Fears that Budget will be tougher than expected

A tougher Budget than previously expected could be on the way, economists said today.

The prediction followed on from an interview in which Minister for Finance Michael Noonan said that the job of righting the public finances wasn’t even half done.

The clue to the fact that the Budget may be even tougher than previously thought came with his mention that the budgetary adjustment for next year may be €4bn.

Up until this the Government stated that the adjustment would be in the order of €3.6bn.

The Minister, in talking about the task facing him in getting the State’s finances back in an acceptable balance by 2015, said that the scope for cuts would be much harder in the December Budget.

This was because a lot of work had already been done in this regard.

However, the task of putting the country’s finances back on a sound basis would continue.

The good news from the Minister was that export earning still continued to be the star performer in earning revenue for the State.

But the worrying news is that consumer spending is still sluggish and as a result tax revenue from this sector is again down.

The Minister recently urged consumers to return to spending.

Dan McLaughlin, chief economist with Bank of Ireland, said it seemed that consumer spending by volume would be down 2.5% this year, a larger amount than the Government probably expected.

Figures released yesterday show that the Budget deficit in the first half of this year, after February loans to Anglo Irish and Irish Nationwide were taken out, was €7.8bn, a reduction of €1bn from the previous year.

The Minister, in an RTE interview, said the country was on target to meet its repayment under the terms of the EU/IMF deal.

Article courtesy of The Evening Echo.