Ireland Unfree

Luke Cassidy and Eoin Burke-Kennedy writes:

Taoiseach Enda Kenny has rejected reports that details of next month's Budget, including a planned hike in the VAT rate, were shown to German officials yesterday.

Mr Kenny met chancellor Angela Merkel in Berlin yesterday after which reports emerged that the Irish Government was planning raise the top rate of VAT by 2 per cent to 23 per cent.

According to documents presented to a Bundestag budget committee, the measure would generate an additional €670 million for the Government.

Opposition parties rounded on the Government today accusing it a "staggering breach of faith", with suggestions that the German chancellor was now "pulling the strings".

Asked how the document ended up in the Bundestag, Mr Kenny said: “I have no idea.”

Reuters news agency reported seeing a document presented to the German parliament’s budget committee yesterday which showed Irish budget plans, including a 2 per cent increase in the top VAT rate to 23 per cent to generate €670 million.

It is understood papers were dated November 2011 but not signed by the Minister for Finane Michael Noonan.

Mr Kenny, at his first official meeting with Northern Ireland‘s First and Deputy First ministers Peter Robinson and Martin McGuinness in Belfast, could not explain how or why the lower house of the German parliament was examining Ireland's budget options.

“Let me confirm something to you, the Cabinet have made no decision in regard to the Budget. It is on December 6th,” he said.

“It is only after the Cabinet make decisions that these things become a reality.
“I'm not going to comment on speculative (reports) - or comment about decisions that have not been taken by the Government at all.”

Much of the plans for €2.2 billion in spending cuts and €1.6 billion extra in tax have already been floated publicly, such as the VAT rise and €700 million savings from social welfare.

A Government spokesman insisted the disclosure from overseas had nothing to do with the Taoiseach’s meeting with the chancellor and said the Government had yet to make budgetary decisions.

Government officials have also been demanding answers from the European Commission over the leak amid fears that the document may have originated from communications and discussions between Dublin and Brussels. “We are trying to get the bottom of it but our concerns have been expressed to the commission,” a spokesman said.

However, Fianna Fáil’s Michael McGrath said. "If this proves to be true, it would be a staggering and unprecedented breach of faith with the Irish parliament and Irish people on budget plans.

"It would represent a fundamental breach of established protocols in relation to the disclosure of budgetary measures," he added.

Sinn Féin finance spokesman Pearse Doherty accused the Taoiseach of undermining the Dáil and said if the reports were true, Dr Merkel is pulling the strings.

“The increase in the VAT has already been outlined in the Memorandum of Understanding. However, having it discussed by a German budget committee undermines the Irish Parliament,” Mr Doherty said. “Enda Kenny needs to come into the Dáil and give a report on his meeting with Angela Merkel, including exactly what details and documents he gave to his German counterpart.”

The Press Association news agency ran with the story today under the headline “Germany inspects Irish budget”.

Asked earlier to confirm the report, Minister for Public Reform Brendan Howlin said “it’s information that hasn’t happened”.

He insisted the Government had yet to make any budgetary decisions. “The Budget is a work in progress,” he told RTÉ’s News At One. “I’m certainly not going to comment on any potential elements of it, but I can tell you there are no decisions in relation to any element of the Budget, and there won’t be until the entire package is before Cabinet.

Tánaiste Eamon Gilmore later said he did not know how anyone could have a document of Irish budgetary measures.

Chambers Ireland expressed dismay at the reports of a possible VAT hike.

"At a time when consumer confidence is weak, an increase in VAT will only strengthen the black market and push consumers towards illicit traders," said chief executive Seán Murphy.

Retail Excellence Ireland said increasing the top rate of VAT too drastically would be fatal to any recovery in domestic consumer demand.

"When finalising its plans for an increase in VAT in Budget 2012, the Government needs to be particularly careful to strike the right balance,” said chief executive David Fitzsimons. “It would be all too easy to kill off any tentative signs of a recovery in consumer demand. We will be shooting ourselves in the foot if we jeopardise growing domestic consumer demand by raising VAT by too much too soon."

As pointed out a year ago by the grandson of Henry McDevitt, Fianna Fáil TD for Donegal East from 1938 to 1943, more than a third of people in the Irish Republic wanted to revert to sterling, with support highest among the young and rising to 43 per cent among Sinn Féin supporters. That was then. It is no doubt even higher now.

They really only gave it up in 1979, prior to which the value of the punt was fixed at whatever happened to be that of the pound sterling. Long after that, their money was run up at the Royal Mint (their euros may still be), with coinage identical to that of Britain in shape, size and colour, such that British coins could have been and were passed routinely in the 26 Counties. And the state comprised of those counties was a lot more independent before 1979 than it is now.

Following the success of the Queen's visit, Commonwealth membership is now a formality. Which will be nice. Why not also reaccession to the Sterling Area? Which would be a whole lot more than just nice.