THE STATE was spending €50 for every €30 of income, Taoiseach Brian Cowen told the Dáil in a strong defence of the Budget.
“That has to stop,” he said. “We have to stabilise it, we have to correct it and we have no time to waste.” Mr Cowen said tax levels had fallen back sharply to 2003 levels.
“This means that next year, if we did nothing, we would have a deficit in the region of €22 billion in our public finances,” he added.
“To bridge this gap, we are borrowing over €400 million every single week. Clearly, this cannot continue.” Making the correct policy choices meant the State could emerge from the recession, despite its breadth and severity.
“If we tried to duck the choices, to wait it out, or to postpone the pain, it would be worse in the long run,” he said.
“In any case, the loss of confidence in that approach might be such, that decisions would be rapidly taken out of our hands.”
He said that even if that did not happen, the pain would be prolonged, and it could be the 2020s before Ireland saw any gain.
He added: “Our strategy over the coming years is to bring expenditure back to 2006/07 levels. As the world economy recovers and demand for our exports increases, there will be more people in jobs, and our tax revenues will rise.
“This combination of cutting expenditure and increasing revenue has the aim of restoring our deficit to a sustainable level by 2013. In order for this strategy to work, we must take resolute action to increase Ireland’s international competitiveness. Since the crisis erupted 18 months ago, we had to make adjustments amounting to €8 billion. Inevitably, out of short-term necessity, at least half of them came from raising taxes and levies.
“Next year. . . we are making adjustments of €4 billion. In 2011, an improvement on our last April’s forecasts, reductions of €3 billion will be required.”
Mr Cowen said that acting decisively now would bolster confidence in the State’s capacity to climb out of the crisis.
“Our actions in the Budget are already improving international perceptions of Ireland and will help us continue to attract the investment on which we depend,” he added.
“Equally important, it will help bring back domestic consumers’ confidence that we are getting on top of the problem – increasing consumption and helping to create jobs again.”
Minister for the Environment John Gormley said there was no doubt the Budget was very tough.
“But we in the Green Party worked hard with our partners in government to ensure it was fair,” he said. “I believe that – taken in the round – people will find that it is fair.”
Mr Gormley said no one came into public life to cut public sector workers’ pay or reduce welfare.
“But given the scale of the public pay and welfare spending, there was no other option,” he added. “This is about our prosperity and independence.” Mr Gormley said his colleagues were in politics to tell people the truth.
“We believe that is far more important than chasing short-term popularity,” he added. “The truth is that there is no easy option to fix our current crisis.”
