Noonan refuses to rule out tax hikes

FINANCE Minister Michael Noonan has refused to assure the public a forthcoming “jobs budget” will not include increased taxes or further cuts in spending.

He said the bailout team of the EU, IMF and European Commission are quite happy with “the method of funding it”.

But asked if a €220 million a year cost, previously signalled by Fine Gael, would mean further pain for taxpayers, the minister said: “You will have to wait until May.”

He said the wording of the plan was changed, last week, from “jobs budget” to “jobs initiative” because “the budget has connotations of pain and suffering adding that this was “not the impetus of what we are doing.”

He said: “We’re trying to change the way things are done across a range of activities so that jobs are created and confidence is built up.”

The Minister for Public Expenditure Brendan Howlin assured the public the initiative will not contain any “component parts” which would “diminish confidence.”

Joining Mr Noonan at a press conference on the review of the EU-IMF and ECB bailout programme, the Labour Party minister said: “There will be confidence building measures in it and the significant fiscal issues will be addressed in the normal budget at the end of the year.”

The bailout team insisted the jobs initiate is revenue neutral but Mr Noonan refused to say whether the Government is sticking to a previously signalled cost of €220m this year.

“When there are matters being announced of a budgetary nature, even though it’s described as a jobs initiative, you don’t pre-announce them,” he said.

Mr Noonan confirmed Ireland has, so far, been compliant with the terms of the €85billion rescue package agreed last November.

The Government has put its stamp on the deal by agreeing a revised memorandum of understanding on the conditions of the bailout.

“In terms of renegotiating the programme, we have done what we said we would do and we have done what we set out to do,” the Fine Gael minister said.

He also said the EU, IMF and ECB team were “happy” with Ireland’s progress and the new administration had changed conditions that they disagreed with in the memorandum of understanding “to conditions we wanted.”

Under the new terms:

* The minimum wage will be restored to €8.65 an hour, reversing a cut imposed by the previous government.

* The move will be balanced with a job-boosting measure of a 50% reduction in employer’s PRSI on income up to the minimum wage.

* Nama II —for loans under €20 million— will not now go ahead as promised in the Programme for Government. The banks will take responsibility for deleveraging those assets.

* Banks will be fully capitalised by the end of July.

* A Fiscal Advisory Council to be created to provide an independent assessment of public finances — A Fiscal Responsibility Bill will be submitted to the Dáil before the end of 2011.

Although the agreement contains no changes on the interest rate charged to Ireland on the loan, Mr Noonan said progress is being made in this area.

Mr Howlin also said the targets set out in the Croke Park deal had “by and large” been achieved to date, but that €1.4 billion in savings was required.

The memorandum requires that if the targets are not met, the Government will have to address the matter of further pay cuts in the public service.

Q & A

By Mary Regan

Q: What did the Government agree with the European Central Bank (ECB), The International Monetary Fund (IMF) and European Commission troika during their visit?

A: A new “memorandum of understanding” or new conditions to the €85 billion bailout.

Q: Are there any big changes in the agreement?

A: This was essentially the Government putting its own stamp on the bailout deal. The conditions agreed with the previous Fianna Fáil-Green Party administration remain broadly the same.

Q: Did Fine Gael and Labour get what they wanted?

A: The troika agreed to a reversal of cuts to the minimum wage, restoring it to its old level of €8.65.

The team demanded this be compensated by other job-boosting measures, so the coalition agreed to include a 50% cut in employers’ PRSI on the part of salaries up to minimum wage level. The Government also got agreement to its promised jobs budget. It has to be revenue-neutral but the bailout team agreed with the Government’s methods of funding job-stimulating measures. The EU-IMF-ECB mission also agreed with the Government’s argument that the transfer of loans worth less than €20 million to Nama should not now take place.

Q: Is there anything they did not get?

A: The pre-election promise of both Fine Gael and Labour to “burn the bondholders” or make senior bondholders take some losses was not agreed to. The ECB has been opposed because it fears it will scare bondholders across the eurozone.

Q: Did they agree any change to the interest rate Ireland will be charged on the bailout?

A: No. This decision has to be made with agreement of other EU countries, probably in June.

Q: When will the bailout team be back?

A: In July. And every three months after that to monitor progress.