THE GOVERNMENT’S four-year, €15 billion adjustment plan will focus more on spending cuts than tax increases, Taoiseach Brian Cowen has said.
Speaking in the two-day debate on the economy yesterday he said the budget adjustment for next year would be “somewhat frontloaded”.
He said in the Dáil that “while a degree of frontloading may dampen economic growth in 2011” it would given confidence to the markets and secure Ireland’s funding position, which was “fundamental to sustaining public services for our citizens and achieving sustainable economic growth in future years”.
Governor of the Central Bank Patrick Honohan said last night the deterioration in the public finances had been “worse than almost any other country”.
Speaking to the Institute of Certified Public Accountants in Ireland he said the decline partly reflected the fact that the “home-grown property bubble had risen further and so has fallen further than most”.
He was hopeful the adjustment in the public finances would, by “rolling back unaffordable excesses”, help to restore lost competitiveness and enhance growth potential while aiming at a fair distribution of the burden. On Government borrowing, Mr Honohan said Irish sovereign debt was “a great buy at current prices”. Significant budget savings would have been needed even if the Government did not have to bail out the banks, he said.
Green Party leader John Gormley said he was aware of the difficulty in persuading people of the necessity for such a radical plan when trust in the political system had broken down. He said changes would have to be made to ministerial transport, the salaries and expenses of TDs and Senators and the working times and productivity of the Dáil and Seanad.
Fine Gael leader Enda Kenny said his party would not be browbeaten into accepting the Government’s plan. He said depression, anxiety and fear stalked the land because of the catastrophic failure of the Coalition to handle the economy.
Labour Party leader Eamon Gilmore said there should be a 50:50 ratio between tax increases and spending cuts. He proposed a number of initiatives including a three-year pay freeze; a new tax rate for people earning over €100,000; and the reduction of tax relief on pension contributions.
Minister for Finance Brian Lenihan said the endorsement of EU ministers, the European Commission and the European Central Bank would be of key importance in demonstrating to the markets the soundness and credibility of the Government’s plan. “Only last Monday I flew to Brussels to update commissioner [Olli] Rehn on the current economic position and on the progress being made towards preparing Budget 2011. As a result of these contacts with my colleagues I am confident that they all have a clear and detailed understanding of Ireland’s position and what we intend to do about it.”