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  3. Irish Budget Gives Away £2bn But Increases Taxes And Spending - Only In Ireland!

Irish Budget Gives Away £2bn But Increases Taxes And Spending - Only In Ireland!

Jason Gorringe,, London

08 December 2000

Faced with projected GDP growth for the current year of a startling 8.6%, inflation which has nearly doubled in the last year to reach 6.8%, and a boom in tax revenues which has stimulated demands from all sides for giveaways which he dare not finance, Ireland's Finance Minister Charlie McCreevy had a hard task yesterday in presenting a budget which would not disappoint too many people.

He seems to have done the trick, because only some people have criticised him, and not too heavily.

Tax revenues are forecast to increase by 12% next year (a really unprecedented jump in any industrialised country), growth will be held back to (only!) 6%, and inflation will fall to 4.5%. The increased tax take will finance 6.5% higher public spending but in part will serve to dampen consumption since it won't all be spent.

With his eyes fixed on a possible general election next year, Mr McCreevy has spent £2bn, reducing income tax rates by two full points to 20% and 42%, unveiling the most substantial child benefit package in the State's history, and holding back the pace of tax 'individualisation' - allowing fiscal drift to deliver him some stealthy extra tax revenues instead.

But employers criticised the heavy burden of PRSI (social insurance), which will no longer be capped at a salary of £36.500. From April 6th, they will have to pay PRSI on the full salaries of their employees, costing them an extra £159m in the year. Mr McCreevy also introduced anti-inflation measures including a 1% VAT cut to 20% and fuel tax reductions, moved to resolve problems such as the taxation of credit unions, and delivered a major package of benefits for pensioners. The fuel duty cut further widened the big gap between fuel prices in Ireland and the UK. From tomorrow, people in Northern Ireland will be able to cross the border to the south and save 12 pence per litre on purchases of either diesel or unleaded petrol.

Michael Noonan, spokesman for the conservative Fine Gael opposition, attacked the budget, claiming it was "over-stimulating an economy that is running at full tilt." He described the high spending as "a booby trap that will blow the economy into the air".


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