Wednesday 28 June 2017

Coalition signs up to €2.1bn cuts in Budget

Emmet Oliver Deputy Business Editor

AT least €2.1bn of spending cuts are on the cards in the Budget as the Government formally signs up to the latest IMF/EU demands to slash the deficit.

The Cabinet will make €3.6bn of savings in December's Budget primarily through spending cuts, rather than tax rises, it emerged yesterday.

The Government has signed up to €2.1bn of spending reductions, while agreeing to €1.5bn of tax increases in an agreement with the IMF/EU.

However, apart from introducing a property tax, it has declined to spell out in any great detail the measures likely to be included in Budget 2012.

The Department of Finance yesterday published the formal agreement it has reached with the IMF/EU for the latest tranche of assistance to be paid to Ireland.

Most of the measures had already been well flagged, although -- as it now customary -- the IMF is demanding that the Government hits various targets, known as milestones.

One of these is that it must outline a medium-term spending plan, complete with ceilings on certain levels of spending. State assets of up to €2bn will also have to be sold off, although the companies have yet to be identified.

Deficit

The agreement between Ireland, the IMF and EU comes after the third review of Ireland's €85bn bailout programme.

Under this programme an adjustment of €3.6bn is envisaged for Budget 2012.

The agreement sheds some light on the tax-raising measures likely to be included. Personal income tax bands and credits will be reduced. Tax relief for pensions will be curbed, while a property tax will be introduced.

Carbon tax will also be increased and capital gains tax will be looked at.

On the spending side, it is indicated that some social welfare programmes will be cut, public sector numbers will be reduced and pension entitlements curbed. Reductions are also expected in the capital budget, which controls roads and other infrastructure.

Sources played down the numbers at this stage of the process, pointing out that tax revenues for the second half of the year would shape the final outcomes. The document makes it clear that €3.6bn is the minimum required.

Finance Minister Michael Noonan says Ireland is on target to hit its budget deficit target -- which is 10.6pc of GDP.

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