Is Noonan’s budgetary defiance deliverable?
Analysis: Labour concerned about raising Budget expectations that may not be met
A file image of Minister for Finance Michael Noonan with Budget 2014. The Minister has said an adjustment of less than €2 billion may be required in the budget this year, placing him at odds with the IMF, the EC and the Irish Fiscal Advisory Committee.
Minister for Finance Michael Noonan’s defiance in relation to the scale of the adjustment required in the coming budget in the face of the International Monetary Fund (IMF), the European Commission (EC) and other bodies is beginning to come under scrutiny from nervous Labour backbenchers.
The wounded Labour Party has just suffered electorally for making foolish promises towards the end of its time in Opposition.
It can now ill afford to get involved in raising expectations about how much money that will be left in voters’ pockets after Budget Day.
Mr Noonan is insisting that improving economic conditions will enable the Government to implement Budgetary cuts of less than the previously-predicted €2 billion.
This contradicts advice from the Government’s own Irish Fiscal Advisory Committee (IFAC), as well as the IMF and the EC.
All three organisations say the State should stick to the annual the EU-mandate deficit reduction targets – which requires a budget deficit below 3 per cent of economic output - even if growth comes in ahead of expectations.
Previous Department of Finance estimates had found that a €2 billion retrenchment package would be required to receive this aim.
Of course the IMF, EC and IFAC don’t have to get re-elected; Labour and Fine Gael TDs do.
The Budget on October 14th will be a particularly dangerous one for Labour deputies, who were assured by outgoing party leader Eamon Gilmore that Budget 2014 would be the “last of the difficult Budgets”.
While no-one could accuse Mr Noonan of adopting a Charlie McCreevy-style “if I have it I spend it” approach to Budgetary matters, few could blame the wily politician for wanting to inject a little optimism into a rather weary electorate.
The Minister has deliberately decided not to be definitive on what will is achievable this autumn.
He is basing his positive prediction on the fact that the 3 per cent deficit reduction can be achieved with cuts of less than €2 billion on a number of factors, including what he describes as “moving parts”.
His assessment is that while there has been some movement in the wrong direction, on balance there had been “more plusses than minuses” in the first five months of the year.
Mr Noonan is not yet in a position to say how much lower than €2 billion the final figure might be, but appears very confident that a reduction is deliverable.
His close relationship with Labour Minister for Public Expenditure and Reform Brendan Howlin means they have conversed extensively about the upcoming Budget in private.
Perhaps Mr Howlin could use his sway within the Labour Party to settle nerves.
Whether or not this will impact on their former once bitten, twice shy supporters is another story.