Government committed to €3.5bn budget adjustment, Noonan says

THE GOVERNMENT remains committed to an adjustment of €3.5 billion in the forthcoming budget, Minister for Finance Michael Noonan said yesterday, adding that this would be achieved through a combination of tax increases and expenditure cuts.

Speaking at a gathering of the Leinster Society of Chartered Accountants, Mr Noonan said the goal of the budget is to be “fair and balanced”.

“We’re conscious of the need to bring all the people with us,” he said, also confirming to reporters that there will be no extension to mortgage interest relief in this December’s budget.

While he noted that the details of the property tax would not be revealed on budget day, he reaffirmed that it will apply from July 1st next and the Revenue Commissioners will be responsible for collecting it.

On the domestic economy, he noted that there are signs that it is bottoming out.

“We’re not there yet, but we are making progress,” he said, adding, “I’m going through an optimistic phase. I think things are going to work out.”

While he expects Ireland to exit the bailout programme next year, he noted that the next measure of success will be whether or not the country can access funds on the markets at equally low interest rates.

“The signs are pretty good,” he said, adding that the National Treasury Management Agency (NTMA) is committed to issuing treasury bills on a monthly basis.

From a business perspective, he noted that foreign direct investment continues to perform strongly, with the IDA expecting another record year in 2012, while Irish multinationals are also growing.

“Big indigenous companies are showing their confidence in Ireland,” he said, referring to the recent expansion plans from the Kerry Group and Paddy Power.

However, Mr Noonan noted that there were still “issues” around the banking sector, particularly with regards to lending to small and medium-sized businesses.

“We badly need to get those credit lines flowing again,” he said.

Of the Government’s recent decision not to go ahead with the European Financial Transaction Tax, Mr Noonan said the risk to Ireland of dislocation to centres such as London was “too high”, and the Government would maintain its position on this.

Noting that the building and construction sector has been “scapegoated to such an extent that we’re losing the overall view”, Mr Noonan said the sector should be at a sustainable level of contributing between 9 per cent and 10 per cent of GDP but is only at the 5 per cent level.

In this regard, he said, he would like to see a boost in supply by developers starting to build houses again.

“That’s the next phase,” he said.