Opposition parties have been told the crisis in the public finances is worse than feared and a package of spending cuts and tax increases of close to €5 billion could be on the cards for next year.
The finance spokespersons of Fine Gael, the Labour Party and Sinn Féin met senior officials from the Department of Finance in separate sessions yesterday for a briefing on the public finances.
They were told growth over the next four years was likely to be much lower than forecast and the adjustment to the public finances would be much greater than the €7.5 billion originally announced by Minister for Finance Brian Lenihan.
During the summer, the International Monetary Fund suggested a much bigger adjustment of more than €10 billion would be required but, according to Opposition sources, they were told yesterday it would be significantly greater than that and was likely to be more than €11 billion.
The Fine Gael Finance spokesman Michael Noonan said a bigger adjustment would be required because the figure for growth next year was not going to be the 3.25 per cent forecast by the Government.
“The figure of adjustment published already in the Government plans was €7.5 billion. With lower growth rates projected, the level of adjustment is going to be significantly higher than that,” he said.
Decisions on the budget would affect the projections for growth. If the emphasis was on tax, the growth projections would go one way and if it was on spending cuts it could go in another way, he said.
Mr Noonan said detailed costings of the various budget options and the revenue they could raise or the savings from particular spending cuts did not form part of yesterday’s discussions. He said the Opposition would need time if the process was to work. “The can’t give us the information a few days before the budget,” he said.
Labour Party finance spokeswoman Joan Burton said the officials had been clear that a final forecast could not be produced until early November. “What they told us is very challenging,” Ms Burton said.
The Department of Finance team was led by the secretary general of the department, Kevin Cardiff, and included Michael McGrath, assistant secretary in the budget division.
Ms Burton added that while the officials did not expect overall tax receipts to be too much out of line, they were concerned that income tax receipts were below expectations. “And the reason for that of course is that less people are actually working and an awful lot of people have taken wage cuts,” she said.
Ms Burton stressed a proposed meeting between Taoiseach Brian Cowen and other party leaders due to take place later this week was a separate parallel process and more information on that was required.
Sinn Féin finance spokesman Arthur Morgan said the 2014 target for reducing the deficit to 3 per cent represented an overly-punitive approach.
He said Sinn Féin believed the process of getting the deficit under control would take six years.
Mr Cowen has ruled out the appointment of an independent chairman to the talks between party leaders.
At a meeting last night in Luxembourg, euro area finance ministers took stock of developments in Ireland as they reviewed the position of other vulnerable countries such as Greece and Portugal.
“We’re sure that this strategy will be able to reduce the excessive deficit by 2014 in a resolute way so as to be able to return to sustainable growth based on appropriate structural reforms,” said Luxembourg prime minister Jean-Claude Juncker, chief of the euro group.
Economics commissioner Olli Rehn echoed those sentiments and confirmed officials from the commission and the European Central Bank had been on a number of “missions” to Ireland as the Government prepares its budget proposals.