Ireland's welfare and pension bills are “on the table” in discussions on the four-year plan to be announced next month, and in the December budget, Minister for Finance Brian Lenihan said yesterday in New York.
"We have already reduced public service pay by nearly 14 per cent on average . . . Likewise, we've looked at our welfare bill, at our pensions bill. All of these areas will have to be looked at. They're on the table," Mr Lenihan said.
A spokesman for Mr Lenihan said afterwards that the Minister was referring to "the medium and long- term cost of pensions".
The exchequer spent just over €9 billion this year on public sector pensions, as well as those paid through the social welfare system.
It is understood that new measures might affect tax treatment of pensions, such as tax allowances given against pensions.
The Government has already changed the rules for new entrants to the public service, and there may be a re-examination of what they qualify for in the future.
The European Commission was not negotiating a plan with the Irish Government to reduce the deficit, a Commission spokesman said today.
"We are not telling the Irish Government what kind of budgetary measures it has to take. It was not the Commission's job to be prescriptive," said Amadeu Altafaj Tardio, the spokesman for the EU Economic Affairs Commissioner Olli Rehn.
"Our role is to assess whether these measures are effective in order to make sure the budgetary targets are met," he told RTE's Morning Ireland.
A series of proposals for the forthcoming budget will be put forward this morning at the annual pre-budget conference organised by the Economic and Social Research Institute (ESRI).
University College Dublin economist Joe Durkan will suggest that a single VAT rate should replace the current system. He will cite research showing that "the case for using differential rates of VAT to help those on lower incomes is weak".
"Zero-rating most foods and children's shoes may not be ideal."
Mr Durkan will also advocate abolishing the social insurance fund into which PRSI contributions are paid and from which contributory benefits are funded.
The existence of the fund fuelled excessive spending increases on a wide range of programmes without corresponding tax increases during the boom years, according to Mr Durkan.
A separate paper by Prof Tim Callan of the ESRI and others will find that amalgamating employee PRSI, health contributions and income levies into a universal social charge at a rate of 7.5 per cent would benefit high-income earners most and fall most heavily on those on the lowest incomes.
In his Budget speech last year Mr Lenihan said he would introduce such a new universal social charge, at a rate of 7.5 per cent, in the 2011 budget.
A recently appointed senior economic adviser at the Department of Finance Jim O'Leary will tell the same conference the argument for "exclusively national control of fiscal policy" had been weakened by the setting up of an EU bailout fund in May.
The paper was written before Mr O'Leary started work as an official in the Department of Finance.
The former academic and financial services economist, who served as a director at AIB, began a three-year contract at the beginning of the month.
As a respected and forceful voice in the economics profession, Mr O'Leary is expected to exercise considerable influence over budgetary and wider economic policy.
He is likely to be all the more influential given the recognised paucity of economic expertise in the department.
Discussion of the budget in political circles intensified yesterday, when the Labour Party outlined its opposition to cuts in child benefit and social welfare payments.
Referring to Labour's position in advance of the budget, party leader Eamon Gilmore said he favoured increased income taxes only for those earning €100,000 or more.
Mr Gilmore argued the country could afford to keep paying the current social welfare rate of €196 per week for single people, saying there were other ways of reducing the social welfare budget.
He also said that the party would "not hit middle-income Ireland" and was not prepared to raise income taxes for middle earners.
He said that other cuts and savings could be made through removing inefficiencies, changing capital spending, as well as cutting the public sector pay bill.
He suggested reordering the National Development Plan to bring forward projects that created jobs, and delaying others, such as Metro North.
The Government responded yesterday by saying it was very difficult to work out how Labour could honour its pledge to reduce the deficit to 3 per cent of GDP by 2014 on the basis of Mr Gilmore's proposals.
