Budget package of tax cuts and spending hikes now set to be €3bn
The total value of tax cuts and spending hikes in the Budget is set to come to €3bn - twice what was expected - according to Davy's chief economist.
In a note circulated this morning Conall MacCoille said the just-published White Paper on Estimates of Receipts and Expenditure showed that spending will finish 2015 €1.5bn higher than expected due to new policy changes.
"Net voted expenditure is now expected to equal €43bn this year, close to €1.5bn (or 0.7pc of GDP) above the target. The majority of the additional €1.5bn of spending will be carried through into 2016. For example, a €600m health spending over-run will be locked into next year’s expenditure plans. The remainder looks to set to be distributed into the departments of Transport, Education and Social Protection," Mr MacCoille said.
"The higher level of spending means the government now expects the deficit to equal 2.1pc of GDP in 2015. We had expected the deficit to equal 1.7pc of GDP in 2015.
"However, after the additional spending measures announced over the weekend, a figure closer to 2pc now looks more likely. Tuesday’s Budget will announce a further €1.5bn worth of tax cuts and spending rises to be implemented in 2016.
"So the total package of policy changes will equal €3bn, or 1.5pc of GDP – a larger stimulus than we indicated in April’s Stability Programme," Mr MacCoille said.