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Sorry Michael: Spending watchdog still thinks Noonan should cut €2bn in the budget

Economic figures warned Michael Noonan that the hard slog is not over at the MacGill Summer School tonight.

Finance Minister Michael Noonan
Finance Minister Michael Noonan
Image: Laura Hutton/Photocall Ireland

THE GOVERNMENT HAS again been told to stick to the plan to cut €2 billion in the October budget by the chairman of the State’s spending watchdog. 

John McHale, the chair of Irish Fiscal Advisory Council, said that anything less than a €2 billion would represent a “worrying weakening of the commitment” to the fiscal targets laid down by the EU. 

At the MacGill Summer School in Glenties tonight, McHale said: “The original plan for doing the €2 billion additional adjustment should be followed through on.”

He said the reasons for doing this include Ireland still having a large deficit of between €7 and 8 billion this year and a very large debt of 120 per cent of gross domestic product.

His comments came just hours after Finance Minister Michael Noonan said that the 3 per cent deficit target will be hit “by making less cut backs and less tax increases”.

Hitting the 3 per cent deficit target is required in order for Ireland to exit the EU’s excessive deficit procedure which obliges governments to avoid spending more than they take in through taxation.

But McHale said tonight: “The likelihood of not needing the full €2 billion to meet that target has increased given the recent [exchequer] numbers. But again we can’t forget the underlying risks and the possibilities of setbacks.”

Last year the government cut €2.5 billion in the budget, some €600 million less than was previously flagged.

McHale stressed that while this did not harm Ireland’s reputation a second year of scaled-back adjustment “could raise doubts about the political capacity to hold to the framework” having exited the bailout programme last December.

‘Hard slog not over’

He said that while exchequer returns for the first half of the year have increased the likelihood of the target being met with a smaller adjustment than €2 billion these figures can be “notoriously volatile and subject to revisions”.

Earlier, the former secretary general of the Department of Finance, John Moran, said that he still sees “quite a lot of risk on the horizon” citing many external factors beyond Ireland’s control.

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“It’s not plain sailing out there, a lot of stuff is outside our control,” Moran told the audience, while stressing the department he has just left is better prepared for any crisis.

Fiona Muldoon, formerly head of credit institutions at the Central Bank, also warned against easing off on austerity, saying: ”The hard slog is not over, we are simply not there yet.”

In a well-received speech at the summer school Muldoon warned that Ireland still has a large debt pile to contend with and said that tax breaks would inevitably lead to more borrowing which would not be in the country’s long term interests.

She said: ”It will undoubtedly make for an easier political term for an elected government but it is not I believe collectively in our medium or long term interests.”

Impact general secretary Shay Cody bemoaned rising house prices saying that “property porn” has returned in recent months. He called for urgent government intervention in the housing market.

Earlier: “Less cutbacks, less tax increases” needed for Budget 2015 — Noonan

About the author:

Hugh O'Connell

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