Budget 'toughest' in years - Cowen


Taoiseach Brian Cowen said that today’s emergency Budget was one of the toughest budgets in many years but said that the steps that were taken were necessary.

Both Mr Cowen and the Minister for Finance Brian Lenihan accepted that substantial taxation increases in the Budget would cause hardship but both defended them on the basis that they had been levied fairly across the board.

The Taoiseach said that those earning more would pay proportionately more.

Mr Lenihan said that “we are all in this together. At the end of the day, fairness means you cannot shuffle off responsibility to somebody else.”

They were speaking at a post-Budget press conference at Government Buildings this evening, attended by all 15 members of the Cabinet, in addition to the Minister of State for Children Barry Andrews.

Mr Cowen said that the Budget was the first steps in a process to address the structural elements of the deficit that will take a number of years to correct.

“We have to change the way we operate as a country and we cannot let it sap our confidence,” he said.

“This recession will pass and the world will recover. The consensus is that the world economy will recover in 2010. That will bring a return of growth in Ireland in 2011,” he said.

The Minister for Finance said that the value of €80-€90 billion that the Government had put on toxic loans was the first time that this had been done publicly.

He said that by putting the book value on record, it would correct some of the erroneous reports on the level of the State’s exposure to the banks. He said that one publication had referred to a figure of €400 billion.

“We were anxious to quantify the outer limit of those loans on a book value,” he said.

Mr Lenihan said that those assets would be transferred to the new National Asset Management Agency.

He said the State would pay a reduced price for them but would not be drawn on the figure, saying it would require careful examination. Mr Lenihan also repeated the comments from his Budget speech about a “hardening” of approach to borrowers who owed the banks money.

“There will be a considerable hardening of attitude towards those who have been loaned money in these circumstances. We want to ensure that resources are taken up taken up front so that banks are returned as proper lenders in the economy.

“As far as [borrowers] are concerned they will have to pay up,” said Mr Lenihan.

Asked whether the concept of fairness had been preserved by a scrapping of the Christmas social welfare bonus; a halving of the job seekers’ allowance and bringing those on the minimum wage into the tax net, Mr Cowen replied that the contributions of those in those categories was relatively small compared to higher earners.

“The scale of the crisis that we face means that nobody can be immune from the steps that are necessary and we have done it in a fair and proportionate way.

“The Social Welfare consists of over €21 billion and we have to use that to the greatest effect. We have not sought to decrease rates. We have taken a targeted approach,” he said.

The Taoiseach also rejected the proposition that he had taken the soft option by doubling income, health and insurance levies rather than focusing those who benefited most from the boom.

He acknowledged that families were being asked to make further contributions. He continued that the problem was that a third of the revenue had disappeared over the past two years because of structural problems. He said that on average people were going back to tax contributions they made in 2005 and 2006.

“The scale of the crisis is such that we need to raise revenue as well as making cuts. I do not agree that we have taken soft options.”

He said that since last July a total of €4.8 billion had been taken out of the 2009 spending budget. He said that by comparison the tax savings amounted to €3.7 billion.