Tax Default: FG forced to admit hikes will form bigger part of plan

FINE Gael has been forced to admit that tax hikes will form a bigger part of its deficit reduction plan than previously claimed.

The admission came as a poll showed the party firmly on course to lead the next government.

Launching its “five-point plan to get Ireland working”, Fine Gael pledged it would not raise income tax on workers or corporation tax on businesses if returned to power.

But it is proposing other tax hikes.

Prior to the budget, Fine Gael said it would opt for a 3:1 ratio of spending cuts to tax hikes in order to make the required €15 billion fiscal adjustment by 2014 — meaning €3 in cuts for every €1 in new taxes.

Fine Gael said yesterday it was sticking with the 2014 deadline, but under questioning from reporters at a heated press conference, finance spokesman Michael Noonan admitted that the party’s ratio was now closer to 2:1. He said the “arithmetic” had changed because of the way the Government had made the first €6bn of the adjustment in the budget.

“The €6bn correction, where certain things were done through tax increases and other things were done through cuts in expenditure, has changed the basic arithmetic. We have re-examined the situation.”

Mr Noonan said of the €9bn adjustment left to be done, Fine Gael was proposing “slightly more than €6bn” in cuts and “slightly less than €3bn” in taxes — approximating a 2:1 ratio.

He conceded that the change in ratio had been “well spotted” but insisted it was not as dramatic as it appeared.

The development came as Fine Gael’s likely coalition partners, Labour, also revised its economic strategy.

Labour, which will publish the strategy today, will call for just €7bn of an adjustment between now and 2014, compared with the €9bn Fine Gael says it would make in the same period.

Labour is expected to argue that the timeframe for meeting the deficit reduction target set down by the EU should be pushed back from 2014 to 2016.

Fianna Fáil leader Micheál Martin sought to play up the differences between Fine Gael and Labour, suggesting Ireland could not afford a “tug of war government”.

But Fine Gael leader Enda Kenny immediately shot back, saying of Mr Martin: “He seems to think you can suddenly emerge from the shadows of the worst government in the history of the state… and expect people to forget all about that.”

The bickering came as the latest poll showed Fine Gael on 33% (up three points since the corresponding poll in December), Labour on 24% (down one), Fianna Fáil on 15% (down two), Sinn Féin on 12% (down three), the Green Party on 1% (down one), and Independents and others on 15% (up four).

Satisfaction with the outgoing government has fallen to a record low of just 4%, according to the Ipsos MRBI poll for the Irish Times.

Meanwhile, the latest Exchequer figures have indicated that the state finances appear to be stabilising. The figures showed that the amount of tax collected by the state last month came to just over €3.1bn, a hike of €57m or 1.9% on the same period last year.

But while the tax take is in line with expectations, the wider outlook remains a concern, following the Central Bank’s forecast on Monday that economic growth this year will reach just an anaemic 1%.