Noonan confirms budget will take €2.5bn out of economy

The forthcoming budget will be see spending cuts and tax increases totallying €2.5billion, Minister for Finance Michael Noonan confirmed this morning.

The adjustment, and not as much as an anticipated €3.1billion, is the amount of money the Government needs to take out of the economy in 2014 to meet strict bailout targets set by the State’s trokia of lenders.

Mr Noonan’s comments indicate the Government now has to find up to €600m less than expected on October 15th to meet the targets and run the country in 2014.

Speaking on his way into a pre-budget Cabinet meeting this morning he said “we can achieve our targets by not going the full way to €3.1billion because there are other savings in the system “.

Mr Noonan said these savings could be “reckoned as part of the adjustment”.

“If you simply add the spending cuts to the tax increases if comes in slightly ahead of two-and-ahalf billion”.

Also speaking as he arrived for the Cabinet meeting Minister for Education Ruairí Quinn said he agreed with Siptu’s Jack O’Connor that “if we have for room to manoeuvre we should do it to stimulate the economy.” He said he agreed there was a need to focus on job creation in next week’s Budget.

But in regard to the necessary cuts in Government spending he said a balance needed to be struck.

“I think we’re in the middle of a recovery process, it’s not easy, everybody is suffering to a certain extent”. He said the Government’s aim was to “try and minimise the suffering as quickly as we can” .

Speaking earlier this morning on RTÉ's Morning Ireland Siptu's Jack O'Connor said any room to manoeuvre in the Government finances should be used to stimulate job creation and protect those on social welfare.

Mr O’Connor was responding to overnight reports that a Budget package based on the reduced €2.5 billion adjustment, was all but agreed between the Government parties.

According to reports the Fine Gael and Labour ministers were about to agree a Budget which would include cuts in social welfare, school class sizes and GP care , among others.

Mr O’Connor said the Government should be taking the minimum out of the economy to comply with the requirements of the bailout.

He said the only way to achieve the ultimate deficit target of 3 per cent of GDP by 2015 was to increase the size of the economy by about €13 billion by then.

He said this could not be achieved if domestic demand continued to be suffocated.

He said the Government had to find some way to put money into the economy, as “if you are depressing three quarters of the economy you are not going to get out of this mess”.

He said Siptu, as the State’s largest trade union, would propose pay rises right across the economy if the Government exceeds its target of reducing the budget deficit to 5.1 per cent of GDP for next year.