The Budget for 2015 is due to be published on 14th October 2014 – and there has already been plenty of suggestions and opinions from various sources about what the government should be doing for Budget 2015.
In previous Budget forecasts , agreed with the IMF/EU , it was proposed that €2 billion worth of savings would be needed in Budget 2015. With the introduction of Water Charges , an improving economy and some creative accounting – there have been suggestions that there might be some scope for the cuts/savings to be less than €2bn.
But one of the latest bits of advice was from the Central Bank – who are suggesting that the €2 Billion of savings should go ahead . They said that …
“To continue to demonstrate that Ireland remains on course for fiscal consolidation and to retain market confidence, the budgetary plans for 2015 need to meet agreed commitments.” … “The priority, acknowledged by Government, remains to reduce the deficit-to-GDP ratio below 3 per cent in 2015. This is a high profile target that calls for special prudence in budgetary planning, ideally with an additional provision for some buffer to guard against adverse shocks.”
In June the ESRI also said that there is limited scope for tax cuts in Budget 2015 – and that the €2 Billion planned savings should go ahead.
Alan McQuaid – an economist for Merrion Stockbrokers, thinks differently… he says that the Government could reach budget targets with just an adjustment of €1bn in Budget 2015. Mr McQuaid, in his latest quarterly economic outlook, forecasts GDP to grow by 3.3% this year and 3.9% next year — well ahead of the Government’s forecast of 2.1% GDP growth.
Meanwhile – in recent months , the European Commission, IMF, and the Irish Fiscal Advisory Council have all urged the Government to implement the €2bn budget cuts in October.
The government have promised to cut the top 52% marginal income tax rate over the next few years – beginning in Budget 2015. However, this measure is to be be targeted at low and middle income earners – so we might also see higher earners paying more taxes in the form of changes to tax bands and credits or the Universal Social Charge (USC) .
The Nevin Economic Research Institute (NERI) have proposed a net discretionary Budget 2015 adjustment of just €800 million – to be made up mainly of increases in government revenue in the form of reduced tax expenditures increases to Capital Acquisitions Tax as well as the introduction of a Net Wealth Tax.
They also suggest a “modest” increase in social spending as part of a social emergency fund targeted at the most vulnerable individuals and communities. Alongside these two suggestions – NERI also propose an ‘off‐book’ investment package that restores public investment in the Republic to the EU average in 2015. They say the investment package could be funded through the Ireland Strategic Investment Fund.
Because the Budget for 2015 now comes in October – not long after the Dail get back off holidays – there is less time for leaks and rumours and vote grabbing speeches about how things should be done . Still – expect to hear and read more promises and threats as Budget day approaches.