LABOUR Minister Pat Rabbitte said he is not in favour of taking more than €3.6bn out of the economy in the coming budget, contrary to indications from Finance Minister Michael Noonan and advice from various bodies to increase this substantially.
The Fiscal Advisory Council this week said €4bn worth of extra taxes and cuts were needed to meet the deficit target of 8.6% of GDP with an additional €400 million as a cushion to restore investor confidence in the country.
Mr Noonan said he accepted that it would take more than €3.6bn to meet the deficit target agreed in the bailout deal but he was less convinced of the need to take the additional sum as suggested by the independent body set up in July to assess budgetary figures.
But Mr Rabbitte said he did not support the idea of frontloading the budget cuts.
“I’m not a fan of the big bang prospect,” he said, adding that taking €20bn out of the economy in last three to four years was very, very severe.
“The target is for a deficit of 8.6% of GDP and the advice I have is that €3.6bn is likely to meet that target... taking out €3.6bn will be very difficult and there are noises offstage that advocate more than that but that would not have my support.”
He denied that he was at odds with Mr Noonan and said, “I have never met a minister for finance that limits his room for manoeuvre”.
Mr Rabbitte said it was not possible for the finance minister to take a position on the size of the budget needed because the growth projections for next year and revenue returns are not available yet.
This month was very significant in that the tax returns for the self-employed come in and next month, December, was when corporation tax came in and this information would be necessary before making budget decisions.
“And it would be wrong to impede the capacity of the economy,” he added. “I am giving you my view that we will take €3.6bn out of the economy this December and we should stick to that commitment even if painful.”
He denied there was any dispute in the cabinet about the situation, “because we have not got near that position yet”.
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