€4.5bn should be spent on stimulating the economy

The Government should ease back on austerity over the next two years and spend €4.5bn on a stimulus package by the end of 2015, the trade union-funded Nevin Institute has said.

The think tank said that the Government should take €2bn out of the economy this year and a further €1bn next year, instead of the planned €3bn and €2.1bn.

It also called for a hike on taxes for top earning households to generate €600m over the next two budgets as part of a package of tax measures.

Tom Healy, Nevin Economic Research Institute (NERI) director, said the deficit would be reduced to the 3pc target under its plan, claiming it could save 75,000 jobs over a two year period.

“There is no silver bullet here. There is no magical way of solving our problems by just simply taxing the rich only or investing in infrastructure.

“Every particular policy mix or choice involves unpalatable choices or difficulties.”

NERI’s latest quarterly economic observer said it expects a low growth rate of between 1pc and 2pc a year for the coming two years, with no significant growth in employment until 2016 at the earliest.

The think tank predicts that under the Government’s current austerity path, the budget deficit will be at 3.8pc of the value of the economy by 2015, missing the 3pc target.

By contrast, the Department of Finance is currently projecting it will beat the 3pc target, coming in at 2.2pc.

The institute said it could raise about €600m a year by targeting revenue increases on the top 5pc or 10pc of households.

Mr Healy accepted that increasing the tax take on the top 10pc of earners was “very controversial”.

The institute said that an increase of 1pc in the effective tax paid by those in the €109,000-€140,000 would add €1,600 per year to their total income tax bill.

A 2.9pc increase on households above €140,000 would add €5,700 to their tax bill.

It also called for front-loaded investment stimulus funded off balance sheet, including €1.5bn in extra investment next year. Source: Irish Independent