Plans to push through a €2bn package of spending cuts and tax hikes in the October budget have been abandoned.
The Cabinet was told yesterday the financial situation had improved since the beginning of the year and the level of austerity could be eased off.
Finance Minister Michael Noonan said that six months of better than expected figures in tax returns would mean the Exchequer would hit the target of getting the deficit down to 3% of GDP through less drastic action.
“We thought it would be necessary to increase tax and cut expenditure by €2bn. We’ll get under 3% now by making less cutbacks and less tax increases,” he said.
Mr Noonan, along with Public Expenditure Minister Brendan Howlin, outlined to Cabinet the boost to State coffers but said they would not know how big the reduction would need to be until the September tax figures are in.
Mr Howlin said the upturn pointed to a “less demanding” Budget.
“The economy has grown, the tax revenue has increased, the number of unemployed has fallen. So these are all good auguries,” Mr Howlin said.
Fianna Fáil finance spokesman Michael McGrath called on the Government not to concentrate on the marginal rates of the tax bands, but offer a wider relief for people.
However, Irish Fiscal Advisory Council chairman John McHale warned: “Slowing the pace of deficit and debt reduction would leave the public finances more exposed to shocks that create unsustainable debt dynamics.”
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