There will be no "easy or painless" way to deal with the downturn in the economy, Taoiseach Brian Cowen said today.
Exchequer returns, due to be published by the Government this afternoon, are expected to show a €1.5 billion shortfall in the tax take for the first half of this year.
The Cabinet discussed the rapidly deteriorating financial situation yesterday, but final decisions on the strategy to deal with the issue will not be taken until next week's Cabinet meeting after Ministers have considered the official figures. But Minister for Finance Brian Lenihan is set to issue a statement when the figures are published this afternoon on how his Department may deal with the shortfall.
"We will have to cut our cloth to measure on the basis of the revenues that are available to us now," Mr Cowen said during leaders' questions.
"There is no easy, painless way in which this can be done but we will do it as conscientiously as we possibly can", he added.
He said current industrial output remains 30 per cent higher than in 2002. "That is not a bad position to be in because every other country is being affected by the international economic climate," he told TDs.
But he said there is "three billion euros less in tax coming in this year than was hoped for and we have to deal with that situation in the best way we can." Mr Cowen denied there would be a "disruption of services all over the place" to make up the deficit by the end of the year.
"That is not the position. And there is nobody suggesting that we should do that. That would be the wrong thing to do. In good times we'll build surpluses. In more difficult times we will have deficits."
There were heated exchanges with Labour leader Eamon Gilmore accusing Mr Cowen of having “codded and lied” to the electorate.
Mr Gilmore accused Mr Cowen of promising to cut tax rates during the election campaign last year when he knew there “wasn’t a hope in hell” of that happening.
“Your former leader promised a reduction in the standard rate of tax of two per cent when you, as Minister for Finance, knew there wasn’t a hope in hell of that being delivered. You lied to the electorate,” he said.
Mr Cowen angrily rejected the allegation, saying he had given no absolute commitments on tax cuts before or after the election.
“A sound economy is a prerequisite for all our ambitions. I made this clear during the election campaign. All programmes, including the programme for Government, are based on availability of resources,” he said.
Pressed to say whether rates would be cut in this year’s Budget, Mr Cowen said tax reform was “not on the agenda” in tough economic times.
Fine Gael leader Enda Kenny asked the Taoiseach whether he agreed with the Minister for Finance Brian Lenihan’s statement that the construction industry had come to a “shuddering halt.”
Mr Cowen conceded that activity in the sector had decreased but denied that it had come to a halt.