Doubts over fiscal policy addressed - Lenihan

PRESS CONFERENCE:MINISTER FOR Finance Brian Lenihan has said there could be "no international question marks" over Ireland's fiscal position after the Budget.

Speaking at a press conference after delivering the Budget, Mr Lenihan said it would have been easy to impose more taxation, but making adjustments on the expenditure side demonstrated that the State could control its own cost base. “There were doubts, big international question marks about Ireland’s capacity to tax herself last spring,” he said.

Many commentators believed that a country with such low corporation taxes and income taxes “wouldn’t have the bottle” to set realistic tax rates, but that had been done in the supplementary budget, he said.

“I don’t think there should be any international question marks about Ireland after this,” he said.

Mr Lenihan insisted Ireland was now on a positive trajectory. Next year’s deficit would be the same as or lower than the United Kingdom’s, he added.

He said the difficulties with the banking system were a separate set of problems which were being addressed by the Government “in a very aggressive way”, and would be brought to a conclusion shortly.

He paid tribute to Colm McCarthy, the economist behind the Government’s plan to reform the public service. He said his report had focused the public mind on where savings might be achieved.

He noted the report had recommended “massive reductions” in funding for community centres, which the Government did not carry through.

The Minister said he anticipated savings of about €56 million in fees to medical practitioners, lawyers and those who provide contractual services to the State.

He insisted there was no rift within the Government following the collapse of talks with unions. Social partnership involved not only the trade unions but also farmers and other employees, he said. There were different strands and the Government had to listen to the views of all.

Referring to the unworkability of the unions’ suggestion of 12 days’ unpaid leave, Mr Lenihan said it wasn’t a personal view of his, but a collective Government view. He said everyone could see both sides of the argument, but the Government had to proceed.

Meanwhile, Mr Lenihan said Budget measures relating to tax exiles followed the international model. “The bottom line here is that if you’re 183 days out of the country, you’re out of the country. We’re going to have to be realistic about this issue.”

The Minister said Ireland had stabilised its deficit. “We came in this year at 11.7 per cent, the European Commission predicted it would be 12.5 per cent . . . It’s a high figure but it’s a lower figure than the UK, for example.”

The adoption of the Budget would prove that Ireland could control its public finances.

Referring to the reduction in the pay of public servants, he said there would be a 5 per cent reduction on the first €30,000 of salary, “and then it’s tiered above that, so it gets greater and greater, the greater the recompense”. Mr Lenihan said higher-level salaries had been benchmarked against public positions internationally.