Maintain momentum

The Taoiseach confirmed yesterday that the next budget would be announced on December 6, 2011.

The adjustments will amount to €3.8bn in the form of spending cuts and altered taxation.

Such changes will inevitably contain a lot of pain. The amount needed includes €200m more than was previously anticipated, because of lower than expected growth this year.

The fluctuations in Irish exports are indicative of some of the problems. Exports were up by 8% in the first half of the year, but the Irish Exporters’ Association announced yesterday that there was an unexpected decline in the third quarter, with the result that it has lowered its forecast of expected growth from 7% for the year to 5%.

The overall changes are just the start of a four-year programme of readjustments totalling €12.4bn. Of that, €7.75bn will be made up of spending cuts and €4.65bn will come from taxation measures.

The adjustments of the forthcoming budget have essentially been telegraphed to prepare people for harsh changes. Increased taxation will account for €1.6bn of the alterations. Of that, €1bn will come from new tax measures.

Spending cuts of €2.2bn are planned. The Government hopes to implement the measures in a way that would not hamper economic recovery. This poses a monumental challenge.