Spring statement: 'USC and tax cuts up to 2020' - Michael Noonan
Tax cuts of €2bn over the next three yeas with focus on job creation
Finance Minister Michael Noonan has said the economy will grow by 4pc this year and by 3.75pc every year until 2020, in his Spring Statement today.
Speaking in the Dail, Mr Noonan said the Government will introduce an "expansionary budget" this year and every year until 2020, "if this is deemed prudent".
He said, because of the crash, the country has suffered a lost generation in terms of economic growth.
"We have essentially lost a decade in terms if economic growth and job creation," he told the Dail.
He promised steady and stable economic growth and a future with more people at work than ever before," he said.
He said a return to the 'if I have it I spend it, I'll spend it" policy stance poses the greatest risk to th economy.
Mr Noonan said we must never return to the boom and bust policies which he said caused so much damage to the economy and the country.
In the full Spring Statement document, Mr Noonan and his department warns that high levels of personal debt will act as a constraint to growth.
"The need to repair household balance sheets will continue to restrain expenditure at least to some extent. The investment-to-GDP ratio is assumed to increase further, given that current investment levels (relative to economic activity) remain below historical norms," the document states.
The document also reveals that there was some slippage in the budget deficit last year because of Government policy spending decisions.
"Budget 2015 projected a deficit of 3.7pc of GDP for last year. The actual outturn is now estimated at 4.1pc of GDP. There are a number of reasons for the changes since Budget day but a significant portion reflects policy decisions on the part of the Government which impacted the timing of certain receipts and expenditures," the document adds.
It also states that the tax revenue end-year outturn for 2014 was higher than expected at Budget time.
For the full-year 2014, tax revenue grew by 9.2pc with significant increases across all the major tax heads. Tax revenues finished the year €242 million above the forecast set out on Budget day 2015.
Budget 2015 targeted a deficit of 2.7pc of GDP in 2015, well inside the 3 pc of GDP deficit limit set down by Europe.
"Developments in the intervening period have been primarily positive and the deficit is now forecast to be in the region of 2.3pc of GDP," the document states.
Taking account of the cuts in taxation announced in Budget 2015, tax revenue was forecast to increase by around 4.5 per cent year-on-year in 2015 (excluding the impact of the levy on pension funds3).
The performance through the first quarter of 2015 has been positive and has exceeded expectations with taxes ahead of profile by €545 million or 5.5 per cent, which represents a year-on-year increase of €1,238 million (13.4pc).
Mr Noonan told the Dail that the European Commission has accepted his argument to allow greater flexibility to how Ireland can spend its money.
Mr Noonan said he and Public Expenditure Minister Brendan Howlin will have between €1.2bn and €1.5bn of additional money to split evenly between new spending measures and tax cuts.
"Fiscal space of the order of €1.2bn and up to €1.5bn will be available for tax reductions and investment in public services," he said.
He said the final scale of this space will become clearer closer to the Budget.
In relation to the country's national debt, he said it peaked in 2013 and is now firmly on a downward path and will be below 100pc of GDP shortly.
Mr Noonan said the country must never again be allowed to become so reliant on transaction property taxes.
He said the Government has introduced a number of new taxes which has broadened the base which does not damage the potential to create jobs.
Mr Noonan said that because of increasing confidence here at home, young Irish people working abroad will be able to come home in the knowledge they will find well-paid jobs in Ireland.
"We must never again repeat the mistakes that left Ireland on the verge of bankruptcy in 2010 and resulted in a lost decade and such hardship in the lives of so many people," he said.