Fiscal Council Urge More Cuts And Tax Rises

The government should make a bigger than planned series of adjustments to reduce the budget deficit, the Fiscal Advisory Council has suggested again.

The council has said that while the government’s medium-term budget policy comfortably meets the new balanced budget and debt reduction rules introduced by the fiscal treaty, and that the policy also meets the rules specified in the Fiscal Responsibility Bill, which is currently before the Oireachtas, the debt sustainability and creditworthiness of the State remain fragile.

It believes an additional €1.9bn in spending cuts and tax rises over the period to 2015 should be considered by the government. This is around €1bn less than in its last report.

It says this would help reduce debt faster and provide what it calls a limited measure of insurance in the effort to ensure debt sustainability.

Warning that the government's current medium-term budget plan is heavily dependent on achieving significant spending cuts and a sustained upturn in economic growth, they repeated their previous advice that the government should not rule out income tax increases and cuts to public service pay and social welfare rates, given the scale of the budget adjustment needed.

Sinn Féin’s Deputy Leader Mary Lou McDonald TD called the councils proposal “reckless”, saying: “If implemented they would damage the economy, further undermine vital front line public services and hurt families.

“The deficit reduction strategy outlined by the council simply won’t work. The single biggest obstacle to fiscal sustainability is the absence of growth. The deficit cannot be properly reduced when more than 400,000 people are on the life register.

“The economy urgently needs more investment not more austerity. Investment in jobs is crucial. Getting people off the dole and back paying taxes is the surest route to deficit reduction. Cutting government spending and the disposable incomes of low and middle income earners will further depress the domestic economy and lead to more job losses.

“Once again the Fiscal Advisory Council has shown that it simply does not understand what is happening in the Irish economy. I would urge the Government to ignore the latest advice from the Fiscal Advisory Council as they did to the Council’s advice in advance of budget 2012.”

(H)