1% income tax cut may not happen
At the launch of the Pre-Budget Outlook yesterday, the minister pointed out several times that the promised tax cut was contingent on Ireland maintaining its current economic strength.
While saying that any tax adjustments would be a matter for him on Budget Day, the tenor of his presentation yesterday was that the economic situation was “tight”, that growth rates for next year had been trimmed down to 3.25%, and the era of double digit growth each year in departmental expenditure had come to an end for the moment.
Underlying what will be a cautious approach he said: “It is clear from this scenario that the position is very tight. Given this position I will focus on ensuring a sustainable financial position as we move into the future.”
However, even with reduced growth, the figures he presented yesterday were not altogether bleak. However, he acknowledged new house starts will fall from a high of 80-90,000 down to 60,000. This, he accepted, will have knock-on effects which might lead to an increase in the number of unemployed people in the State.
He also accepted that Ireland could be vulnerable to global trends and external factors that were outside the Government’s control such as exchange rates, increases in oil prices and interest rates, as well as a slump or recession in the US economy.
However, he went on to argue: “I am not suggesting that we are on our uppers here. There is still a growth pattern for the economy. But I want to get away from the situation where, too often in the past, we have gone from boom to bust.”
Besides more modest growth projections for next year, Mr Cowen also said a deficit up to circa €1 billion was expected this year. However, when the general Government measure was used (this is the one that excludes the money deposited into the National Pension Reserve) Ireland will still have a surplus of 0.9% in 2007.
Mr Cowen also projected a small deficit of 0.4% of GDP in 2008 and 2009 and promised a balanced budget in 2010.
Overall, the estimate figures for various government departments and agencies show an increase of 4.5% in spending next year, bringing the overall Government budget to €51bn.
Fine Gael’s Richard Bruton said it proved FF’s election promises were broken, given that borrowing was up and revenue was down.
He said Ireland was facing a five-year rocky ride as the spending binge had come to an end.
Labour’s Joan Burton said the slowing economy would be a real test of FF’s priorities. “It means that the era of the pre-election splurge is well and truly over,” she said.
CONTRIBUTIONS to international organisations are to increase by almost €6 million under the Department of Foreign Affairs budget.
Under the funding, which has stagnated at €214m, international organisations are to receive a 17% increase in funding. Office premise expenses have been reduced by 17% to balance this in an effort to transfer resources elsewhere.
Funding for emergency humanitarian assistance and payments to international funds for the benefit of developing countries will remain the same as this year at €90m and €25m respectively.
Funding will also remain the same for the Atlantic Corridor Project, the Irish American Advisory Board and International Fund for Ireland.
DESPITE the dramatic slowdown in economic growth, there will be no attempt to try and push through an agenda like the so-called “Savage 16” benefit cuts proposed after Fianna Fáil was returned to power in 2002.
The department’s €8.6 billion budget will increase by 5% next year, with only a handful of areas being trimmed.
These include social assistance which is set for a 4% drop, and farm assist will dip by 1%.
Employment support services will also be cut by 1% — despite an expected increase in employment. State pension payments will also drop by 1% to €910m in 2008.
ENERGY conservation grants are to jump by 40% to €56.6m as part of government expenditure next year.
The grants are going up from €40m in 2007, reflecting the increased demand for incentives to reduce energy in buildings.
The money is set to be spent on grant-aid for energy-saving measures in homes and buildings, such as alternative heating systems.
Meanwhile, there is a drop in the level of funding for aquaculture development and in the 2008 spend on natural resources — down by 22%. However, €12m is to be spent on salmon conservation projects — up from €10m in 2007 — and there’s also a 9% increase in the budget for inland fisheries, up to €29.8m.
A total of just under €585.4m has been provided for this for next year, up by 1.7% on the 2007 estimate.
Of this figure, €180m is for capital expenditure — an increase of 3.8% on this year.
FUNDING for compensation payments by the Defence Forces will decrease by 18% next year according to yesterday’s pre-budget estimates.
The Department of Defence, which has paid out millions in hearing and non-hearing compensation claims, has a budget of €6.2m next year, compared to this year’s allocation of €7.6m.
Overall, the budget for the department is to increase by 3% to €822m. An additional €13m will be spent on value for money and policy reviews, while substantial sums will be spent on military transport, defensive equipment and military training.
FUNDING of €1.7bn is provided in this department’s pre-budget outlook. Another €110m is being made available for fisheries.
Agriculture Minister Mary Coughlan said her department will also disburse almost €1.4bn in EU direct payments and market supports in 2008.
She said farmers can plan for the future with confidence in the knowledge that the funding for the single farm payment is secure until 2013.
More than €1bn is provided for measures under the rural development programme and for capital investment in the dairy, beef, sheepmeat and farm sectors. Provision for the agri-food sector include €171m for food safety, animal health and welfare and plant health.
Some €27m is provided to support Bord Bia in promoting Irish produce in overseas markets which, the minister said, is more vital than ever in the face of increasing competition from non EU producers.
More than €175m is provided for research and training, including almost €133m for Teagasc, which is also to receive separate funding for a major investment programme in its research facilities.
ENERGY conservation grants are to jump by 40% to €56.6m as part of government expenditure next year.
Under the estimates’ allocation for the Department of Communications, Marine and Natural Resources, the grants are going up from €40m in 2007, reflecting the increased demand for incentives to reduce energy in buildings.
The money is set to be spent on grant-aid for energy-saving measures in homes and buildings, such as alternative heating systems.
THE Department of Community, Rural and Gaeltacht affairs is to get a slight increase in budget next year, according to estimate figures released by the Department of Finance yesterday.
Its overall budget will increase from €475m to €480m.
The department is set to save some money by efficiencies in administration. There are increases in budget for An Comisinéir Teanga (24%) and for Údarás na Gaeltachta. The only significant cutback is one of 22% for programme for peace and reconciliation, down from €13m to €10m.
THE OVERALL Arts, Sport and Tourism budget will rise next year from €649m to €654m with most of the increase going to the tourism sector.
There will be 42% more spent on tourism product development while in the sport sector, grants to sports bodies will rise by 22%.
There is drop in the amount being spent on arts and culture with 36% less spent on cultural infrastructure and 20% less spent on cultural programming and 11% less on national museums such as the National Museum, the National Concert Hall and Crawford Gallery, Cork.
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