Ireland eyes more tax cuts as growth forecast to be nudged up

DUBLIN (Reuters) - Ireland will have up to 1.5 billion euros (1.07 billion pounds) extra in its budget for next year to divide evenly between tax cuts and additional spending, finance minister Michael Noonan said on Monday ahead of major speech on the economy.

Noonan and spending minister Brendan Howlin will deliver the government's "spring economic statement" on Tuesday, less than a year ahead of elections when the coalition parties hope to be rewarded for Ireland's economic recovery.

That statement coincides with a regular update of the government's growth forecasts, a requirement under European Union rules, and a source close to the process told Reuters that the government would nudge up its 2015 gross domestic product forecast to 4 percent from 3.9 percent previously.

Ireland's economic growth rate surged to a post-crisis high of 4.8 percent last year, the fastest in the European Union and Noonan said on Monday that his department predicted average growth of 3.25 percent from now until 2020.

"We will have some fiscal space and it will be somewhere between 1 billion euros and 1.5 billion," Noonan was quoted as saying by both the Irish Times and Irish Independent newspaper websites.

"That will be divided equally between expenditure measures and tax measures," he added.

The expansionary budget, the second in succession after Ireland was able to end a seven-year austerity drive this year, followed tax increases and spending cuts totalling 30 billion euros or about 20 percent of annual economic output.

In an interview with the Irish Independent, Howlin, whose junior coalition Labour party is struggling in the polls, was quoted as saying the government would target the extra spending on childcare, education, health and policing.

Howlin is also set to begin discussions with trade unions over reversing some public sector wage cuts after they signed up to cuts averaging 15 percent during Ireland's financial crisis.

Ireland's opposition parties said Tuesday's statement would be nothing more than a election stunt.

"The public want to see action on the issues of concern in their lives, excessive mortgage interest rates, soaring long term mortgage arrears, the squeeze on household budgets and deteriorating public services," Fianna Fail finance spokesman Michael McGrath said in a statement.

"They are not interested in hearing a draft election manifesto."

(Reporting by Padraic Halpin; Editing by Robin Pomeroy)