Government gets go-ahead for €1.5bn giveaway budget

Prof John McHale: 'Coalition should not go beyond €1.5bn.'

The Government’s spending watchdog has rubberstamped the Coalition’s plans for a giveaway budget but also warned that the public finances must be protected from future shocks.

Despite getting the Irish Fiscal Advisory Council’s approval for a €1.5bn spending spree, the Coalition yesterday formally agreed to EU rules not to exceed this in the budget.

In a U-turn since its last pre-budget submission, the council now says that a €1.5bn package is “within the range of prudent policies” for the economy.

Given the recent high growth figures and falling unemployment, it says that “the degree of slack in the economy is likely to be diminished rapidly”.

Speaking today, council chairman John McHale says: “We also say very strongly that the Government should not go beyond the €1.5bn.”

Cabinet ministers, eager to open the purse strings further, were given the firm line from Brussels yesterday at the weekly Cabinet meeting.

Government gets go-ahead for €1.5bn giveaway budget

Finance Minister Michael Noonan and Public Expenditure and Reform Minister Brendan Howlin told colleagues the maximum fiscal space for next year’s spending is in the upper part of between €1.2bn and €1.5bn.

The Coalition also expects that the deficit could be below 2% by the year’s end.

As recently as June, the Irish Fiscal Advisory Council effectively put the Government on notice that its budget plans would break EU-binding debt-reduction and expenditure cap rules. It had said that even a €1.2bn spend would fall foul of the letter and spirit of EU budget rules.

Some economists believe the Coalition, because of the looming election, would be tempted to exceed limits it set itself in April and instead spend up to €2bn in the budget, especially as the economy is now growing at the fastest rate in the eurozone.

The Coalition has promised tax cuts, returned welfare entitlements, improved childcare support, and relief for the self-employed over the next year. Taoiseach Enda Kenny has said his Government is “not going to blow the recovery”.


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