Noonan indicates 'difficult' cuts in budget may touch €4bn

MINISTER FOR Finance Michael Noonan has indicated the budget adjustment for 2012 may be higher than the €3.6 billion specified in the memorandum of understanding with the EU-IMF.

Mr Noonan said yesterday the Government would have a correction “of about €4 billion” to make in next December’s budget, a slightly higher figure than that set out in the memorandum. He also warned of an austere budget in December containing cutbacks that would be “very difficult” to achieve.

The Minister, who was giving his response to the six-monthly exchequer returns, referred to the EU-IMF requirement of €3.6 billion. Asked if the Minister was not ruling out a higher adjustment, the Department of Finance said the budget would set the exact amount. “Obviously the exact adjustment will be decided in the budget and will be informed by the latest data,” said a spokesman.

Fianna Fáil’s spokesman on public expenditure Michael McGrath said: “Michael Noonan’s reference to a €4 billion adjustment may be the opening salvo in the Government changing the goalposts in terms of increasing the adjustment it will make in the budget.”

Mr Noonan said yesterday’s figures, which show Government figures to be broadly on target, were welcome. “We are saying that it’s good news that we have no great black hole to fill either on the tax side or expenditure side. Things are working as expected.” On December’s budget, he said: “That’s going to be difficult and it’s going to be difficult on Government departments.”

Tax receipts amounted to €15.3 billion, 0.7 per cent below target. While income tax was marginally higher, corporation tax and VAT were both below expectations. Mr Noonan said the “soft” VAT returns stemmed from the cold spell last February.

He said the lower-than-expected receipts for corporation tax during a period when there had been a substantial increase in exports may be explained by companies deciding to invest in 2010, and offsetting those investments against tax.

Tánaiste Eamon Gilmore said yesterday Ireland was “doing its bit” to address the financial crisis but it was important for Europe “to find a European solution”. Speaking at the Institute of International and European Affairs in Dublin, he said: “Most recently, France has taken an initiative on private sector participation in the Greek [bailout] programme, and it appears that others may follow suit”.

“Whether that approach can be generalised for more than French-held Greek debt, is yet to be tested. What it demonstrates, however, is that we can, if we try, find innovative ways to deal with indebtedness in Greece, without provoking unintended consequences. What is also important is that, in finalising a solution for Greece, there is effective communication of the implications, if any, for other programme countries.”