Ireland to reverse cuts in budget with eye on re-election

Dublin, October 13

Ireland's finance minister will effectively kick off the government's re-election campaign on Tuesday when he presents his 2016 budget, with a booming economy meaning he can offer to cut taxes and spend more on services.

Ireland brought an end to seven years of austerity last year and has up to 1.5 billion euros - or about 0.75 percent of gross domestic product (GDP) - to further bring down personal taxes, offer relief on childcare and reverse some of the most unpopular cuts imposed during a three-year international bailout.

Ireland will still comfortably cut its budget deficit below the European Union target of 3 percent of GDP this year, even with the measures and a 1.5 billion euro ($1.7 billion) overspend, thanks to a fast recovering economy set to grow by over 6 percent.

With the economy forecast to be Europe's best performing  for a third successive year in 2016 and expand by at least 3 percent every year until 2020, Finance Minister Michael Noonan will use his speech to lay out a plan predicated on the coalition government being re-elected.

"I will be looking at the budget as the first budget of a new phase, budget one of five," Noonan told national broadcaster RTE last month.

"I'll be starting off things and saying, look, I can't afford to do everything that I think should be done in this budget but this is the first instalment and we'll do more next year and more the year after depending on who is in government." Prime Minister Enda Kenny on Sunday said he did not intend to call a parliamentary election in Ireland before early next year, seeking to halt widespread speculation that he would call a snap vote following the budget.

By next February or March, voters would be starting to feel the benefits of Noonan's 2016 tax cuts, public sector wage rises and a hike in the minimum wage, potentially spreading the recovery to hard-hit rural areas.

Noonan will also seek to tackle a severe shortage of housing in urban centres for the third budget in a row, possibly bringing in legislation to link residential rents to the rate of inflation to temporarily control soaring costs.

He will announce details of the new "knowledge box", Ireland's latest corporate tax measure similar to patent boxes elsewhere aimed at its large multinational sector, though its scope has been limited by new international tax guidelines. —Reuters