MINISTER for Finance Michael Noonan conceded that his third budget speech to the Dail had been the most difficult yet to deliver – as he has been suffering from a hoarse throat since last Friday.
Most of the speech had been drafted before Fine Gael’s national conference on home turf in Raheen at the weekend, he said, although it took one more late night session to fine-tune some of the details.
“We tidied it up at the weekend after I went back up in Dublin on Sunday. We were very late on Sunday night, into one o’clock on Monday morning.”
While the €2.5 billion package of tax hikes and spending cuts represented the smallest correction he has had to make to date, it had taken a lot of effort to agree Budget 2014 without increasing income taxes.
“It was difficult but I think that taxes on income are taxes on work and our job in this budget, as it was in the previous budget, was to create as many jobs as possible or at least lay down the conditions for job creation. Increases in income tax or the universal social charge would have run counter to that policy. So I strayed away from that and took taxes elsewhere, like the levy on the banks.”
Outlining the process, the minister said: “We had to decide first of all what the parameters of the budget would be, how much of a consolidation we would make and that is dictated by the target deficits that we have to arrive at. Then I had discussions with Brendan Howlin to see what portion of it can be done by expenditure cuts and what portion by tax increases. Then we have to get government agreement on that.
“When that is agreed, we have to fill out the detail of each part with Brendan Howlin talking to all of the departments to decide on their budgets. Then I assess what tax changes will have the biggest positive impact on the economy.”
He was pleased with the favourable reaction to such incentives around home renovation, the retention of a lower rate of VAT in tourism and hospitality and the abolition of the airport departure tax which he said would help increase passenger numbers at Shannon Airport.
“I was also very pleased to announce that €6 million funding has been provided to the Limerick City of Culture 2014 project. Limerick City was chosen as Ireland’s first ever City of Culture and I am sure that the project will be a resounding success,” he said.
Less well-received has been the decision to reduce unemployment benefits to the under-25s, with anti-poverty groups arguing that young people on the margins of society with addiction or other issues would be at greater risk of homelessness.
But Minister Noonan has defended the measures, saying young people can get higher payments if they are in training.
“We don’t see welfare as a suitable way of life for young people and the alternative is that if they take up a training course that will suit their skills or an education course, they will get €160.
“It will be up to Department of Social Protection and other departments to provide the appropriate set of courses. Just because somebody has an addiction problem doesn’t mean that they can’t spend at least part of the week in upskilling or making themselves suitable for jobs. One person’s welfare payment is another person’s tax. Social welfare is costing us in excess of €20 billion. It’s 40% of everything we spend, 40% of all the taxes people pay,” said the minister.
The 50 cent increase in excise on a bottle of wine, compared to 10 cent on the pint, was part of an effort by the minister to “distinguish between on-trade and off-trade”. “I would prefer if people drank in bars than to be loading up with cheap alcohol and drinking too much at home. There is an element of supervision in bars. Wine is by and large something that is bought in supermarkets or in off-licences and taken home whereas cold drinks are served in bars,” he said.
The last of the budgets to be passed under the watchful eyes of the EU/IMF/ECB, Minister Noonan told the Dail that Ireland would be “handed back her purse” in December when it exits the bailout.
Asked if he would be raiding the wine cellar when the troika finally ride out of town, Minister Noonan said: “We have no plans for that at the moment. I think the Tanaiste has sold most of the good wine that was above in the Department of Foreign Affairs”.