Wednesday 7 December 2016

€1bn purse 'won't be enough to get Budget passed'

Kevin Doyle and Colm Kelpie

Published 21/06/2016 | 02:30

Michael Noonan. Photo: Tom Burke
Michael Noonan. Photo: Tom Burke

Almost €1bn will be available to Finance Minister Michael Noonan for October's budget - but a leading bank is warning it may not be enough to stave off a General Election.

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The minister will today seek approval from the Cabinet to publish a Summer Economic Statement which shows the Government will have nearly double the spending power previously predicted.

Mr Noonan will outline a "solid" economic performance that gives extra scope for tax cuts and spending increases in 2017, including a further reduction in the much-hated Universal Social Charge (USC).

A source told the Irish Independent that "on current trajectory there will be more than €1bn to play with on Budget day, compared to the €500m predicted during the election".

They noted that Mr Noonan will present a figure of between €900m and €1bn in the summer statement, but the expectation is that this will grow again.

However, specialist bank Investec has told investors to expect another general election before the year is out, warning that the minority Government is precarious.

"The minority Government has the worst of both worlds - all of the responsibility but no power to push through its preferred legislative programme," the Investec note said.

"It has already been outmanoeuvred on some policy issues, while some of the recent polls suggest that Fianna Fáil has overtaken Fine Gael in terms of popularity. We continue to struggle to see a Budget getting passed in October, an outcome which would prompt fresh elections."

Mr Noonan will today unveil an updated assessment of the public finances along with Public Expenditure Minister Paschal Donohoe.

It was forecast in Budget 2016 that overall tax revenues for this year would grow by 5.8pc to approximately €47.2bn.

Based on the latest figures, Mr Noonan will increase his outlook while also signalling the need for caution against a backdrop of a possible 'Brexit'.

He will note that the growing economy will allow the new Government to meet social and economic challenges "in a more timely manner".

It is understood that Mr Noonan will say there is no conflict over the available so-called 'fiscal space' between the Government and the Fiscal Advisory Council (IFAC).

"We'll be reconciling our figures with the Fiscal Council, and what we'll be publishing will be figures that, in terms of fiscal space, the Fiscal Council will agree with," he told the Irish Independent recently.

The amount of money available to the new Government became a source of controversy during the election campaign, as the council warned that in reality, the government only had a fraction of what it was claiming to have because the Department of Finance wasn't factoring in inflation and the full effect of demographic pressures.

The department said about €8.6bn could be available up to 2021, but the IFAC warned it could actually be as low as €3.2bn, sparking a debate about whether the previous government was over-inflating the amount of resources available to its successor.

The council said earlier this month that the Government will need an extra €6bn over the next five years just to maintain current spending needs.

Irish Independent

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