The chairman of Special Group on Public Service Numbers and Expenditure Programmes has said the current level of Government borrowing was unsustainable.
The report of the group, also informally known as An Bord Snip Nua, which was published on Thursday, contains measures designed to save the Government some €5.3 billion annually. Among its recommendations are a merging of local authorities, cuts in hundreds of millions of euro worth of allowances for State employees and the removal of €1.5 billion from the social welfare budget.
The report also calls for 17,000 State job losses, including a €300 million reduction in the Health Service Executive’s paybill.
The group was established by the Government in November to identify potential reductions in public expenditure.
Speaking on RTÉ Radio's This Weekprogramme today, UCD economist Colm McCarthy said the current situation, where the Government was borrowing nearly €400 million per week, could not be allowed to continue.
“We’re borrowing so much now that we can’t go on like this,” he said. He said the Government, if it continues borrowing at the current level of some €20 billion per year, could find it difficult in the near future to secure loans.
On social welfare, Mr McCarthy said current levels of spending must be addressed. The report said there is a “clear case” for a 5 per cent cut in social welfare rates because of falling prices and pay cuts. This would save €850 million a year, it said.
“We’re not proposing to dismantle the welfare state, we’re not proposing to bring the social welfare system back to where it was eight or ten years ago,” Mr McCarthy said. “We are merely suggesting that the Government consider a situation where the real value of rates of payment in the social welfare system are brought back to where they were last summer when it finally dawned on people that we were in a serious financial mess.”
Mr McCarthy accepted his report was a collection of suggestions and the Government did not necessarily have to implement them. The final decision on cuts rests with the Government, he said. However, he did note that health, education and social welfare account for over three-quarters of Government expenditure and this would have to be addressed if the Government was to achieve the required savings.
“You cannot say ‘we want to see a better economy and Government spending’ but leave health, education and social welfare out of it. That’s not a viable strategy," Mr McCarthy said.
Taoiseach Brian Cowen said on Friday the report would be considered by Cabinet next week and nothing could be “immune” from examination.
