Noonan's budget plans 'nearly twice as generous as they should be'
Published 12/06/2015 | 02:30
The Government is planning a budget that is close to twice as generous as it should be, an economic watchdog has warned.
The Fiscal Advisory Council told an Oireachtas Committee that in order to meet EU rules, an expansionary budget of no more than €700m should be considered this year. Finance Minister Michael Noonan has said the Government will introduce an "expansionary budget" this year and every year until 2020, "if this is deemed prudent".
And he said the Coalition would have between €1.2bn and €1.5bn of extra money to split evenly between new spending measures and tax cuts for Budget 2016.
But the Fiscal Council has warned the Government is on the cusp of breaking budget rules imposed on all European Union governments.
"The plans that were laid out in the Spring Economic Statement involved an expansionary package of €1.2bn," said council chair Professor John McHale. "Our calculations suggest that to be fully in compliance with the various rules, you would have a package that would be somewhere in the region of around €700m.
"The precise figure may well change by budget time. But our concern is that based on the Government's own projections, they have set out a plan that is not fully consistent with the requirements of the framework."
Asked what type of financial sanctions could be imposed if EU rules were breached, Prof McHale said there was a graduated set of sanctions that could eventually reach as high as a fine of up to 0.2pc of the value of the economy.
"Which is a very significant fine," Prof McHale added.
The value of the economy is about €181bn, so 0.2pc would be around €362m.
In its latest assessment report released last week, the council warned that the Government had no real plan and was too optimistic about future economic growth.