A MAJOR Government plan to stabilise the economy against further deterioration and "unprecedented economic difficulties" will be published early in the new year, the Departments of Finance confirmed yesterday.
The Department of the Taoiseach is taking the lead in the initiative which will contain a range of tax incentives and grants designed to kick-start the economy.
The plan will be launched as further reductions in current spending are likely to be implemented in the light of substantial shortfalls in tax revenue.
Minister for Finance Brian Lenihan, who described it as "a comprehensive programme of economic stabilisation and renewal", said it would be submitted to the social partners for approval before being published.
No details are available as to how the plan will be announced but it will happen in the new year and not before Christmas as originally envisaged.
The prioritisation of the plan has come after Mr Lenihan disclosed for the first time this week that the economy is now likely to contract between 3 and 4 per cent in 2009, significantly more than previous forecasts made by the Department of Finance.
Answering priority questions in the Dáil on Thursday night, Mr Lenihan said that in the October budget it was estimated that the economy would contract by 1 per cent in 2009.
However, he said that the "unprecedented economic developments" since then had led to revisions of forecast for next year.
"By the end of November the consensus of market forecasters was for economic activity to decline in 2009 by approximately 3 per cent," said Mr Lenihan.
He added that the further deterioration in tax receipts as evidenced by the November exchequer returns had led to a further downward revision for economic performance next year.
"A revised economic and fiscal assessment will be prepared by my department in early January and brought forward for Government consideration," he said.
"This assessment will reflect the dramatically changed environment now being faced. We are living in a time of unprecedented economic difficulties and the changed circumstances that have occurred in a short period of time must be addressed," he said.
The Department of Finance yesterday said that the Minster remains of the opinion that taxes should not be increased and that his main focus would be on cutting current spending.
However, that was challenged by Fine Gael finance spokesman Richard Bruton who questioned whether Mr Lenihan could continue to stand over his insistence that there will be no tax increases and cuts in capital spending during 2009.
"Does he accept that it was a serious mistake to bring forward the budget which was built on numbers that do not hold water," he said.
Labour Party finance spokeswoman Joan Burton said Mr Lenihan's acceptance that the decline would be between 3 per cent and 4 per cent meant that the budget forecasts were "basically hopelessly optimistic".
"It means that the basis of the figures in his budget has been rendered shambolic," she said.
