BUDGET:NEXT MONTH'S budget will be tough on the public, Minister for Finance Michael Noonan has said but he hopes the Government is backed as a plan exists to guide the economy out of difficulty.
Speaking at the publication of the Medium-Term Fiscal Statement, Mr Noonan said that cuts of €3.8 billion – €200 million more than anticipated – would be required to bring the deficit down to 8.6 per cent of gross domestic product next year.
This is a figure set out in the agreement with the bailout troika that he described as “sacrosanct”.
Mr Noonan said the target figure would be achieved through €2.2 billion in expenditure cuts and €1.6 billion in taxation, €0.6 billion of which would come as a result of measures enacted in the last budget. He said everything necessary would be done to hit the GDP deficit target.
“These cuts are real. One person’s cut is another person’s public service; we are not making light of this,” said Mr Noonan. “This budget is going to be hard on people. We are asking the people to stay with us because we have a clear plan for getting the country out of the difficulty it is in . . . and to get people back to work.”
The Minister said that with the important November tax returns still to come, which include payments from the self-employed and corporations, the final budget figures could be tweaked.
He said he believed the target saving could be reached without increasing income tax in 2012. He pointed to the introduction of the €100 household charge and rising carbon charges as ways to achieve the taxation target.
Mr Noonan said that although the outlook was largely positive, recent developments in the euro zone had led his department to downgrade growth prospects for the coming years.
He said the economy would likely expand by some 1.6 per cent in 2012, down from a 2.5 per cent target set in April of this year. And it would grow at an average of about 2.8 per cent over the following three years.
“A key reason for the downward revisions is that the outlook for the global economy has deteriorated in the intervening period,” he said.
When asked if cuts of €750 million to the capital budget meant the end for proposals like the Metro North rail project, Mr Noonan replied that he would leave it to colleagues to announce if projects would proceed.
He said he expected general debt to peak at 118 per cent in 2013. And he hoped it would stand at 113 per cent by 2015.
With regard to Greece, Mr Noonan said the country was in a “bad space”, but that some credit was deserved as considerable adjustments had been enacted.
He said he would continue to explore ways to reduce our debt with colleagues in Europe as the State had been expected to bear a “disproportionate” amount to protect the European banking system.
He said taxpayers were forced to carry a burden for private banks and there was a case for them to be compensated. He said, as an example, European authorities could take equity in Allied Irish Banks in return for cash.
The Minister said he “did not like” paying a €715 million bond earlier this week to senior unsecured and unguaranteed bondholders in Anglo Irish Bank. However, he said that given the anxiety over the Greek and Italian economies this week, the Republic could have been set up as the “patsies” that brought down the euro had the bond gone unpaid.
