The Coalition’s two economic Ministers will this week open negotiations with Government colleagues on departmental spending ahead of next month’s budget. Budget negotiations will begin in earnest this week with the resumption of the Dáil on Wednesday.
Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin will hold the first bilateral meeting with line Ministers this week and will also begin its series of meetings with representatives of industry, unions and social interests in society.
Both Coalition parties have already indicated that an improving economic situation will allow it to achieve its fiscal targets in Budget 2015 without having to make the adjustments of €2 billion forecast in October 2013.
However, Fine Gael and Labour have also maintained it will not be a populist giveaway budget and that the Government will adhere to fiscal discipline. The divergent views over budgetary approach for his department, expressed by Minister for Health Leo Varadkar and Taoiseach Enda Kenny last week, were an indication of the wrangling that will occur over the next month.
Mr Noonan has predicted a growth rate of up to 3 per cent this year and ongoing growth rates of the same order for a decade. According to Government sources, the accuracy of those predictions will be determined by two key sets of data to be published over the next month.
The first will come on Thursday, when the Central Statistics Office publishes the GDP growth figures for the second quarter of the year. The second will be in early October when the September figures for exchequer revenue and spending are published.
“No decisions have been made, genuinely, at this remove,” said the source. “If the growth figures are good on Thursday and if the September returns are strong and it is a big month, we will see how embedded the recovery is and it will give some room for manoeuvre.”
The Statement of Government Priorities published in July includes several specific Budget 2015 commitments, including a tax reform plan to reduce the 52 per cent rate for middle- and low-income earners, an increase in the household benefits package, more child income supports and new funding schemes for affordable housing.
Yesterday, the director of Social Justice Ireland Fr Seán Healy published the result of a study of six possible changes in the budget. It showed that three would produce what it called a fair outcome – increasing the personal tax credit, reducing the lowest USC rate by 1 percentage point or reducing the middle USC rate by 2 percentage points.
The study found that three of the changes would produce what it said was an unfair outcome by disproportionately benefiting the better off – reducing the top tax rate to 40 per cent, increasing the standard rate band and reducing the 7 per cent USC rate.
Separately, there is optimism within the Department of Finance that the agreement by 28 finance ministers to back Ireland's request for earlier repayment of its IMF loan will have a beneficial knock-on in the budget.
On RTÉ's This Week yesterday, Minister of State for Finance Simon Harris said he expected the deal on the IMF loan to be worth some €1.5 billion over five years. However, it is thought that the impact it will have on Budget 2015 will be relatively modest.
