the upcoming budget, the Economic and Social Research Institute (ESRI) has said.
Amid claims yesterday its latest economic forecast signalled an end to austerity, the economic think tank warned there was only “limited scope” for tax cuts in the budget.
Factoring in an extra €500 million from water charges, the institute forecasts the Government’s budget deficit will come in at 2.8 per cent of gross domestic product (GDP) next year without any further adjustments.
This would be 0.2 per cent inside the troika-agreed target of 3 per cent, giving the Government about €360 million to play with.
On that basis, the ESRI’s Prof John FitzGerald said yesterday the Government had only “limited scope” for tax breaks, despite public expectations to the contrary.
Tax breaks
"They don't have money to giveaway. If they want to cut taxes, they'll have raise the money somewhere else. At this stage, there really isn't scope for tax breaks unless things come in better than forecast."
Prof FitzGerald said there was no safety margin in Budget 2015 to allow for any shortfall in economic growth. In addition, he warned the ending of the pension levy next year would make things even more difficult for Minister for Finance Michael Noonan.
In its recent quarterly bulletin, the ESRI warned there still remained the possibility of unforeseen shocks to the economy, and therefore it advocated “erring on the side of caution” to ensure budgetary targets for 2015 were met.
The Government is coming under intense pressure to end its prolonged austerity drive in the upcoming budget.
Pledged
Mr Noonan has pledged to widen income tax bands as soon as the State can afford it to take more people out of the higher tax bracket.
The Department of Finance will publish its own economic and fiscal forecasts for the coming year next Tuesday.
On the basis of current budgetary data, it is likely to signal some sort of retrenchment on the planned €2 billion adjustment for 2015, agreed with the troika.
This is likely to put it on a collision course with the European Commission, which maintains Ireland will still need to make a sizeable adjustment if it is to meet its targets.
Minister for Jobs Richard Bruton said yesterday it was too early to say if the Government's prolonged austerity drive was over."There's no doubt I would be arguing from an employment-creation perspective we would be better off if we could reduce the burden on hard-pressed families," he said.
