Detailed plans to cut spending and increase taxes over the next three years are to be announced by the government this autumn.
The decision to announce the multi-year programme is designed to show the markets how Ireland will reduce its deficit and to give certainty to consumers about what lies ahead.
The move by Michael Noonan, The Minister for Finance, to include the details in the pre-budget outlook document – probably in October – would provide clarity about what will happen, according to senior sources.
It will also be seen as a measure to bolster confidence in the country’s determination to deliver on its pledges under the EU/ IMF bailout.
While the precise level of detail to be included in the three-year programme remains to be finalised, it will include a new spending plan to emerge after the comprehensive spending review in all areas, now nearing completion.
The government also hopes that details of its tax strategy, while sure to provoke controversy, will give consumers a clear view of what they will face and thus help restore some level of confidence.
Final projections for 2012, to be completed in the early autumn, will show the exact outlook for 2012.The existing plan is for €3.6 billion in spending cuts and tax increases next year.
But the government is not ruling out the need for an increased adjustment of up to €4 billion, if this is required to reduce the 2012 budget deficit to 8.6 per cent, the level promised in the EU/IMF programme.
Sources said a clearer picture on the level of adjustment required in next year’s budget would come when full-year figures for growth rates, taxes, job creation and unemployment had been evaluated in November.
This weekend, the government’s projected adjustment of €3.6 billion was described as ‘‘the working target’’ by junior minister Brian Hayes.
But he warned that ‘‘this may go up because the bigger question is getting the deficit down to 8.6 per cent’’. Fears of a global double-dip recession have raised serious concerns about Ireland’s tentative return to growth on the basis that export growth is driven primarily by foreign direct investment, particularly from the US companies.
‘‘In the second half of the year there are ominous signs on the world economic stage in relation to the entire question of national debt and where economies are going,” the minister said. ‘‘Our task is to navigate our way through this as a small, open economy. If the world economy takes a hit, we take a hit.”
The government’s strategy would see the bulk of adjustments in the public expenditure rather than in taxation, but household and other charges will form part of the budget.
The public expenditure savings to be introduced by Brendan Howlin, the Minister for Public Expenditure and Reform, were described as ‘‘critical in financing the budget for next year’’, according to Hayes.
All departments have been participating in a detailed review of all their spending programmes, and reforms and money-saving measures are to be finalised in the weeks ahead in final negotiations between the departments and the Department of Finance
Source Sunday Business Post