THE government is aiming to turn the upcoming budget into a Super Tuesday of economic, budgetary and financial measures in the hope of addressing the crisis in the public finances and restoring confidence in the banking sector and wider economy.
It is now accepted within government that the mini-budget on 7 April cannot simply be about bringing order back to the public finances. The budget measures would be "meaningless without dealing with the banking crisis" to ensure credit is available to businesses, one senior government minister said yesterday.
Ideally, the government would like to unveil a radical banking package, if not actually on the day of the budget, then as close to it as is possible.
While no final decision has been made, there is growing support among ministers for a proposal, made to government by economist Peter Bacon, for the establishment of a special state agency that would take over bad property loans from the banks.
The agency – funded by both the state and private-sector equity – would effectively buy the loans, and the property underlying them, at a much reduced price, set by independent valuators. It would then manage that property, potentially taking advantage from any upturn in the economy by developing or selling it. A similar proposal is likely to be unveiled by the Obama administration in the US this week.
While the Department of Finance is at pains to stress this is just one option being considered, other government figures told the Sunday Tribune this weekend they believe it is an inevitable outcome. "I can't see how it won't be this solution and it is possible that it could be agreed in time for the mini-budget. The sooner the better," one senior government politician said.
Whether or not this solution is finalised in time for 7 April, ministers say the budget will not be a conventional package and that it will include a range of measures to help boost economic confidence, as well as laying out spending and revenue projections for the next two-and-a-half years to the end of 2011.
"What are we trying to do? We are trying to restore confidence. You can't do that just by budgetary measures," one government source said. This was echoed by the senior government politician who said: "We must generate confidence rather than solely wielding a big axe."
A number of fiscal measures are being considered including the possibility of subsidising employers to hire workers currently on the dole by continuing to pay social welfare for a period and potentially paying a grant to the employer if the position is made permanent. Measures already flagged, such as the €100m enterprise fund for small business, are likely to be teased out in further detail on budget day.
However, the level of tax increases and spending cuts will be severe, with the budget likely to be the toughest in the state's history. As well as increases in income taxes, probably by way of extra levies, and widening the tax net, finance minister Brian Lenihan is likely to flag the introduction of a property tax, changes in children's allowance in future budgets and, possibly, new limitations on the duration of mortgage interest tax relief.