Noonan commits to more budget austerity

Another austerity budget this autumn has been signalled by Finance Minister Michael Noonan despite the economic recovery creating jobs faster than expected.

While growth forecasts for the year only nudged up 0.1% to 2.1%, new Government predictions show employment growing by an extra 42,000 jobs this year, up from a 30,000 target set at last October’s budget.

However, Mr Noonan remained cautious, stating that an adjustment of €2bn in tax hikes and spending cuts would still be needed in the next budget to stay on course to bring the State’s funding deficit down to 3%.

The Coalition’s conservatism is in contrast to forecasts by the Economic and Social Research Institute indicating the deficit target could be met without the need for any fresh austerity measures apart from the €500m to be raised from the water metering tax.

However, Mr Noonan said if he had room to manoeuvre financially, he would use it to ease the tax burden on people on relatively low incomes who go straight into the top rate, because he said this was a hindrance to reducing unemployment levels more quickly.

“I’m saying that my next move in relation to tax is to address that,” Mr Noonan told TDs, adding he was “pledged to do something,” but the scale would depend on the resources available to him in October.

The latest predictions, produced as part of the eurozone economic stability programme, revised growth for next year up from 2.3% to 2.7%, and said unemployment would fall below 10% in 2016, and drop to 8% by 2018, down from its 2012 peak of 15.1%.

Consumer spending, especially on new cars, is helping quicken the pace of economic growth, the Finance Department said.

Mr Noonan told the Oireachtas finance committee: “Job creation is the best indicator of economic activity.” He refused to criticise the €834,000 remuneration package of Bank of Ireland chief Richie Voucher when invited to do so by Labour committee member Kevin Humphreys.

The finance minister said the State owned just 14% of the bank, and it was wrong to treat individual bankers on the basis of legacy issues from the crash.

The €2bn projected October budget adjustment would break down into spending cuts of €1.3bn, with extra taxes of €700m, the bulk of which — €500m — will come from the water tax.

Despite the Government insistence that it is keeping to the austerity agenda, a number of Cabinet ministers have hinted at tax cuts, prompting opposition claims that the Coalition is attempting to “buy” votes ahead of next months European and local elections.

Mr Noonan told the committee a number of drugs, such as Viagra and Lipitor, going off patent had led to a GDP shrink of 0.3% in the economy last year.