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Dublin: 11 °C Saturday 1 November, 2014

Stephen Donnelly: The Troika targets can be met with no additional budget measures

But just because we don’t have to become more efficient, that doesn’t mean there aren’t some adjustments that we should make, writes the independent TD.

Stephen Donnelly

A WEEK AGO I asked Minister for Finance Michael Noonan for an estimate of the amount needed from Budget 2014 to meet the Troika target of 5.1 per cent gross domestic product of GDP for 2014.

He replied that he didn’t have all the figures. Department of Finance officials were still running the numbers.

“The budgetary and economic forecasts which will underpin the Budget are still a work in progress,” he said, pointing out that all the data available was “quite dated”.

In the absence of any numbers from the Government, I’ve based my pre-budget submission on the figures produced this week by the ESRI.

When you use the ESRI’s figures as a starting point, you find something very interesting – Ireland would meet the Troika target for 2014 with no additional budgetary measures for the year ahead.

Yes, you heard me; no additional taxes, no additional cuts in services, nothing. How is this the case?

Exceed the Troika target

Here are the two sets of figures side-by-side. The first column shows the best estimate of how we think the government will meet the Troika target, including their €2.5bn of cuts, plotted against the ESRI figures. The second column shows my proposal:

image

But just because we don’t have to become more efficient, that doesn’t mean there aren’t some adjustments that we should make.

What we could do this year is exceed the Troika target, improve public sector effectiveness and reinvest in families, education and job creation. Sounds good, right?

My pre-budget submission tries to do those things in the following ways.

  • By identifying €2.2bn in Revenue (€0.8bn) and Expenditure (€1.4bn) measures;
  • By reinvesting half of that in families and education;
  • And by recouping €1.1bn from the banking sector and reinvesting in job creation for one year.

This approach would yield a 2014 deficit of 4.5 per cent of GDP, significantly exceeding the Troika target of 5.1 per cent (and the Government’s latest target of 4.8 per cent).

The proposals for reducing expenditure are based on increasing operational effectiveness in public service delivery. They are based on potential savings already identified by the Government.

This includes improving procurement practices, moving to generic drugs and reforming sick pay arrangements. The measures require no cuts in wages.

Health warning

On the investment side, I’m proposing measures that would put money back in people’s pockets via lower property taxes, support parents via cheaper childcare, reduce primary and secondary school class sizes, significantly increase funding to colleges and universities, alleviate the mortgage crisis and provide numerous supports to employers and entrepreneurs, leading to a boost in job creation.

The whole thing has to come with a health warning similar to that expressed by John Fitzgerald of the ESRI. The International Monetary Fund, European Commission and ESRI all have different projections for the 2013 deficit.

Some proposals could not be accurately determined by the Department of Finance, for example making childcare a tax deductible, the carry forward from Budget 2013.

Certain estimates are highly preliminary for example applying the local property tax to the net value of properties.

Nonetheless, the proposals include a safety margin on the Troika target of twice the Government’s margin. So even if the figures require updating, there’s still a buffer.

In short, I believe the Government should use the ESRI figures, reduce the deficit anyway and reinvest in families, education and job creation.

My proposal for Budget 2014 shows how this can be done. Whether the Government takes any heed is another matter, entirely. You can read the full budget proposal here.

Stephen Donnelly is an independent TD for Wicklow and East Carlow

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