Category: Archive

Record 2001 budget rife with giveaways

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — The government has brought in the biggest spending budget ever, handing out tax cuts and social welfare benefits and announcing major spending plans for 2001.

Finance Minister Charlie McCreevy is gambling that the Celtic Tiger boom will slow down gently, the amended key national pay deal will hold, an international recession is not on the way and inflation will moderate.

With government coffers bulging with money from the economic boom — the expected treasury surplus this year is a huge £2,479 million — the coalition has opted for a big giveaway.

The minister said he will be delivering the fifth budget of his administration next year but many commentators believe the minority Fianna Fail/Progressive Democrats government is gearing up for an election next spring or summer.

McCreevy said his measures were framed against the prospect of "strong but moderating economic growth". The economy has grown by an average of 7.8 percent in GNP terms since 1993.

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The minister said his aim is to continue to create a "prosperous, fair and caring nation."

The tax cuts and social welfare benefits will cost £2.1 billion and with £2.2 billion already committed on services and for running the country, it means that spending of more than £4 billion is involved for next year. Even after all that spending, a surplus of about £2.5 billion is expected next year.

Economists have been urging the government to be cautious and moderate in spending and one commented that the minister had thrown "everything but the kitchen sink" at the economy.

Taoiseach Bertie Ahern strongly refuted criticism that too much money was being pumped into an already overheating economy.

"It was the first budget in the history of the state in which Ireland’s GNP per capita is estimated to be about 100 percent of the EU average."

He said if the money had not been spent, it would have gone either to pay off more of the national debt or on pensions for the future.

Ahern said Ireland already had the second-lowest national debt in the EU at 33 percent, which was only surpassed by Luxembourg, with none. There is already £5 billion in a pension fund for 2025 set up 18 months ago.

McCreevy had "got it right" in giving it to hard-pressed taxpayers and the old and young that needed it badly, Ahern said.

Tanaiste Mary Harney also dismissed criticisms: "In bad times we were told by some economists that we couldn’t cut taxes because we had no money to do so; in good times we are told we can’t cut them either because of inflation pressures. I don’t accept that."

The minister forecast GPD would increase at an annual average rate of 6.9 percent over the three years 2001-2003, compared to a growth rate of 10.7 percent in 2000.

He said GNP was a more accurate reflection of national income in Ireland and he anticipated it would average 6 percent over 2001-03, compared to an estimated 8.6 percent this year.

The estimated inflation rate for 2001 is an average 4.5 percent, compared to the 6.8 percent last month. The minister predicted inflation for 2000 would be an estimated 5.5 percent, compared to 1.6 percent in 1999.

He said that if the effects of higher oil prices, interest rate increases and currency exchange rate developments unwind, inflation is forecast to come down further, to 2.5 percent, in 2003.

Employment should grow by about 2.5 percent annually with unemployment declining a bit further.

Welfare improvements, which the social partners negotiating a key national pay deal have sought, will cost £850 million in a full year compared to last year’s budget welfare handouts of £400 million.

He is giving away £1,231 million in personal tax cuts — three times the amount promised under the national pay deal, the Program for Prosperity and Fairness.

McCreevy’s income tax changes will mean the proportion of income earners paying the top rate of tax will fall to 23 percent and 150,000 people will be removed completely from the tax net.

A single person earning £15,000 with no children will get about £12 more a week. A married couple on about £20,000 with two children will be £25 a week better off. A married couple with two incomes totaling £45,000, with an £80,000 mortgage, will have a £54 a week saving.

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