BUDGET STRATEGY:THE GOVERNMENT insisted yesterday that it will not disclose the details of the four-year budgetary plan to stabilise the national finances until about the time of its publication in November.
The Department of Finance indicated yesterday that the Government was under no obligation to provide the gist of the plan to the European Commission or to the European Central Bank in advance of that.
A spokesman did confirm, however, that the plan would include proposed new taxation measures.
“The Minister for Finance Brian Lenihan has acknowledged that taxation will form part of the solution to our fiscal problems and stabilising the deficit,” said the spokesman.
The economist Colm McCarthy yesterday said that obvious tax measures included the introduction of water charges in urban areas, in addition to a widening of the income tax net to include the 50 per cent of workers who pay no tax.
The department said preparatory work was just beginning on the plan and it was premature to speculate on any measure that might be contained within it.
In response to EU commissioner on economic and monetary affairs Olli Rehn’s comments on Ireland’s 12.5 per cent corporation tax rate, the spokesman insisted that the status of the tax was immutable and would not form part of the plan.
“This commitment is protected, in an EU context, by the principle of unanimity in taxation matters. That was further enhanced by the insertion of a legal guarantee in the Lisbon Treaty. The 12.5 per cent corporation rate is a cornerstone of the Irish industrial policy,” said the spokesman.
That view was bolstered by Taoiseach Brian Cowen yesterday, who contended that the decision to publish the plan – and to bring forward the pre-budget outlook to mid-October – was agreed by Cabinet as late as its meeting this week.
Mr Cowen described the plan as a framework and contended that it would not be a replacement for yearly budgets.
“There still will be four budgets in the next four years. [The four-year plan] will set out what the fiscal realities are, how to reduce expenditure and increase revenues, to get to a point where the budget is more or less back in balance.” He said it was a difficult task but the Government wanted to do a similar exercise for the public finances as was done this week with its announcements that €50 billion might be needed for the State’s bailout of troubled Irish banks.
“I think the important point to be made is that there are choices. There is a way forward. We have to set it out over a four-year framework. By doing it we can grow, prosper and return to times that we have known before,” he said.
Mr Cowen said that intensive work would begin immediately on drawing up the framework.
“You don’t get into the business of deciding what’s going to be the outcome until you have looked at all the policy options and come up with a coherent four-year framework to do that,” he said.
The Taoiseach would not be drawn on the elements that would be included, or the level of detail that would be included in the document.
A Government source said yesterday that the pre-budget outlook, due later this month, and the four-year plan may be merged into one publication in November.
The source also said that the Stability Programme Update, to be published in December, may contain revised figures for expenditure cuts between now and 2014.
The last update, published in December 2009, envisaged cuts of €3 billion for 2011, €3 billion for 2012, €2.5 billion for 2013 and €2 billion for 2014.
Mr Lenihan has admitted that the Government will seek cuts of significantly more than the promised €3 billion this year. The source said that if more severe cuts were frontloaded, then there may be no need to increase the cuts in subsequent years, if growth assumptions hold firm.
The Fine Gael spokesman on finance Michael Noonan has predicted a significant slowing down of growth from next year, a development which, he claimed,would force the Government to impose more cuts until 2014 in an effort to reach the 3 per cent of GDP deficit target.