Decisions on radical cuts to be delayed until the autumn

WITH THE economy suffering its worst performance in the history of the State, it has emerged that decisions on radical action…

WITH THE economy suffering its worst performance in the history of the State, it has emerged that decisions on radical action to curb public spending are unlikely to be made until the autumn.

Taoiseach Brian Cowen told the Dáil yesterday that the report of the Expenditure Review Committee, known as “An Bord Snip Nua”, would go to Minister for Finance Brian Lenihan next week and he did not expect it to be debated in the House before the summer recess on July 10th.

Mr Cowen said the report would be considered by the Cabinet some time later this month. He declined to give a commitment to publish the document, saying that a decision on that issue would not be made until Ministers had time to read it.

The report from the committee, chaired by economist Colm McCarthy, is believed to contain some 500 recommendations, including cuts in public service numbers and cuts in social welfare.

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Government sources suggested last night that while the report may be published before the end of July, decisions on which elements of it to implement will not be taken until after the Lisbon Treaty referendum in the first week in October.

The Taoiseach warned Fianna Fáil TDs last night that there were no sacred cows when it came to public spending and he advised them not to be lobbied into ruling anything out.

Addressing the Fianna Fáil parliamentary party, he said the Government would give careful consideration to the report and make decisions in due course. Mr Lenihan and the special economic adviser to the Department of Finance, Alan Ahearne, also addressed the meeting.

Irish Congress of Trade Unions general secretary David Begg described media reports about proposed social welfare cuts as “horrendous” and said there was a need to protect the vulnerable by safeguarding social welfare rates. “The situation is very bad indeed with the country nearly banjaxed,” he said.

The final meeting of the review group took place yesterday as the quarterly national accounts published by the Central Statistics Office (CSO) showed that in terms of its Gross Domestic Product (GDP), the Irish economy plummeted an unprecedented 8.5 per cent on an annual basis in the first quarter.

Gross National Product (GNP), the measure of economic output that excludes multinational revenues that flow outside Ireland, fell even faster, declining by a massive 12 per cent.

The data also shows a fast contraction in consumer spending, which was 9.1 per cent lower in the first quarter of 2009 compared with the same period in 2008.

Fine Gael deputy leader Richard Bruton said the figures suggested that “talk of the green shoots of economic recovery are sadly premature” and said the economy was now “paying the price for Fianna Fáil’s litany of mistakes in Government”.

In the first quarter alone, GDP fell by 1.5 per cent and GNP by 4.5 per cent compared to the previous quarter, with consumer spending substantially drying up as unemployment spiked. Although the figures were worse than expected, there are hopes among economists that the first quarter of the year will mark the worst quarter of the recession.

Business group Ibec described the fall in the economy as “brutal” and said it demonstrated the magnitude of the adjustment that the Irish economy must undergo.

The multinational sector led industry to a 4.6 per cent quarter-on-quarter gain after a contraction in 2008, while agriculture also “surged back to life” as commodity prices recovered on global markets, with a 9.5 per cent quarterly growth.

However, activity in the construction sector fell further, with its output declining 14.4 per cent on a quarterly basis. Construction activity dropped 31.4 per cent over the year to the first quarter.

Figures on unemployment levels, to be published today by the CSO, will throw further light on the scale of the economic problems.