Fianna Fáil Finance spokesperson Michael McGrath has welcomed the pre-budget assessment of the Fiscal Council describing it as a wake-up call for Ministers engaged in a daily round of ever more extravagant election promises.
Deputy McGrath commented: “The Fiscal Council have set down a clear marker that €1.5bn in tax cuts and expenditure increases is at the outer limit of what would be prudent for the government to undertake. The Council also calls for a “realistic” medium-term plan to be presented on budget day.
“This is in contrast to the approach which the government have been adopting in recent times with promises of major tax reductions and massive current and capital spending increases. Since the start of 2015 Ministers have been falling over themselves to make promises on everything from paid paternity leave, to massive income tax cuts and infrastructure spending. What has been remarkable is that many of these un-costed proposals have subsequently been dropped, denied or described as unaffordable in parliamentary replies.
“It is my view that the Government is not living up to its Programme for Government commitment to “open up the budget process to the full glare of public scrutiny in a way that restores confidence and stability by exposing and cutting failing programmes and pork barrel politics”. The budgetary process and the decisions taken remain clouded in secrecy.
“In advance of the Budget 2016, I am calling on Minister Michael Noonan and his colleague Brendan Howlin to clarify a number of key points:
· Does the fiscal room of €1.2 – €1.5bn identified for 2016 refer to the full year effect of taxation and other measures or the first year effect? This is a very significant point. For example, Revenue estimate the full year cost of a 2% reduction in the standard rate of USC would be €728m – almost the entire amount earmarked for tax reductions. On the other hand, if the government base their plans on the “first year effect”, this reduction would be €528m, implying over €200m in scope for further tax cuts. Addressing this point gets to the heart of identifying the true scope the government has on budget day and assessing the choice they make.
· Does the €300m in commitments for public sector pay increases under the Lansdowne Road Agreement reduce the €750m available for expenditure announcements on budget day?
· Will additional spending commitments required to take account of demographic pressures in health, education and welfare further reduce the scope for expenditure to improve overall service delivery?
“I believe the government should now be required to set out a formal response to IFAC’s report. It is within its rights to disagree with advice given but it should be required to issue a detailed response setting out why it is taking a different course of action. The approach to Budget 2016 must be transparent and above board. Answering the questions I have set out will go some way to achieving that.”