Ireland: Coalition tensions rise over budget strategy
08 August 2013
Posted by: Author: Juno McEnroe
Author: Juno McEnroe (Irish Examiner)
Coalition tensions over the upcoming budget strategy have heightened with two Labour ministers saying people needed relief rather than the deeper cuts proposed by Fine Gael minister Brian Hayes.
Labour ministers have rejected suggestions by the junior finance minister that the Government should exceed its savings target and bring the deficit down to around 4% to please the markets. Speaking to the Irish Examiner, junior enterprise minister Sean Sherlock rounded on his remarks and said excessive savings would curb economic recovery and take "cash out of people’s pockets”.
While coalition ministers disagree on the amount of savings in the October budget, most have agreed that the cuts must reduce the fiscal deficit to 5.1% of GDP next year.
Mr Hayes says we should go further to "get the credibility” of the markets as we exit the bailout at the end of the year.
However, Mr Sherlock, a Labour minister, rounded on his colleague: "Any moves in Budget 2014 to cut deeper than is necessary or make an excessive adjustment will curb growth, impact consumer confidence, and take more money out of people’s pockets.
"We haven’t made sufficient inroads in tackling the potential for job creation from retail. I would worry that, if we drastically reduce the deficit by a further 1% in a calendar year, then any economic recovery in towns throughout the country will be severely hampered.”
The Cork East TD warned that consumers were already dealing with the property tax and existing cuts to child benefit.
"The retail sector, in particular, will be damaged if consumer confidence does not pick up. Thousands of jobs can be created if people are encouraged to spend. Cutting further than necessary will do the exact opposite.”
Despite Mr Hayes’ assertion that "reputation is everything”, Mr Sherlock said international lenders had already seen Ireland’s ability to rein in spending.
"We have proven to the markets that we can achieve the targets for deficit reduction. A balanced approach [in the budget] is necessary.”
Labour’s junior transport minister Alan Kelly also said ordinary workers needed relief, not more pain. "I certainly believe that we need to ensure the savings that were made from the [Anglo] promissory note in particular, that we can give some relief to those taxpayers and to the people in the country and show that we can provide for them and not just aim to go down the line of austerity,” he told RTÉ.
Between €600m and €1bn in savings from the Anglo deal could be used to ease the budget strategy.
Mr Kelly called for an end to the budget being debated openly. However, the Tipperary North TD also added: "We need to achieve what we said we’d achieve and get to the targets we set, and we need to lessen the burden on ordinary workers and taxpayers because they’ve been through an awful lot over the last number of years.”
Sources say final numbers in the budget strategy will only become clear once exchequer figures at the end of September show tax returns for the third quarter.