Thursday 29 September 2016

Noonan does his best to dampen Budget hopes

Published 21/09/2016 | 02:30

Finance Minister Michael Noonan. Pic: Tom Burke
Finance Minister Michael Noonan. Pic: Tom Burke

Low expectations are the best protection against disappointment, and Finance Minister Michael Noonan did his utmost to get this message across in his joust with the Oireachtas Budget Oversight Committee yesterday.

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Those hoping to be dazzled by the lustre of gilded promises were dissatisfied. Taxpayers would not be throwing hats in the air on Budget night, he warned.

Given the uncertainty of Brexit, he explained that distinguishing the affordable from the merely "desirable" would have to be the priority.

There are many bones of contention regarding our tax system, of which the USC is the biggest, and it will be with us for some time to come. A three-budget cycle to discard it would simply be too ambitious, although it might be managed in five, he believed. Considering it yields €4bn and accounts for 25pc of the tax take, it was always going to have a slow death.

Mr Noonan accepted that the marginal rate is far too high. The fact that workers find themselves hitting the highest band on just €34,000 is simply unfair. Therefore relief, such as there is, must focus on low- and middle-income sectors. The incentive for multinationals to come here is reduced if rates are too high, and they also discourage young Irish people abroad from returning.

Mr Noonan also revealed that employment has also increased by 56,200 year-on-year, while unemployment has fallen from a peak of over 15pc to 8.3pc in August.

The good work of the Government, Enterprise Ireland and the IDA in generating and protecting jobs needs to be recognised. But rulings such as that on Apple, and the prospects of further negative fallout over Brexit, suggest that the international outlook is still highly unstable.

Finding a balanced approach that can deliver a Budget which can secure support given the precarious Dáil arithmetic is a big ask, especially in the context of some of the self-serving behaviour and political pirouetting witnessed of late. However, Mr Noonan's sober, realistic and grounded approach at least set the right tone.

Mortgage lending limits need to be reviewed

Mortgage lending limits have been under fire for some time for making it extraordinarily difficult for young people to get a roof over their heads.

But the Central Bank has been implacable on the subject, insisting that the limits are necessary; all entreaties that they favour those with rich parents and are therefore inequitable have been dismissed.

Now the ESRI has added its considerable voice to the chorus of disapproval on the grounds that they may be acting as a barrier to having desperately needed new houses built.

The limits are curbing the profits prospective builders might hope for and thus are keeping them out of the game.

Given the scarcity of houses and the relentlessly upwards pressure on rents, any bar to building must be taken seriously.

The Central Bank is on record as saying that only the strongest of evidence will hold any sway in shifting their thinking.

The loan-to-income limits are supposed to make the financial system more secure but if they are actually stopping building taking place, then the evidence for a change is surely overwhelming. The restrictive nature of the limits is having a disproportionate impact and urgently needs to be reviewed.

Irish Independent

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