Coalition budget rift widens as Rabbitte criticises Noonan plan
Published 17/10/2011 | 05:00
The rift within the Government over forthcoming budget cuts intensified last night as a Labour Party minister directly contradicted Finance Minister Michael Noonan.
Mr Noonan's assertion that more than €3.6bn in cuts and taxes would probably be needed in the Budget was dismissed by Communications Minister Pat Rabbitte, who said talking about more pain was "unhelpful".
Taoiseach Enda Kenny's efforts to play down a split Cabinet were undermined by Mr Rabbitte's continued insistence that more pain should not be inflicted in the Budget.
Government sources insisted that there was no disagreement in the Coalition and portrayed Mr Rabbitte's views as "one individual expressing a view rather than a split".
Mr Rabbitte said: "To find another €100m among 15 ministers is really a painful exercise".
He said the Government needed up-to-date figures on economic growth and tax returns to calculate the Budget for next year.
"To talk about making the pain worse in the absence of these figures is engaging in the kind of speculation that is not helpful," he said.
Last week, families got the clearest signal yet from Mr Noonan that there would be more pain than expected in the Budget.
Under the bailout terms, the Government is committed to reducing borrowing to 8.6pc of economic output.
The previously estimated package needed to meet that target is €3.6bn, but all projections indicate it will need to be slightly higher. "My own thinking is we probably need a little more than €3.6m to get to 8.6pc," Mr Noonan said.
Over recent months, the Government has been preparing the ground to go above the previous estimate of cuts, by raising the prospect of the package hitting up to €4bn.
The Government's new economic advisers called for a much harsher Budget this December than any other organisation advising the Coalition.
The newly established Fiscal Advisory Council, set up at the insistence of the IMF and ECB, wants Mr Noonan to suck €4.4bn out of the economy next year through spending cuts and tax hikes.
The advisory group also recommended cutting another €4bn over the next four years and told the Government not to rule out income tax hikes, social welfare cuts or pay cuts.
But Mr Noonan gave no indication he was willing to go that far.
The group also warned that the target of €3.6bn would not be enough to meet the IMF-EU debt targets next year.
Meanwhile, the review of the bailout by the IMF-EU team is continuing for the rest of this week.
Today, builders' representatives will claim €2bn is being lost in taxes this year because of the black economy in contracting, one-off house building, and the residential repair, main- tenance and improvements sector.