THE Maastricht rules on the public finances are limiting room for manoeuvre in the Budget. Because they take a stricter interpretation on the level of Government borrowing, the Government has less to spend on Budget day than a quick glance at the sums suggests. For this reason agreement on the final package is not likely until the end of this week, with the Minister for Social Welfare, Mr De Rossa, laying down markers on his position at a briefing yesterday.
The Maastricht Treaty sets down the rules for those states wanting to qualify for a single currency. One requirement is that Government borrowing be below 3 per cent of national output. However, the EU measure of borrowing differs from the normal Exchequer Borrowing Requirement (EBR). The figure used is the General Government Deficit (GGD) - a wider measure of borrowing than the more normally-used EBR
This is causing some difficulties for the Government partners, who want to keep borrowing at not much more than 2.7 per cent on the Maastricht criteria to stay comfortably within the 3 per cent barrier. One reason for the difficulty is that £119 million in debt savings carried over from 1995 will reduce the EBR, but not the General Government Deficit measure which treats such transfers differently. The same applies to the £60 million of Hepatitis C compensation paid out of last year's Budget, but which will not be given out until this year. Local authority spending is also included in the General Government Deficit.
For these reasons, Exchequer borrowing may have to be held at 2.3 to 2.4 per cent of GNP to keep the wider Maastricht measure comfortably below 3 per cent. This will restrict the amount the Government can spend on tax and PRSI relief on Budget day and makes agreement on a package all the more difficult.
Speaking at a briefing yesterday, Mr De Rossa indicated some areas of priority. It would be the first time a Budget dealt in a coherent way with long-term unemployment, he said.
Mr De Rossa reiterated his opposition to major reductions in employers' PRSI and to a target of reducing it to British levels proposed by the Minister for Enterprise and Employment, Mr Richard Bruton.
It was false to suggest that the competitive problems faced by Irish companies in low-wage sectors could be addressed through this route, he said. The exchange rates and the relatively low wages paid by British competitors were the main reasons, he said.
Last year, the Government introduced a low 9 per cent employers' PRSI rate for companies paying low-wage employees. Mr De Rossa said it "would be a mistake to introduce even more rates and levels".
Along with his officials he argued that PRSI should not be seen as "just another tax" and was instead a scheme which paid for valuable benefits to both employers and employees.
According to Mr De Rossa's policy adviser, Ms Rosheen Callender: "Tampering with PRSI rates and income has very serious implications for the future and is not something a Minister of the day can agree to lightly."
What is to be offered in PRSI on Budget day has still to be finalised. But a significant increase in the employees' £50 PRSI allowance is expected, while relief for employers may again be directed at lower-wage companies.
The Minister also hinted that another increase ahead of inflation in child benefit would be announced on Budget day. Last year there was a 35 per cent increase and Mr De Rossa said this was a particularly effective measure to deal with family poverty.
