Noonan set out position from which he cannot easily retreat
Deep pressure to give something back, Noonan struck a different note
Taoiseach Enda Kenny and Minister for Finance Michael Noonan, at the Fine Gael Parliamentary Party conference, at Killenard, Co Laois, yesterday. Photograph: Eric Luke
Michael Noonan humbly insists he is neither a martinet nor an ideologue when it comes to the public finances. As the budget debate rages, the man who runs the Department of Finance cast himself yesterday as the grown-up version of a schoolboy who happened to be good at his sums.
“I was just good at arithmetic when I was in primary school,” he told reporters.
As for the budget target, he remains quite elusive. Is there room to yield to Labour’s push to reduce the all-important €3.1 billion? “Well, we’ll see,” Noonan replied. “I don’t think it’ll be more anyway.”
There was a time in the crisis when every step towards budget day brought with it an increase in the “adjustment”. No longer.
Without delving into the detail, Noonan said it’s still going to be a tough and suggested there was little to be gained by easing off when release from the bailout is in view.
‘They’re all tough’
“Whether it’s the lesser or the more, they’re all tough – that much expenditure cuts and tax increases – is a tough budget. But what I can say to people is we’re coming towards the end, and we want to keep with it now. Because we’re like a hurling team five points ahead going into the last quarter. We need to close out the game – now’s no time for slacking.”
So far, so firm.
While all the pressure from Labour is on the necessity to give something back to the people, Noonan struck a different note by emphasising the need for the package to convince the markets.
In Noonan’s view the best approach is to run a primary budget surplus. Simply put, the Government would take in enough taxes to meet all its expenditure commitments apart from interest on the national debt.
This opened new ground. The debate has been dominated for months by the emphasis on the infamous €3.1 billion and the parallel target for a 5.1 per cent budget deficit, the figure which takes account of debt servicing costs. Still, Noonan insisted he was not shifting the goalposts.
The basic aim is to ease cost of borrowing on the open market, the markets being the only source of funding next year when the bailout money runs out.
So where does this leave us? Noonan wasn’t saying so in public but set out his thinking privately to TDs and Senators. In that forum he said a negligible primary surplus would not suffice and that an appreciable sum would be required.
To do that – based on current figures, which will be out-of-date by budget day – would necessitate a budget deficit of 4.8 per cent.
This is where the Coalition politics come into the frame, for Labour’s position is that it will go the prescribed 5.1 per cent and not an inch further. There is, therefore, a
pretty big gap between the two parties. Labour wants to limit the fiscal pain to €2.5 billion, but Noonan would need to go far closer to the €3.1 billion to get the primary surplus he wants.
Each party clings rigidly to the line that it really is too early to say what the final adjustment should be because tax and economic growth figures are not yet to hand.
In one move, however, Noonan set out a position from which he cannot easily retreat. Having dangled a primary surplus before the gazing markets, he could hardly take it away.