TAOISEACH BRIAN Cowen is adamant a serious adjustment in the public finances over the next four years is feasible and he has pointed out that €14.5 billion has been taken out of the economy since the summer of 2008.
In an interview with The Irish Times, Mr Cowen has insisted the 2014 deadline for the budget adjustment cannot be changed.
He rejected suggestions from the Economic and Social Research Institute (ESRI) and general secretary of the Irish Congress of Trade Unions David Begg that the deadline for getting the deficit down to 3 per cent of gross national product can be moved out to 2016. “Putting back the deadline is not a feasible option and ESRI say that . . . we have to retain credibility with the markets and our commitments with the European Union.”
He says the additional borrowing and extra interest repayments that would be incurred by moving the deadline back to 2016 rule it out as an option. He said the full-year cost of the adjustments made in taxation and spending cuts over the past two years amounted to €14.5 billion.
It began with €1 billion in spending cuts in July 2008 and was followed with €2 billion in tax increases the following October. In February 2009 there was a further €2.1 billion in cuts in the shape of the pension levy on the public service, followed by another €1.8 billion in cuts and €3.6 billion in tax increases in the supplementary budget of April 2009. The budget of December 2009 took another €4 billion in cuts, including the public service pay cuts.
The Taoiseach said it had been hoped that with the return of growth another €7.5 billion adjustment over the next four years would have returned the public finances to health. But the changed world outlook for growth since the Greek default had altered the picture.
He said a more ambitious four-year plan was now required to bridge the gap between revenue and spending. He refused to be drawn on whether that adjustment would be nearer to €10 billion or €15 billion.
He said the emphasis in December’s budget will be on spending cuts rather than tax increases. “I shouldn’t pre-empt a Cabinet decision . . . I think the expenditure will still be the greater share but taxation will certainly be an important part of it. Growth is the third component that you need to make this work.”
Mr Cowen defended the Croke Park agreement saying it could transform work practices in the public services. He said it was imperative to avoid a situation where others ended up dictating our economic future.
