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Irish government, eye on re-election, reverses cuts in budget

Ireland's Minister for Finance Michael Noonan waits by the steps of Government Buildings in Dublin, October 13, 2015. REUTERS/Cathal McNaughton

By Padraic Halpin and Conor Humphries DUBLIN (Reuters) - Ireland's finance minister effectively kicked off the government's re-election campaign on Tuesday by using the spoils of a newly booming economy to reduce taxes and reverse unpopular cuts in an all-encompassing budget. A year after calling an end to seven years of austerity, Dublin will pump an additional 1.5 billion euros (1 billion pounds) into an economy set to grow by over 6 percent this year, with measures including lower personal taxes, relief on child care and unwinding cuts imposed during a three-year bailout. Ireland will still comfortably cut its budget deficit below the European Union target of 3 percent of gross domestic product (GDP) this year and Finance Minister Michael Noonan said talk of an "excessively expansionary budget" were well off the mark. "These are sensible, affordable steps that will keep the recovery going and bring its benefits to every family," Noonan said in his fifth and final budget speech before elections due early next year. "But we must not gamble with the future. This Government will not take chances that destabilise the recovery." Noonan and spending minister Brendan Howlin used their speeches as a pitch to voters that only they could prudently manage the state's finances after the election. Goading left-wing challenger Sinn Fein, who curtailed their vociferous support for Greece's Syriza-led government when Prime Minister Alexis Tsipras jettisoned his anti-austerity rhetoric, Howlin said: "Who speaks of Syriza now?" "GOODIES FOR EVERYONE" However opponents accused Noonan last week of trying to "buy votes" by channelling 2015 tax windfalls into a late-year spending splurge. The central bank urged against using the fiscal gains to finance long-lasting spending commitments. By next February or March, when an election is set to be called after speculation of a snap vote was dampened, voters would be starting to feel the benefits of Noonan's 2016 tax cuts, public sector wage rises and a hike in the minimum wage. The budget also introduced free doctors' appointments for children up to the age of 12, increased funding set aside for social housing and put plans in place to employ more teachers and police officers. With the economy forecast to be Europe's best performing for a third successive year in 2016 and expand by at least 3 percent every year until 2020, Noonan said he would continue to with more of the same if re-elected. "The government will want people to take this budget in isolation, to forget what has happened in the last four and a half years, to forget the way the vulnerable have been targeted," said Michael McGrath, finance spokesman for the largest opposition party, Fianna Fail. A levy on banks that yields 150 million euros a year was extended until 2021 while Noonan placed a lower 6.25 percent tax rate on the new "knowledge development box", the latest measure aimed at multinationals, though its scope has been limited by new international guidelines. Noonan also sought to tackle a severe shortage of housing in urban centres for the third budget in a row, mandating Ireland's bad bank, the National Asset Management Agency (NAMA), to build 20,000 units by 2020 at a cost of 4.5 billion euros. The country requires more than 20,000 new houses a year just to keep up with demand. However, tentative discussions on linking soaring residential rents to the currently flat rate of inflation were put on hold, pending further analysis from Noonan's department, a spokesman said. "I don't think the government appreciates the seriousness of this housing crisis," said Peter McVerry, a homelessness campaigner. "Homelessness and housing are not priorities for this government, their priority at the moment is throwing goodies to everyone." (Editing by Jeremy Gaunt/Ruth Pitchford)