Rabbitte hints at softer budget than planned €3.1bn in cuts

A senior Labour minister has strongly hinted that the budget adjustment announced in October should be significantly less than the €3.1bn previously planned.

Communications Minister Pat Rabbitte said he “can’t see any argument” that would justify going further than the target of reducing the deficit to 5.1% of GDP next year.

Last week the economic think tank, the ESRI, recommended that the Government stick to its “fiscal consolidation” of €3.1bn in spending cuts and tax increases.

That figure had been signalled before last February when a deal to replace Anglo promissory notes with long-term Government bonds meant the Government will have about €1bn less to pay on interest as recorded in the public finances in 2014.

“The restructuring of the promissory note allows the Government some flexibility within the existing targets.” Mr Rabbitte told RTÉ’s The Week in Politics yesterday.

The ESRI advised caution, saying there are still many uncertainties and risks, both internationally and domestically, that may impact on economic growth and the public finances.

“Economic recovery is a fragile thing, there are tentative signs of domestic recovery. The international economy, especially the eurozone, is still very sluggish, In those circumstances, the Government has to be careful,” said Mr Rabbitte.

“But the fact of the matter is that some people have been enduring hardship during the five years since the economic crash. And in those circumstances, I can’t see any argument — and I’m not one of the ministers negotiating with the troika — that would justify us going further than the deficit target.”

He would not say what size the budget adjustment should be, but added: “Because we will have to pay less interest as a result of the restructuring of the promissory note, there is some breathing space there.”