Public finances 'under control', says Tánaiste

The Tánaiste has said the public finances are under control and ruled out further spending cuts or changes to the tax regime until next year’s budget.

Mary Coughlan also cautioned against talking down the economy, saying Ireland had to “make sure that our international reputation is not damaged to such an extent that we will not have access to borrowing requirements, that we will not have access to money for our banking systems”.

Speaking on RTÉ's Morning Irelandprogramme earlier today, Ms Coughlan said the Government had made a decision on the amount of expenditure for this year and "we must remain within that".

She defended the Government's response to the recession saying it has a three-fold plan to restore the public finances, manage the economy, sustain the banking system and sustain jobs.

“It is not true to say that we are not managing the economy, and it is not true to say that the Government and all those within the Cabinet are not acutely aware of the absolute necessity of managing the public finances.”

She said spending cuts of €2 billion this year had been found and the Government was working on a plan to reduce spending by €4 billion next year.

She said the Commission on Taxation would put forward new ideas on taxation and noted that the tax base in the State was very low. The Tánaiste said it was important any new taxes did not impinge on employment.

“We have indicated nationally and internationally that we are going to reduce even more public expenditure and we are working towards that now. That is for next year’s budget.”

Asked if she was confident that the approach taken by the Government to recapitalise Bank of Ireland and AIB would work, the Tánaiste replied: “I really would love if we found ourselves in the situation where we won’t talk ourselves into an even bigger crisis than we presently are in”.

She said the biggest issue facing business was access to working capital. “There is huge interaction between the banks and the Department of Finance to make sure that money is well spent and it does what it does.”

Shortly after the Government announced details of its recapitalisation plan, which will see the State contribute €3.5 billion to Bank of Ireland and AIB, both increased their bad debt forecasts.

AIB almost doubled its projections for loan losses to €1.8 billion, or 1.37 per cent of the overall loan book, while Bank of Ireland raised its three-year bad debt estimate to € 4.5 billion - and in a possible worst-case scenario of € 6 billion - from €3.8 billion.