First, the good news: there is no need for spending cuts in Budget 2014. This should come as a relief to people on social protection, users of public services, people reliant on public investment for work and public sector workers. This should also come as a relief to everyone in the economy. As Friends First states:
‘The greatest stimulus that Government could now give the Irish economy would be to indicate an easing of the fiscal austerity. This would have a massive impact on consumer and business confidence.’
Too true. Why are spending cuts unnecessary? First, let’s recall the Minister for Finance’s comment on The Week in Politics:
‘There are options emerging. We have to make targets in the programme. The ultimate target is to get the deficit below 3% in 2015.’
So the ultimate target is 3 percent by 2015. What would happen to the deficit if there were no spending cuts? We can use three different models to make what can only be approximate estimates – from the ESRI, the Nevin Economic Research Institute and the Department of Finance. They all show similar results (notes on these appear at the end of this post).