Budget tensions are escalating between Fine Gael and Labour as TDs in the two Government parties clash over the fiscal plan for 2014 .
Amid pressure on the Fine Gael backbenches to avoid any dilution of spending cutbacks and tax hikes mooted for next year, a group of five Labour TDs launch a broadside in The Irish Times today against "austerity junkies" on the other side of the Coalition.
"We will do as much austerity as is needed to secure the recovery. Not a cent more," say Labour TDs Derek Nolan, Michael McCarthy, Kevin Humphreys, Arthur Spring and John Lyons.
Softer budget
Their call for a softer budget in mid-October stands in marked contrast to demands from a group of eight Fine Gael TDs – Eoghan Murphy, Seán Conlan, Paul Connaughton, Pat Deering, Brendan Griffin, Noel Harrington, Seán Kyne and Anthony Lawlor – who insist that the Government must continue to exceed fiscal targets set by the troika of international lenders.
In this newspaper on Wednesday, the Fine Gael TDs also said there should be no new taxes on work earnings next year.
With Budget 2014 to be finalised by the Coalition immediately after the summer break, the deepening divisions between rank-and-file TDs in the two parties point to difficult talks in the autumn between Taoiseach Enda Kenny and Tánaiste Eamon Gilmore.
The looming negotiation comes against the backdrop of repeated warnings from the troika – comprising the EU Commission, the European Central Bank and the International Monetary Fund – that the safest option for the Government as it exits the bailout is to proceed with a €3.1 billion retrenchment.
This has antagonised senior Labour figures in particular, who argue that a €3.1 billion package is unnecessary as it would beat the troika’s budget deficit targets by a wide margin.
Although the Fine Gael TDs argued that the Government should meet the underlying deficit target and borrow for a stimulus programme, this is dismissed as a “false choice” by the Labour TDs .
'Deflationary effect'
"It ignores the fact that taking more than is needed out of the economy will itself have a deflationary effect. Moreover, the Government is already committed to a capital programme of €10 billion over the next three years," the Labour TDs say in a letter to the editor.
They say they signed up to the programme for government to help the State out of a serious mess, not because they are against spending on public services.
“Tough decisions have been necessary to get the country to where it now is. Recovery is in sight, though not yet secure. But we are not austerity junkies.”
The Labour TDs also say their Fine Gael counterparts should spell out where budget cuts should fall to meet the deficit target.
Scrutinise
Mr Murphy said in response that he welcomed debate, adding that the discussion underlined the need for an independent parliamentary committee to scrutinise the budgetary process in detail.
“The final responsibility rests with the Ministers,” said the Fine Gael TD for Dublin southeast.
“The underlying amount of the annual deficit has to be dealt with. That’s absolutely essential. That’s why we’re in the bailout programme.
“If we don’t cut it this year we’re just going to have to find the money next year. That’s the economic reality we’re facing.”
