Government meeting to discuss how to cut €3bn from budget

MINISTERS WILL meet on Wednesday to begin discussions on how to deliver €3 billion in cuts in December’s budget.

Ahead of the meeting, Minister for Finance Brian Lenihan has strongly signalled that a property tax will not form part of the budget. “One of the problems with capital taxation at present . . . is that we’ve seen this huge reduction in the value of property so that the capacity of the capital taxes to raise money has reduced accordingly,” he said.

“It’s very difficult if you’re talking about capital taxes in the present climate to talk about property taxes because that’s just another capital tax,” he added.

At the all-day meeting at Farmleigh House in Dublin, the Cabinet will also finalise a €40 billion five-year capital spending programme, to be announced later this week.

A confidential budget strategy memo, setting out the preliminary outline of the Government’s initial approach to formulating December’s budget, has yet to go to Government but will be discussed on Wednesday.

All departments have submitted proposals for various cuts to the Department of Finance ahead of the meeting, which will be the first official budget discussion involving all departments.

Government sources would not confirm reports a general cut of 5 per cent in all current spending would be required in all departments. “The focus of the Cabinet meeting will be jobs,” a Government spokesman said.

The big-spending departments of Social Protection, Education and Skills and Health and Children are expected to face the largest cuts.

Government sources said spending was likely to be protected in the Department of Enterprise, Trade and Innovation in an attempt to prioritise spending on job creation and enterprise initiatives. “In a recession it would be counter-intuitive to do otherwise,” one source said.

Green Party chairman Senator Dan Boyle said his party’s contribution to budgetary preparations would not be confined to the Department of the Environment and the Department of Communications, Energy and Natural Resources – the two portfolios held by Green Ministers. “Things we’d be most concerned about would be maintaining social welfare rates and education expenditure. Also on the capital side our priority would be infrastructure relating to public transport and water services,” Mr Boyle said.

Wednesday’s meeting will be the second-last Cabinet meeting before September. The final meeting has been provisionally scheduled for Wednesday 28th.

Mr Lenihan’s latest comments on the prospect of a property tax came in a radio interview.

Speculation that a property tax could be imminent intensified last week after the publication of an International Monetary Fund (IMF) report showing the Department of Finance told visiting IMF officials in May a flat-rate property tax was under consideration.

A Department of Finance spokesman said last night nothing had been ruled out. “All taxation proposals are considered within the context of December’s budget,” he said.

Mr Cowen will launch the capital spending programme towards the end of the week, either on Thursday or Friday. The announcement will reveal the overall financial allocation for each department for the years 2011-2016 and the total envelope is expected to be in the region of €40 billion.

While some transport projects are expected to be among those previously-announced infrastructure initiatives to be dropped, Metro and Luas projects are understood to be safe as they will be particularly labour-intensive. Some projects are expected to be “notable by their absence”, according to a Government source.

Of the €3 billion budget savings required this year, €1 billion will come from the capital programme while the remaining €2 billion will be raised through a combination of taxation and cutting current expenditure. “With €1 billion coming from a reduction in the capital programme, logically €1 billion’s worth of projects are going to fall by the wayside,” a Government source said.