Fine Gael may accept budget target of under €3 billion

Compromise taking place in Coalition on Labour demand to ease budget retrenchment


The Cabinet may push as early as today to set a definitive target for cutbacks and tax increases in the budget.

Fine Gael Ministers have been resisting Labour’s clamour to pin down the figure at an early date but there were clear signs last evening of a fresh effort to settle the matter quickly.

Private discussions
In private discussions, Fine Gael has signalled that it may be willing in principle to reduce the €3.1 billion target set out in Ireland’s agreement with the EU/IMF troika to a little below €3 billion. However, this remains well above the €2.5 billion limit beyond which Labour says it will not go.

At issue in meetings today is whether the two parties can bridge the gap. The question falls first to the Economic Management Council, the powerful Cabinet committee at which Coalition leaders settle key fiscal policies before they are brought to wider Cabinet.

The council – comprised of Taoiseach Enda Kenny, Tánaiste Eamon Gilmore, Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin – is scheduled to gather this morning before the weekly meeting of the Cabinet.

If a deal on the budget target is reached among the members of the council or if they are close to agreement, a proposal may then be brought to Cabinet.

A compromise is already taking shape. Despite pressure from the troika not to dilute the €3.1 billion, Fine Gael appears ready to yield a little to Labour’s demands to lower the retrenchment target. However, Fine Gael will accept a modest reduction only on condition that the Coalition achieves a smaller budget deficit next year than the 5.1 per cent sought by the troika.

Still, Mr Noonan’s declaration that he would seek a primary budget surplus was seen in Labour circles as “changing the goalposts”.

Such a surplus would be achieved if the tax income was greater than the day-to-day cost of running the State when excluding interest payments on the national debt. This would necessitate an overall budget deficit of some 4.8 per cent, a good deal lower than Labour has been willing to accept.

The core aim is to iron out differences between the Coalition parties so discussions can advance on spending by individual departments in talks with line Ministers in the run-up to budget day on October 15th.

While there is some confidence in Government circles that the two sides will ultimately settle their differences, it was far from certain last night that a final agreement was in view.

Faced with persistent Labour demands for measures in the budget to help working families, Mr Noonan is said to have adopted the attitude that Labour should now substantiate its proposals.