Fine Gael abandons plans for balanced budget
Published 05/02/2016 | 02:30
Fine Gael has abandoned plans to balance the country's books by 2018.
The party will use a deal struck with Brussels to justify pushing out the target date to bring spending in line with tax income by at least a year.
It means the party is planning to plug holes in its spending plans with extra borrowing - just a decade after the financial crash.
Taoiseach Enda Kenny's economic plan yesterday focused on the abolition of hated Universal Social Charge (USC) which is based on the premise they can raise €349m from hiking the price of cigarettes and collecting €250m from tax dodgers.
As the much-hyped Long Term Economic Plan was launched, Finance Minister Michael Noonan said Fine Gael's figures were "quite conservative".
"We're not doing it as a kind of looking at an a la carte menu and deciding which are the most electorally friendly things we could do.
"We believe that if we reduce personal taxes, you create more jobs and you'll get more of the skilled young emigrants coming home and you get more people who want to come in here from abroad to invest," he said.
Just last month the minister said that the country's books would be completely balanced by 2018 - but this approach has now changed to reflect a loosening of EU rules.
Mr Noonan's new proposal is to spend €1.5bn more over the next five years than is available as a result of projected economic growth. This will mean adding to the country's debt.
A Fine Gael source said: "We will take advantage of the fact that there will be more fiscal space and we will invest more. You will see more public investment."
Mr Noonan also moved yesterday to try clarify some of the confusion about how much money Fine Gael say will be available to spend in coming years.
The Long Term Economic Plan divides up €10bn into four parts: €4bn for investing public services, €2.5bn for a rainy day fund, €2.5bn for tax reform and €1bn into a jobs fund.
They estimate that the abolition of the USC will cost €3.7bn - although figures provided by Mr Noonan to the Dáil last month suggested it could be as much as €4.6bn.
Mr Kenny said they would help off-set the loss of income from USC with "taxes on bads" like tobacco, a clawback mechanism on high earners and hiring extra data analysts and enforcement officers for Revenue.
Last night, Fianna Fail attacked Mr Kenny saying it will result in the price of cigarettes rising to €13.40 in five years and this would reduce consumption and increase the black market trade.
But Fine Gael source said the party will continue its policy of taxing cigarettes and this will be of "no surprise to the tobacco industry".
Concerns were also raised over Fine Gael's claim it will raise €250m annually in five years time by cracking down on tax cheats.
"None of the Opposition parties could get away with nonsense like that," a Fianna Fail strategist said. Separately, the Irish Independent understands the Labour Party will today pledge to prioritise radically reducing the national debt over the next five years.
"Reducing our debt means we pay less interest, freeing up billions of euro in the long term that can be better spent on schools, hospitals and other essential services," a Labour source said.
Meanwhile the EU's economy commissioner Pierre Moscovici has praised Ireland's recovery which he described as "brilliant and balanced". The European Commission, Ireland's economy will expand by 4.5pc this year, more than twice the EU average.