'Jobs budget' in doubt as State to miss deficit target by €5bn
Published 13/04/2011 | 05:00
Serious doubts emerged last night over the Government's planned "jobs budget" after the IMF said the Coalition will miss its targets on the four-year recovery by around €5bn.
It is now increasingly unclear what elements of the much-vaunted budget will actually make it past the IMF, including the reversal of the cut in the minimum wage.
There were also clear indications that any changes brought in will be funded from cutbacks in departmental budgets.
Taoiseach Enda Kenny denied referring to the plan to be announced next month as a "jobs budget" and downgraded it to the status of a "jobs initiative".
After repeatedly calling the plan a "jobs budget" during the general election campaign, Mr Kenny also called it a "budget" in a speech just a week ago.
Government sources said the name change came about because there was an expectation developing among the public that a full budget was coming.
To boost employment, the Coalition intends to lower employers' PRSI and VAT. But Mr Kenny said the changes would have to be cleared with the IMF and EU and suggested there would be no new taxes to pay for the measures.
"This is not a budget in the sense of proposing new taxes. Adjustments will be made from the internal votes of departments," he said.
The Taoiseach performed the u-turn as Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin met with IMF chief Ajai Chopra in the Department of Finance yesterday.
Mr Chopra is heading up the IMF's mission to Ireland as the Washington-based body reviews Ireland's performance under the €85bn bailout, along with the European Commission and European Central Bank.
The IMF says the Government won't hit the target of reducing the deficit within the next four years. The slippage this year will be around €1.3bn, based on the IMF forecast of 0.5pc growth instead of the 1.7pc pencilled in December's Budget.
Similarly adjusted forecasts would see the amount reach €5bn as Ireland's borrowing will still be more than 4pc of output (GDP) by 2015 -- the year the Coalition hopes it will reach the 3pc permitted under EU rules.
The IMF also lashed out at the so-called "accounting strategems" used by the last Government to hide just how bad Irish finances really are.
"Fiscal transparency seems to be increasingly at risk in some countries," the IMF says before singling out Ireland.
Yesterday's forecasts by the IMF mean further tax hikes and spending cuts will be needed if the State is to have any chance of meeting the 3pc target.
Failure to meet the target could result in the bailout loans being cut off unless there is a renegotiation. The IMF also predicts that our borrowing this year as a percentage of economic output will be 10.8pc of GDP, which would be higher that any other country in the world.
Meanwhile, the Civil and Public Servants Union, which represents 13,000 lower-paid civil servants, responded angrily to ministerial warnings that further pay cuts could be on the way if savings were not delivered under the Croke Park deal.
Its deputy general secretary Eoin Ronayne warned the Government not to "pick on the least well off again". "Lower-paid civil and public servants cannot cope currently, never mind take further cuts," he added.