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Council chairman Tony McHale speaking to TDs and Senators today Screengrab via Oireachtas TV

Government budget advisors: No room for tax cuts until after 2016

The Irish Fiscal Advisory Council is before the Oireachtas Finance Committee today.

THE BODY WHICH independently assesses the government’s budgetary objectives has said that it does not see any room for tax cuts in the next two years.

Speaking before the Oireachtas Finance Committee today, the Irish Fiscal Advisory Council’s chairman, Professor John McHale, said it was the view of the council that there will not be any scope for tax cuts in the near future.

He also warned that if the economy does not grow at the rate expected next year – GDP growth of 2 per cent – then the planned budget adjustment of €2 billion may need to be harsher.

The Tánaiste last week signalled that there may be scope for relieving taxes on some middle-income earners in the lifetime of this government.

But McHale said today: “We really don’t see scope in the next year or two, but if both projections pan out as currently anticipated there could well be scope after 2016.”

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He said there would only be “limited room” post 2016 and said that this would be less likely if there was high inflation.

Despite this McHale said “we should be through the worst of it by 2015″.

The Council was before the committee to discuss its recent report criticising the government’s decision to exit the bailout programme on Monday week without a precautionary credit facility.

In that report the council said that the chances of Ireland not reaching the deficit to GDP ratio of 3 per cent by 2015 had increased from a one-in-three chance to a one-in-two chance as a result of exiting the bailout without a backstop.

Council member Sebastian Barnes (below) told the committee that the state of the public finances could be hit next year by problems in the health budget.

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"We're trying to present an objective analysis and things are getting better," he said, but he added that "as a result of the decision the risks [of Ireland not meeting the target] have increased now."

He continued: "We're not saying it's a reckless policy, but we're just saying, in our view, that the risks have increased considerably."

Former deputy director of the International Monetary Fund, Donal Donovan, told the committee that the €20 billion in funding built-up by the NTMA is an "important weapon in an arsenal" but said that relying only on that "might not necessarily be the most prudent approach".

Using a car insurance analogy, he told the committee that just becuase you don't have a car crash for a year does not mean "it was a bad idea to have taken out insurance" for that year.

Read: Decision on credit line will make it ‘more difficult’ to access future supports

Charts: Here’s how the government’s liabilities have increased to €208bn in five years

Analysis: 5 reasons why the government decided to exit the bailout and go it alone

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22 Comments
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    Mute Grahame Goggin
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    Dec 5th 2013, 3:37 PM

    ”There could well be scope by 2016 if things pan out as anticipated”
    The word ‘if’ is a big word Mr. Mchale
    ‘IF’ my aunt had balls she’d be my uncle

    86
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    Mute Steven O Doherty
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    Dec 5th 2013, 4:17 PM

    If no tax cuts for the middle class how about tax hikes for the advisors? Could balance out with their rate of pay.

    72
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    Mute Ciaran Morgan
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    Dec 5th 2013, 3:54 PM

    things will get worse until Ireland gets a significant debt write off.
    It’s impossible to tax your way out of recession.

    76
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    Mute Pete Foley
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    Dec 5th 2013, 4:25 PM

    I bet there will be tax cuts just before the general election ;)

    53
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    Mute Ryan Ash
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    Dec 5th 2013, 5:55 PM

    “It’s impossible to tax your way out of recession.”

    The correction so far has been made by a combination of tax increases and spending cuts. Do you instead advocate 100% cuts to balance the Budget instead?

    4
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    Mute John Meade
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    Dec 5th 2013, 3:43 PM

    Bang goes another labour promise. Didn’t Gilmore say only last week that in the lifetime of this government there would be tax cuts for middle Ireland. I laughed when he said it and im laughing now. He really is a liability Thank god

    72
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    Mute Philip
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    Dec 5th 2013, 6:26 PM

    Ah there will be a few sweetners thrown out before the next general election

    Plus the eirgrid furore will be put out to report until after the next local elections

    14
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    Mute Declan Conway
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    Dec 6th 2013, 10:54 AM

    Yeah, sweetners such as “there’ll be no income tax increases, only on PRSI and USC, property tax and water rates……….perhaps the odd cent on VAT and a tax extension on private pensions….but definitely no income tax increases!”

    makes you feel lucky to be alive….

    1
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    Mute Plucky Duck
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    Dec 5th 2013, 3:45 PM

    That’s the wife back out on the game then so…!

    52
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    Mute Jason Bourne
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    Dec 5th 2013, 5:15 PM

    Good stuff, I’ve missed her. Tell her that.

    41
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    Mute Sean South
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    Dec 5th 2013, 4:07 PM

    Not going to really affect them especially when most are in breach of the salary cap!

    39
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    Mute Jim Flavin
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    Dec 5th 2013, 4:42 PM

    More BS – there may be tax cuts after 2016 – or the promise of some in Election year ?- surely no-one takes this rubbish seriously .
    Surely no-one will even listen to FF/FG / lab – at the next election – but then in a recent poll – they had 60% of the electorate -. Seems like the Irish like liars .

    30
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    Mute Jason Bourne
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    Dec 5th 2013, 3:44 PM

    So Sebastian Barnes is defo not going back to Criminal Minds then?

    16
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    Mute Michael Berchmans
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    Dec 5th 2013, 5:08 PM

    Fiscal Advisory Council = shills for austerity

    16
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    Mute Ronan Stokes
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    Dec 5th 2013, 6:53 PM

    Why do we need a fiscal advisory council? Dont we have a dept of finance and a minister for finance? Can anyone in Govt actually do their jobs? What a cop out!

    14
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    Mute David Burke
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    Dec 5th 2013, 7:05 PM

    I can believe people need to have this explained. Most developed nations have independent bodies to independently asses and publicly comment on the government budget.

    Do you see the way they are pointing out the increased risk in the government policy. They are independent and you can trust them because they don’t have a political bias.

    A quick list of other countris and their advisory bodies.

    Belgian Federal Planning Bureau
    Canadian Parliamentary Budget Office
    Danish Economic Council
    German Council of Economic Experts
    Korean National Assembly Budget Office
    Netherlands Bureau for Economic Policy Analysis (CPB)
    Portuguese Public Finance Council
    Slovak Republic Council for Budget Responsibility
    Swedish Fiscal Policy Council
    UK Office for Budget Responsibility
    US Congressional Budget Office

    This is why Irish budgetary policy was so shit for so long.

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    Mute Dave Harris
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    Dec 5th 2013, 7:08 PM

    Just because they are supposedly independent does not mean they are right though does it

    11
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    Mute David Burke
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    Dec 5th 2013, 11:36 PM

    Absolutely not as economics is a very imperfect science. But a body made up of non-partisan experts seems like the people who would have the best chance of getting it right. They are smart and they don’t have an axe to grind.

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    Mute Shakka1244
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    Dec 5th 2013, 11:51 PM

    Independant my arse

    2
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    Mute Gis Bayertz
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    Dec 5th 2013, 3:49 PM

    Go away!

    15
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    Mute Dave Harris
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    Dec 5th 2013, 7:06 PM

    well you fiscal advisory council twits are a bunch of miserable bustards arent you….

    Who asked them anyway?

    6
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