THE CHALLENGE facing the Government will be more onerous in the last quarter of the year because of the conditions of the memorandum of understanding with the IMF, the EU Commission and the ECB.
The Government is compelled to draft a budget with a minimum of €3.6 billion in savings, comprising €1.5 billion in tax and €2.1 billion in cuts.
Taoiseach Enda Kenny and Tánaiste Eamon Gilmore have already committed to no increases in income tax or cuts in social welfare rates.
The memorandum specifies that tax measures should include a lowering of personal bands; a property tax; an increase in carbon tax; a reform of capital gains and acquisitions tax; and a reduction in private pension tax reliefs. It also requires social expenditure reductions.
The Government has put a lot of store in the comprehensive spending review overseen by Minister for Public Expenditure Brendan Howlin which, it hopes, can offset some of the more austere measures.
The memorandum specifically allows changes to budgetary measures if alternative savings have been identified by the spending review.
The proposed budget is expected to be a dominant theme in discussions between the Government and the troika this month.
Other conditions include the proposals for establishing the new nationwide water utility (with proposals to set up a charging system); the publication of a Fiscal Responsibility Bill – which gives statutory backing to the Fiscal Advisory Council – and discussion on a “potential programme” for the disposal of State-owned assets.
