Government plan 'ill-thought out and haphazard'

REACTION:There were mixed reactions to the Government's plans to cut €1.5 billion in public expenditure by 2009 with Fine Gael leader claiming it had been "cobbled together" and was "haphazard".

The proposals include a 3 per cent reduction in payroll costs for all State departments and agencies, apart from health and education; the deferral of proposed pay increases for ministers and high level civil servants; reduced spending on consultancies, advertising and public relations; and a pause in the decentralisation programme.

"Surplus staff" in the Health Service Executive are being targeted, with the Departments of Finance and Health drawing up plans to reduce numbers. State agencies are also in the firing line, with plans to abolish or amalugumate some where possible.

In the Dáil, Opposition parties attacked the measures as "back of the envelope" book-keeping.

Fine Gael leader Enda Kenny said he supported the measures because some of them were proposed by Fine Gael in the past.

"It appears to have been cobbled together in an ill-thought out and haphazard fashion after the half-yearly Exchequer figures were published," he said. Mr Kenny said the public spending measures contained no vision, economic stimulation or anti-inflation mechanisms.

Mr Kenny said frontline services must not fall victim to the 3 per cent payroll reductions across departments and agencies. But the Taoiseach said each individual department, state agency and local authority must take responsibility for implementing the 3 per cent payroll savings.

"We are not applying a blunt, uniform, inflexible embargo instrument," he told the Dáil. "We are providing the necessary manoeuvrability at local level for local circumstances to identify appropriate measures which would include in some cases non-recruitment of non-frontline staff or non-essential staff or measures on premium pay or management of vacancies or work processes."

Labour leader Eamon Gilmore described the public spending measures as a "bit of a back of the envelope book-keeping exercise." He added: "Most of it seems full of headline-grabber designed to restore political confidence in the Government rather than the economy."

He said the spending plans did nothing for the 54,000 people who have lost their jobs over the past year.

"Forty-three of the labour exchanges in the country have seen a jobless increase of 50 per cent over the past 12 months and you have hundreds of thousands of people worried about their jobs this evening," he added.

"In fact the only thing you have provided for in this plan is a plan for how to continue to pay them the Dole instead of a plan to get them back to work."

Minister for Health and Children, Mary Harney, said €144.35 million would be saved within the health sector this year through the new nursing home support scheme, the Fair Deal; reduced spending on administrative costs across the Department and all agencies other than the HSE, including payroll, advertising, procurement and consultancy; and the slower than expected roll-out of the package of new developments provided for in the December 2007 budget

"These savings will not affect the provision of health services to patients and clients or the HSE capital plan in 2008," she said.

Ms Harney said the nursing home support scheme legislation, which is currently being finalised, would be submitted to the Government for approval to publish as soon as
possible.

Meanwhile, Green Party finance spokesman Senator Dan Boyle welcomed the decision to halt the decentralisation programme and to defer Cabinet pay increases

"The Green Party has long expressed its support, in principle, for decentralisation as guided by the national spatial strategy. It is clear however that the programme has not to date been optimally implemented. In tightening budgetary circumstances, the time is right to pause, take stock and crucially, to asses value-for-money considerations in any further decentralisation," he said.

"I also welcome the Government's decision to defer the pay increases recommended for members of the Cabinet and other high level public servants. With public sector pay under scrutiny it is very important that Government shows leadership and moral authority and demonstrates that it is both prudent and responsible on this issue.

Fine Gael deputy leader Richard Bruton, however, said there was no evidence of a clearly thought-out plan.

He accused the Government of failing to provide any guarantee that frontline services would be protected and said they gave no detail on what cutbacks are going to be enforced in health and education.

"This package does not represent a credible medium-term strategy to address the serious economic challenges that we now face," he said. "Besides lacking a credible strategy to reform our public finances, the Government has remained entirely silent on how it might help to tackle the deep-seated problem of lost competitiveness that is threatening many jobs across the country."

Labour's deputy leader Joan Burton accused the Government's proposals of "missing the point".

"Two thousand jobs are now being lost every week and the only response the Government can come up with is to get rid of more jobs in the public sector," she said.

"Rising unemployment is the real challenge facing the Government. More unemployment means more social welfare payments and less tax revenue. Unless unemployment can be nipped in the bud, the exchequer situation will continue to deteriorate."

Sinn Féin's economic affairs spokesman Arthur Morgan, said that cut-backs were not the answer to the current economic troubles. He said the proposed measures would have to be "studied carefully", and claimed what he described as "unannounced cut backs" were already having an impact on health and education services.

"While the Government is saying that recruitment freezes will not affect frontline services this has not been the experience in the past. We are very concerned that we are not getting the full picture today – there is mounting evidence across many services including health and education of cuts that are already beginning to hurt the most vulnerable," he said.

Mr Morgan said revenue to fund essential public services must be raised in a "fair, transparent and accountable manner with the burden falling on those who can afford to pay".

"What we need from the Government is for them to outline the measures that it will introduce in the short-term to stabilise the economy, to put forward a medium term recovery plan and for the planning to start now for a longer term re-orientation of the economy that ensures that in future the economy is built on solid foundations and that future economic prosperity is used to eliminate economic inequalities."

Trade union Impact said the proposed 3 per cent cut in public service payrolls could damage services and hit the most vulnerable service users.

"The recent OECD study of Irish public services found that, compared to other countries, Irish public servants deliver high quality services with relatively few staff," said general secretary Peter McLoone.

"In other words, there isn't much slack and badly managed cuts could easily hurt services to vulnerable people."

The news that overseas development aid would be affected by falling GNP was criticised in some quarters. Fine Gael's spokesman on foreign affairs, Billy Timmins, said the €45 million cut was "sizeable".

"It is regrettable that the Government's failure to keep the economy on track has now resulted in the most vulnerable people on the planet having to do without," he said.

However, the Minister for State for Overseas Development, Peter Power, pledged that Ireland would remain on target to honour its commitment to spend 0.7 per cent of GNP on overseas aid by 2012, and said the country's spending on overseas aid is at its highest level to date.

"The decisions announced today across the Government will help secure the Irish economy and in turn the resources available to Irish Aid in the years ahead," he said.

Business groups gave a cautious welcome to the proposed expenditure cuts.

Employers body Ibec said the plan contained some useful initiatives, but further action was needed to strengthen the Exchequer finances.

Ibec director general Turlough O'Sullivan said it the decision of the Government not to borrow to boost finances was "prudent". "It is also encouraging that Government has not engaged in any knee-jerk actions in relation to funding the National Development Plan. It is essential to the future productive capacity of the economy that investment in much needed infrastructure remains on track," he said.

"While the savings already identified for 2008 represent only less than 1 per cent of total current expenditure it is encouraging to hear the Government indicate that further measures will follow."

Chambers Ireland said it was vital that the Government focused on delivering the National Development Plan.

"One of the biggest challenges we face is maintaining our competitiveness and capitalising on the high momentum achieved over the last decade," said Ian Talbot, Chambers Ireland chief executive. "Core to this will be continued delivery of internationally competitive physical and virtual infrastructure."

The Small Firms Association welcomed Mr Lenihan's proposals and said the December Budget would prove "pivotal" in helping sustain existing employment and controlling public expenditure.

"The game has changed and so must Ireland if we are to regain cost competitiveness and maintain employment," SFA assistant director Avine McNally said.

"The major challenge now is to limit the pick up in our inflation rate. As an open economy Ireland is more exposed than most to competitive pressures, and we must ensure that our cost environment is improved, otherwise we will lose competitiveness, investment and ultimately jobs."