Size of budget measures depends on tax receipts out this week

Fine Gael and Labour are drawing close to a deal on the size of the fiscal measures in next month's budget, but the final sum depends on tax receipts this week.

The basic principles underpinning the emerging consensus are that the fiscal plan will be designed to achieve a primary budget surplus and that cutbacks and tax hikes will come in at less than €3.1 billion, the target set out in Ireland’s troika programme.

For the Coalition partners, this marks a tacit change in their position.

A Labour source acknowledged the party has moved to accept the primary surplus “objective” provided this can be done with less than €3.1 billion. The party’s previous fiscal retrenchment target was €2.5 billion, but significantly more is now in play.

Fine Gael had insisted until recently that the €3.1 billion target must be met. Any reduction risks antagonising the troika, which has been insisting that the Government should stick to the €3.1 billion target.

Figure not finalised
An "adjustment" figure in the region of €2.8 billion is being mentioned, although this is not yet finalised. It is readily recognised in Government circles that the sum ultimately unveiled on October 15th may be different.

Two-thirds of the package would be comprised of spending cuts, with one-third coming from tax increases.

While Fine Gael and Labour are said to have reached an outline agreement on a common approach in recent days, informed sources said some of the key calculations remain subject to change after the release next week of exchequer returns for September. The Government expects to collect some €4 billion in taxes this week alone.

At issue is continued uncertainty over the level of VAT returns. Any appreciable breach of targets would jeopardise the emerging budgetary arithmetic and the assumptions underpinning it.