IN OCTOBER WE will have the most up-todate Exchequer figures and growth statistics. Yet none of this will change the following: exports are no longer booming, domestic demand has not recovered and Europe is struggling. That is why Budget 2014 must protect the domestic economy.

When this Government was elected commentators openly spoke of a second bailout being needed. That is thankfully no longer the case.

You may also recall that the markets pushed us into a bailout due to bank liabilities, not the deficit. We all agree that the deficit must be reduced. The debate has been over how long, and with what measures. It is not sustainable for us to keep borrowing billions every year for public services. If we did so we would quickly lose market access again.

Ireland is in technical recession, while stagnation across Europe threatens an export led recovery. Twenty EU countries have excessive deficits. Despite record highs for Irish trade in 2012, European recession and the drug patent cliff are restricting this growth avenue. These problems are outside our control. That is why supporting the domestic economy is crucial.

Speculation has focused on whether the Budget adjustment should be €3.1 billion, or 3 per cent by 2015. In October we should not be taking out a cent more than is needed to meet targets. An unnecessary €3.1 billion adjustment, as some in Fine Gael have proposed, would result in lower growth and loss of confidence.

Falling consumption

The biggest component of domestic growth is private consumption. For the first quarter we saw a 3 per cent fall but the Department of Finance were predicting an increase for the year. That is now unlikely. Exchequer returns show that while income and corporation taxes are on target, VAT and excise duty are 3 per cent behind. This backs up a fall in consumption.

If we want domestic demand to grow in 2014, as the Government and Troika have forecast, the Budget must improve confidence.

We need to support the struggling SME sector, and safeguard the spending that is keeping communities alive. For a start, that means protecting core social welfare payments, solving the mortgage arrears crisis and getting the banks’ lending.

The Promissory Note savings of €1 billion should be deployed to protect the Departments of Social Protection, Health, Justice and Education from further cuts. Their spending reaches into every business and community in Ireland. Reforms must continue in each, while savings and restructurings have to be implemented.

Budget discipline is critical to reassure debt markets. Departments are meeting their 2013 spending targets. Again, this must continue, but restraint should not equate to unnecessary cuts.

Reopening public sector hiring where needed like the Garda College will boost confidence. Nurses on the graduate scheme should be guaranteed positions after two years to improve economic security. The lack of open recruitment across the public service for years is creating a gap in skills and age profile that cannot be ignored and may cost us in the long run.

We must protect those in work and foster more job creation. A good start is keeping the 9 per cent VAT rate that is vital for tourism.

We can increase the income tax take by millions without raising rates or impacting spending by restricting reliefs that benefit the wealthy. Increasing stamp duty on trophy house sales, and a domicile levy of €300,000 should also be on the menu.

Creative solutions

More investment will create jobs but it is counterproductive to link stimulus to cuts in spending that damage domestic growth. The €1.3 billion from the sale of Irish Life should be re-invested in schools, roads and hospitals.

We need creative solutions to solve the emerging housing crisis – thousands sit on housing waiting lists and rents are rising. NAMA and the Housing Finance Agency working with local authorities need to develop a home building program where demand is strong, and lists are long.

The ECB held €13.6 billion of Irish Government bonds at the end of 2012. As happened with Greece, the profits on these, worth billions over a number of years should be returned to Ireland to invest in our economy and help retire debt.

A broad debate is needed on the Financial Transaction Tax that eleven EU countries are introducing but our Government has not supported. It could raise over €300 million in Ireland to protect services and help meet our target of spending 0.7 per cent of GDP on overseas development aid.

In May, the EU extended the deficit targets for six countries, including France, the Netherlands and Portugal. We have not sought an extension. We are one of the only countries who have stuck to our programme targets. We remain committed to getting to 3 per cent by 2015 but we must protect our domestic economy as Europe struggles to grow.

The Budget process must become more transparent and inclusive of all TDs – with the menu of options on spending and taxes clearly outlined in advance, alongside forecasts that are to be given to the Irish Fiscal Advisory Council.

Those calling for more cuts could then spell out where they want the knife to fall, which they failed to do so far. This would also allow us to measure the impact Budget policies will have on the domestic economy.

One thing is clear : Now is not the time for excessive cuts that will damage our recovery.

Kevin Humphreys is a Labour TD for Dublin South East

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