WILLIAM SLATTERY:CUTBACKS IN expenditure were the only option for dealing with the deficit, said the managing director of State Street Ireland, William Slattery.

He said the debate over the deficit was distorted by the confused presentation of the figures and by the gross national product/gross domestic product issue.

Speaking in a personal capacity, he said a considerable amount of public revenue and expenditure was hidden in the social welfare fund. Both figures are understated as a result.

He said GNP was the appropriate measure when discussing the Irish finances as GDP significantly understated the scale of Government expenditure relative to the size of the economy. It also understated the tax burden. The difference between the two measures was €31 billion in 2010.

He said only economic growth would deal with the problems with which Ireland is confronted and the only realistic source of growth was exports.

However, the April 2009 budget severely impacted on Ireland’s income tax competitiveness. In his view this led to materially lower income tax revenue.

For higher earners our average income tax rates are higher than France and Germany, countries traditionally seen as high-income tax locations. “Increasing income tax rates will not lead to an increase in tax revenue.”

He said the deficit was unsustainable. “In my view our only realistic option is to cut Government expenditure to an extent that convinces the markets that we continue to have the will to address our issues in a credible way.”