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Opposition Calls Irish Budget 'Voodoo Economics'

by Jason Gorringe, Tax-News.com, London

06 December 2001


'Houdini' McCreevy Does It Again! the Irish press will say this morning, as Finance Minister Charlie McCreevy managed to square the circle by giving away tax cuts when he has no money in the kitty. And how did he do it: with 'voodoo' economics according to the Opposition.

In his budget for 2002, Mr McCreevy announced the surprise addition of over €2 billion (£2.54 billion) to Exchequer funds in three separate budgetary and accounting manoeuvres. The Government will require special legislation to permit it to take substantial funds from the Central Bank and the Social Insurance Fund to pay for spending rises, tax cuts and social welfare increases without borrowing in 2002. The sourcing of the extra money was denounced by the Opposition last night as dodgy accounting and even "illegal", but Mr McCreevy insisted last night: "These funds are owned by the State".

In the pre-election budget, politically astute measures include rises in health spending, child benefit, social welfare payments, pensions and spending on roads as well as modest tax cuts disproportionately benefiting the lower paid. Mr McCreevy has fulfilled his promise to increase child benefit by a further £25 a month for first and second children to £92.62 and by £30 a month for third and subsequent children to £116. He has also maintained his commitment to putting one per cent of GNP into the National Pension Reserve Fund and given €550 million for roads and other infrastructural projects.

The Minister's third new revenue-increasing measure - bringing forward corporation tax payments - was criticised last night by Mr John Dunne of Chambers of Commerce of Ireland. "The Minister has managed to get business to pay for the Government's re-election campaign", he said.

Increases in tax credits and widening of the standard rate tax band will take 125,000 people out of the tax net. The higher rates of 20 per cent and 42 per cent remain unchanged, as expected.

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