What the economists say:
Robbie Kelleher: Head of research Davy Stockbrokers
Budget 2007 was very much along expected lines with the Minister being able to achieve the "dream scenario" of providing for significant increases in both current and capital spending, announcing a very sizeable reduction in the income tax burden and at the same time targeting a sizeable overall Budget surplus which will see the debt/GDP ratio fall again from an already very low level. The only bad news in the Budget came for smokers who will have to pay 50c more for their pack of 20 cigarettes.
It is disappointing that he did not avail of the opportunity to begin the process of integrating the health and employment levies into the income tax code. Indeed, he did the opposite by rising the health levy from 2 per cent to 2.5 per cent for those on incomes of more than €100,000 per annum. From an overall economy point of view the Budget is very expansionary and adds to the very considerable stimulus that is already due from the release of SSIAs. And it very much underpins forecasts of 5-6 per cent economic growth again in 2007.
Paul Sweeney: Economic adviser, Irish Congress of Trade Unions
Forget the Budget, the Government has to invest in resources to greatly improve capital investment planning and thus improve people's lives. A Budget is about minor changes on one year's spending and taxes. But with a new seven-year NDP, mistakes on capital spending or on privatisation receipts have massive consequences for decades on people's lives. Ireland has had a poor history on capital dis/investment.
Congress originated the idea to nationalise the West-Link toll but we never envisaged buying it at a huge cost and keeping the gates closed. Congress warned about the pitfalls of selling-off State monopolies, but Eircom was privatised just when broadband and cheap telephony was needed. This year, Government did not keep a sufficient strategic stake in Aer Lingus to ward off the Barbarians at its gate. The vain effort to bring in "competition" in this small island economy in electricity has led to far higher prices and to delays in new power plants.
The proposed Luas extension won't work - the existing line is already overcrowded. A metro is vitally needed with global warming and high oil prices but only after serious appraisal.
On yesterday's Budget, the reduction in the top tax rate benefits only the top 20 per cent of taxpayers. It did nothing for 80 per cent of taxpayers. It has fallen well short of what was possible.
Danny McCoy: Director of policy, Ibec
This is an expansionary Budget as conventionally measured with the cyclically adjusted budget surplus predicted to go from 2.7 per cent of GDP in 2006 to 1.8 per cent in 2007.
With Ireland's population growth running at about five times the rate in the rest of Europe, the demand for public services and public infrastructure remains strong. Despite the rapid growth in the number of mouths to be fed, the budgetary arithmetic nevertheless remains the envy of every potential finance minister.
The growth in capital spending of 13 per cent is sensible though the revenue buoyancy afforded from the property boom has been channelled significantly towards boosting after-tax incomes. Whilst it may be unnecessary at present to fuel disposable incomes to such an extent, these changes should underpin wage growth.
Many of the budgetary measures will have a positive impact on business.
Restoring the competitiveness of Ireland's traded sectors is essential for sustained economic prosperity.
Budget 2007 scores well on the productivity front, through support for R&D and business investment incentives. Unfortunately, its impact upon the cost base is more mixed as many of the expansionary measures will lead to higher costs for business with an opportunity to tackle energy costs in particular being missed.
Dr Alan Barrett: Economic and Social Research Institute
During the year, some colleagues and I at the ESRI were urging the Minister to avoid a Budget that injected too much additional demand into Ireland's booming economy. Our concern was that such a Budget would contribute to inflationary pressures. Given that competitiveness has been eroded in Ireland in recent years, containing price pressures should be a core focus of policy.
The Minister's figures show a general government surplus of 1.2 per cent of GDP for 2007. At first glance, this may give the impression that the Budget has passed the "prudence" test.
However, if we compare this 1.2 per cent with the 2006 general government surplus of 2.3 per cent, we can see that the Minister will be injecting a lot of additional money into the economy in 2007 relative to 2006.
This is unwise but with an election looming the political realities are clear.
The obvious question that arises is what specific measures should have been omitted so that a bigger surplus would have been achieved.
The reduction in the top tax rate would certainly be one of the measures with a lower priority but, again, there are those political realities.