A DRACONIAN new budget designed to raise up to €4.5 billion through a combination of tax increases and spending cuts will be unveiled in the first week in April, Taoiseach Brian Cowen confirmed yesterday.
The new budget will come on top of the €2 billion pension levy announced last month and the €2 billion package of savings and tax measures contained in the 2009 budget announced last October.
The Opposition parties were briefed on the scale of the problem by Department of Finance officials yesterday and have been invited by Minister for Finance Brian Lenihan to make their own suggestions about what should be in the budget.
Fine Gael, the Labour Party and Sinn Féin have indicated that they intend to take up the offer to make budget submissions, which will be costed by Finance officials.
The budget developments came on a day when the latest unemployment figures showed another dramatic jump of 26,700. The total now stands at almost 353,000, bringing the unemployment rate to 10.4 per cent of the workforce.
In the Dáil the Taoiseach said that if the current rate of job losses continued, the number of unemployed could reach 450,000 by the end of the year. That would represent an increase of almost 300,000 people in just two years.
Mr Lenihan emphasised last night that the Government had to take resolute action; otherwise borrowing would rise to unsustainable levels. “We have to show the wider world that there is a credible pathway out of our current difficulties.” He said the Opposition parties had been briefed in an effort to get a national consensus on what needed to be done, but ultimately the Government would have to make decisions.
The Minister said the current problems with the public finances arose because of a projected tax shortfall for the year of €2.5 billion to €3 billion and an overrun on expenditure of between €1 billion and €1.5 billion.
Mr Lenihan earlier repeated his view that the exclusion of 40 per cent of the workforce from the tax net was something that would have to change. “Everybody will have to pay something,” the Minister said on RTÉ Radio’s News at One.
The Fine Gael deputy leader and finance spokesman, Richard Bruton, who had been briefed on the budgetary position, said he was prepared to give the Government “one cheer” for acknowledging that its earlier approach was not sustainable.
A party spokesman said last night their approach would include such measures as increasing the lower and upper rates of tax by 1 per cent, a possible new top rate of tax for those on very high incomes, the introduction of a carbon tax designed to raise an additional €800 million a year, increased excise duty on cigarettes and alcohol, a reduction in non-core spending on the capital programme and cuts on non-essential current spending.
“These proposals are in addition to previous measures such as public sector pay, increments and bonuses freezes for 2009 and 2010 as well as targeted back office redundancies for 5,000 and pay cuts for public servants on higher incomes,” he said.
Labour Party spokeswoman on social and family affairs Róisín Shortall warned last night that suggestions that those currently outside of the tax net must now be taxed should be treated with great caution.
“Over the last week there has been a sudden clamour of demands from Fianna Fáil politicians, right-wing economists and comfortable commentators that the 38 per cent currently outside the tax net should now be the first target of the Government’s mini-budget,” she said.