EU blessing signals lower-target budget

A resumption of Garda recruitment and no rise in the pupil-teacher ratio are on cards in the budget after the EU powers gave their blessing to a €2.5 billion package of cuts and tax increases, €600 million less than the troika’s original target.

This marks something of a coup for Labour, which had met Fine Gael resistance to an easing in retrenchment.

However, Fine Gael is pressurising Labour over welfare cuts. A spokesman for Tánaiste Eamon Gilmore said it was fair to "assume" the budget of Minister for Social Protection Joan Burton will drop by less than the €440 million target.

Labour is understood, however, to have major reservations about a number of welfare cuts still foreseen. As Minister for Health James Reilly battles to contain a spending overrun, Fine Gael is agitating to make use of the lower fiscal target to ease health cuts instead of making lower welfare cuts.

Tax receipts
A Government spokesman said the budget should achieve a 4.8 per cent budget deficit and a primary budget surplus, meaning tax receipts will pay to run the State excluding the cost of the national debt. Economic growth is forecast at 2 per cent, higher than the 1.8 per cent IMF forecast. However, the Coalition believes less retrenchment will boost growth.

The leeway means Minister for Justice Alan Shatter would resume Garda recruitment.

Despite pressure on Ms Burton, the expectation that Minister for Education Ruairí Quinn will avert a threatened rise in the pupil-teacher ratio has cheered Labour backbenchers.

“In the context of an increasing number of children coming into the system, that’s welcome news,” said Labour TD Aodhán Ó Ríordáin.

Although the European side of the troika had urged Dublin not to dilute the €3.1 billion adjustment goal set out in international agreements, the budget deficit next year should still be well below the troika target of 5.1 per cent.

The latest ESRI report issued today predicts growth in GNP of 2 per cent this year and 2.7 per cent next year, but warns the Government risks missing fiscal targets by opting for the €2.5 billion adjustment.