Thursday 12 December 2019

Harsh budget cuts 'will kill economic recovery'

Frontloading the Budget with harsh cuts to avoid painful decisions in later years would kill off economic recovery, it was warned today.

Congress economic advisor Paul Sweeney accused the Government of deepening the black hole in the state's finances by undermining consumer spending through severe cutbacks and tax hikes.

As figures show Ireland's budget deficit among the highest in the EU last year, Mr Sweeney said it was time to admit the target of slashing it by 2014 cannot be met.

"The Government blew the Celtic Tiger boom with free-market fundamentalism of tax-cutting and de-regulation," Mr Sweeney said.

"It is again in the grip of failed conservative economic policies."

Official figures from the European Union show Ireland last year had the highest budget deficit of all 26 member states at 14.4pc of Gross Domestic Product (GDP), or the value of the economy.

It was followed by the UK at 11.4pc, Spain 11.1pc, Latvia at 10.2pc and Portugal at 9.3pc. The Eurostat statistics did not include Greece.

At a two-day economic conference organised by the left-leaning economic think-tank Tasc and the Foundation for European Progressive Studies, Mr Sweeney said there were three major crises facing the state - jobs, fiscal and banking.

But he said the Government was focusing only on the fiscal and banking side, claiming it was making a mess of both.

The economist accused the Government of giving in to bankers and bowing before the markets for fear of upsetting them.

He called on the Government to boost investment in December's Budget, reform corporate governance and company law.

Tax increases should be focused on wealth and profits, such as increasing Capital Gains Tax and extending the 2pc income levy to corporate profits.

Meanwhile both the Irish Small and Medium Enterprises Association (Isme) and the Union of Students of Ireland launched their pre-Budget submission.

Isme said cuts should be made in public spending, including the public sector and social welfare bills.

It called for the savings to be transferred to businesses through a stimulus plan to support growth, job creation and retention.

Mark Fielding, Isme chief, said: "The emphasis needs to be on immediate cost savings, by concentrating the majority of cuts on current expenditure, mainly through public sector reduction and reform and social welfare cuts with a modicum of tax increases.

"In conjunction with cost cutting, a stimulus package for enterprise must be introduced to get the country working again."

Meanwhile USI urged the Government to protect higher education funding and called for a cap on the student registration fee.

The charge varies between the institutions but currently stands at a maximum €1500.

The USI warned any increase in the fee could force large numbers out of third level education.

Gary Redmond, USI President, said: "Over the last number of months there have been persistent rumours of a doubling of the Student Service Charge to €3000 in the Budget.

"Many students are already struggling to pay the current fee of €1500, so any further hike will simply cut short their Third Level education."

The national students' union has also urged the Government to allocate an extra €1.2m to the Student Assistance Fund, which helps those in financial difficulties.

PA Media

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