No scope for bigger tax cuts in budget, says Noonan

Homeowners assured by Minister for Finance that property tax will be frozen in 2017

A property tax frieze, adoption rights and future budget cuts are topping the agenda at Lissadell House for the final cabinet meeting before the summer recess for the government. Harry McGee reports. Video: Enda O'Dowd

Minister for Finance Michael Noonan has told the Cabinet there will be no scope in October's budget to increase tax cuts and spending beyond a range of €1.2 billion to €1.5 billion.

Mr Noonan’s warning to Ministers came as he confirmed steps to freeze the property tax in 2017, a move that will insulate homeowners from the recovery in valuations since the tax was introduced in 2013.

The Cabinet meeting on Wednesday at Lissadell House, Co Sligo, was its final gathering before the summer recess. After the talks Taoiseach Enda Kenny and Tánaiste Joan Burton both said the election would not take place this year.

Despite a surge in tax revenue this year and an anticipated advance in economic growth, Mr Noonan told the Cabinet that European Union law prevented the Government from going beyond the “fiscal space” set out in the spring statement.

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He had earlier said the April forecast of €1 billion in additional tax revenue this year had been revised to €1.4 billion but stressed “because of fiscal rules it does not give us any additional budget space”.

Property tax

On the property tax, Mr Noonan said the Government was examining ways of maintaining the yield at its present level.

“I am not going to be in a situation if we are back in government [where we] get into a situation where there is a huge jump in the take on property tax,” he said.

“What I am committing to the people in advance is there will be no sudden shocks in advance of the property tax.”

When homes were first valued, the Coalition promised the tax would not change until 2017. Mr Noonan noted Dublin values had risen 40 per cent since 2013 and values elsewhere in the State were up 20 per cent.

A Cabinet memorandum from the Minister said the budget would be unveiled on October 13th.

The €1.2 billion-€1.5 billion will be divided equally between tax cuts, centred on the universal social charge, and spending increases. However, €300 million has been reserved for public-service pay and pensions.

Given pressure on the health and justice budgets going into 2016, Mr Noonan’s intervention is seen as a clear attempt to curtail ministerial demands for additional resources.

Message of competence

With the election on the horizon, the Coalition is also keen to project a message of economic competence in its budget deliberations by maintaining what it regards as the prudent course set out in the spring. Although the

Irish Fiscal Advisory Council

previously warned the plan did not fully comply with EU rules, the Government insists the final package will.

Mr Noonan’s memo also set out two new downside risks to the fiscal plan.

First was the possibility that €200 million in EU budget payments in respect of 2014 and 2015 might have to be made next year. The question would arise only if member states ratified a new budget cycle in 2016, a year ahead of schedule.

Second was the possibility that the EU authorities would not allow Dublin take into account the benefit of “tax buoyancy” in fiscal calculations. Such a development would limit the funds available for tax and spending measures.

Arthur Beesley

Arthur Beesley

Arthur Beesley is Current Affairs Editor of The Irish Times

Harry McGee

Harry McGee

Harry McGee is a Political Correspondent with The Irish Times