Fiscal Council still wants €3.1 billion budget adjustment

The Irish Fiscal Advisory Council said it maintains the view that the fiscal adjustment in next week's budget should be €3.1 billion.

The statement comes following an appearance by Labour Party TD Arthur Spring on RTÉ's Prime Time programme last night, where he said the council "are now ok" with a lower budget adjustment of €2.5 billion.

The advisory body said today it was required under the Fiscal Responsibility Act to endorse the macroeconomic forecasts underlying the budget, but was “not required to endorse budgetary projections”.

“They know that budgetary wise, the fact that we are creating jobs again and started to increase growth in the economy, we are in a better position than we thought we would be,” Mr Spring said.

The advisory body said it still endorsed the forecasts for this year and next prepared by Government last month, which had outlined the need for an adjustment of €3.1 billion for 2014.

Minister for Finance Michael Noonan said yesterday that spending cuts and tax increases in the forthcoming budget would amount to €2.5 billion, €600 million less than the original target, because the Government could find "other savings in the system".

Today’s statement from the council noted the Government’s intention to implement a smaller adjustment, but said “the macroeconomic forecasts remain within the endorsable range”.

“The Council would like to stress that its assessment of the appropriate fiscal stance is unchanged. It has previously publicly stated that the preferred policy is to continue with the previously planned aggregate adjustment of €3.1bn in Budget 2014,” it said.

The Department of Finance said yesterday that it expects the economy to grow by 1.8 per cent next year.

A report by the Economic and Social Research Institute published today warned that a reduced target could trigger another round of austerity measures in next year’s budget if the Government’s growth forecasts fail to materialise.