14: 2012 : Spending Cuts and Tax Hikes
Economic crisis was the backdrop for Budget 2012.
A rising budget deficit, unemployment at over 14%, a banking crisis, a collapsed property market, loss of sovereignty, and disillusionment amongst the population, were the backdrop for Budget 2012.
Budget 2012 marked a departure from the traditional format of budgetary announcements. The job of announcing the budget fell for the first time into the hands of both the Minister for Finance, Michael Noonan, and the Minister for Public Expenditure and Reform, Brendan Howlin, and these announcements were made over two days.
Budget 2012 was by far the most austere for decades with the IMF and EU now calling the shots on an economically dependent Ireland.
With a Fine Gael/Labour coalition now in government, control of the budgetary purse strings is now firmly in the hands of the EU/IMF bailout partners. Against the legacy of economic decisions made by the previous Fianna Fáil led government, and the current bailout situation, the budgetary options are limited for the new government. The option chosen by this government is for further austerity.
With public services under threat, tax hikes and spending cuts are the flavour of this budget, announced over two days and following a state of the nation address by An Taoiseach, Enda Kenny. Budget 2012 would prove to be the toughest in decades.
The government reinforced their commitment to retaining the 12.5% corporation tax rate. This low corporation tax is considered by many to be crucial to Ireland in attracting overseas foreign investment and job creation. However, not everyone agrees that this is the case.