Expansionary budgets possible every year until 2020 – Minister Noonan
Minister for Finance Michael Noonan said today that the Government will be in a position to implement an expansionary budget every year until 2020, if it’s deemed prudent and appropriate.
In the Spring Economic Statement published today, the Minister said his Department is forecasting that Ireland will pass the two million people in employment mark next year, replace all of the jobs lost during the downturn by 2018 and, in total, between 2015 and 2020, add 200,000 new jobs.
He said net outward migration is expected to cease next year with a return to inward migration from 2017 onwards. “The young people who have left are coming back and will continue to do so,” he said.
He noted that the economy is growing at the fastest rate in Europe: “by 4.8 pc in 2014 and my Department is forecasting growth of 4pc this year. Steady, stable economic growth of 3¼ per cent on average is forecast for the remainder of the decade.”
The Minister said the public finances are under control with the deficit falling below 3pc this year and debt levels are set to move down towards the European average in the next few years.
“As a result we will be in a position to implement another expansionary Budget this year and every year out to 2020, if this is deemed prudent and appropriate,” he said. “We will meet our medium term objective of a balanced budget in structural terms over the forecast horizon.”
“Over the last number of years the need to bring the deficit below 3pc of GDP has been the anchor for our fiscal policy. This was a hugely important commitment and each year we set a target to reduce the deficit on a phased basis.
“Each year we overachieved on our fiscal target, sending a strong message to the public, to SMEs, to the FDI sector and to investors at home and abroad that Ireland was regaining control of our public finances. This, in turn, led to increased confidence, increased investment, lower interest rates and borrowing costs; supporting growth and job creation throughout the country.”
He said the deficit was reduced from €15bn in 2011 to €4.5bn in 2015. “However, we were in a position to achieve these targets with less tax increases and expenditure cuts than originally envisaged and bring an end to the era of austerity budgets much earlier than originally planned.
“My Department is now forecasting a deficit of 2.3pc of GDP in 2015. There are obviously risks to this forecast and it is essential that discipline is maintained in the management of the public finances. With the deficit falling below 3pc, from next year onwards a different set of rules apply and we will be required to make progress towards a balanced budget in structural terms. This will be the new anchor for budgetary policy and it is designed to ensure that budgetary policy supports economic growth.
“Put simply it is designed to ensure that the days of ‘if I have it, I’ll spend it’ are over and this new approach will protect the Irish people from the boom and bust policies of the past. If these rules had been in place, and properly applied and adhered to in the early 2000s, Ireland would have been far better positioned to weather the global financial crisis.”
He said between €1.2bn and €1.5bn will be available for tax reductions and investment in public services in this year’s Budget. “The partners in Government have also agreed that the agreed space will be split 50:50 between tax cuts and expenditure increases and the actual measures will be announced in Budget 2016.”
The Minister also said the 12.5pc corporation tax rate will stay. “We will continue to enhance Ireland’s attractiveness for research and development by introducing a knowledge development box in the next Finance Bill. We have no reluctance to continue, in parallel with our European Colleagues, in reforming corporation tax but we will not, as many in the opposition advocate, increase the 12.5pc rate.”
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