The Government could be on the brink of a "wholesale reneging" on general election promises, the Labour Party said tonight after Minister for Finance Brian Cowen announced a clampdown on public spending.
In the keynote Indecon Public Policy Lecture in Dublin this evening, Mr Cowen, outlining the direction he foresaw the economy going over the next 10 years, said the emphasis must be on productivity, the environment and equity.
He said day-to-day spending must be reined in to account for economic circumstances and allow for funding the National Development Plan (NDP), which may also require further borrowing.
Current spending would fall from over 12 per cent this year to around 8 per cent next and ease further in the coming years, he said.
The economy is expected to grow by an average of around 4.5 per cent over the next five years and Mr Cowen said day-to-day spending growth would reflect this.
However capital spending for the NDP would be intensified as part of the drive for competitiveness. He said funding would increase by 12.5 per cent next year.
Economies must be achieved through reform of the public sector and increased productivity.
"Productivity improvement has to be a priority for the public sector just as it is a continuing challenge for the private sector. A rapid growth in productivity in the public sector will enable Ireland to secure better services and to ensure that costs are not imposed directly or indirectly on the traded sector," he said.
He outlined a series of reforms which could put him on a collision course with public sector trade unions including: "No tolerance for inappropriate vested interest actions ... private sector provision in certain areas ... significant cultural and value changes ... enhanced performance measurement."
Recent comments by Mr Cowen and Taoiseach Bertie warning the public of more austere times ahead were met with an outcry, but Mr Cowen this evening said greater productivity - which can mean lower wage increases - "are the foundation for increased living standards".
Fianna Fail promised cuts in the top and lower rates of income tax during the general election campaign, but Mr Cowen effectively ruled them out for the time being.
"In a tighter economic environment it is unrealistic to expect the type of tax cuts which have been a feature of recent years. Only taxation reductions which are consistent with the prudent management of the economy will be considered," he told the Royal Irish Academy.
Labour finance spokeswoman Joan Burton said the Mr Cowen's speech "is very different from the message the people were given by the Taoiseach, the Minister himself and other Fianna Fail figures prior to the election". "It appears as if the ground is now being prepared for wholesale reneging on Fianna Fail's pre-election promises," Ms Bruton said.
While warning about tighter current spending, the Minister promised that well targeted social spending was needed to achieve equity, which included keeping earners below the minimum wage out of the tax net and "mechanisms to support working families".
Mr Cowen did not elaborate much on the environment but he indicated that better spatial planning - an issue on which Fianna Fail is often criticised - is on his agenda.
Environmental policies must address "not only our physical environment and Ireland's commitment to reducing the CO2 intensity of the economy, but will also need to address other aspects of the physical and social and built up environment which influence our daily lives," the Minister said.