The Government intends to make a major concession to middle-income taxpayers in the October budget as part of a strategy to demonstrate the era of austerity is drawing to a close.
As preliminary talks started on this year’s budget in recent weeks – it will be announced two months earlier than last year – high level sources in Government have said there will be a significant package included in the announcement to recognise the sacrifices middle-class taxpayers have endured over the past five years, through a combination of higher taxes and pay cuts.
"We have come to the point now where working people are beginning to suffer from [austerity] fatigue," said a senior Fine Gael Minister who spoke on the basis of privacy. "We need to make a strong gesture to recognise their efforts and to encourage them to spend in the economy again. That in turn will stimulate growth."
Room for manoeuvre
The Minister would not specify the concession but indicated that it might be on the tax side. A Fine Gael ministerial colleague also expressed the view that last December's budget was the last of the austerity budgets. This Minister said the deals struck on the promissory note as well as that on a lower interest rate on the troika loan would give some room for manoeuvre.
However, the Minister cautioned that the collapse of the Croke Park II deal with public service trade unions was a complicating factor that might prevent it happening in the manner originally envisaged. “It will be difficult to tell the unions they have to take cuts of €1 billion over three years while sending out a message we are making concessions to middle income taxpayers,” said the Minister.
Over the weekend, Labour Minister Joan Burton said she believed that Ireland had "reached its limits of austerity" and that ordinary people were "shouldering too much of the burden".
Addressing the annual conference of the St Vincent de Paul Society Ms Burton questioned the austerity-only approach prevalent throughout the EU.
Policy choice
Fine Gael Minister Leo Varadkar responded by saying he agreed with a lot of what she said but questioned if austerity was a policy choice.
“Ireland ran out of money in 2008, nobody would lend us money and as a result of that we’re in a programme which is largely agreed with the troika and we have to follow that programme.
“It is only when we get out of that programme that we are free to make decisions of our own again.”
Fianna Fáil leader Micheál Martin said he found it surprising that a Minister who was part and parcel of budgetary cutbacks was now distancing herself from them.
“It should not be forgotten that Joan Burton has been presiding over very serious cuts in social welfare and the breaching of promises given prior to the general election,” he said.
Separately Minister of State at the Department of Finance Brian Hayes last night excoriated what he called "failure addicts" for continuing to talk down the economy despite real evidence of recovery.
However, he argued that for the economy to recover, it was important to continue controlling the public sector pay and pension bill.
