The Government is planning to cut €4.8 billion in spending between 2010 and 2011 as part of a package of measures to get the exchequer finances under control over the next five years.
Minister for Finance Brian Lenihan said the Government’s multi-annual consolidation plan contained a range of expenditure reductions that were the "minimum that must be achieved”.
Mr Lenihan said while a portion of the exchequer deficit was related to the global economic cycle, “part of the gap between spending and revenues, derives from structural problems in the public finances”.
He told the Dail the Government expects the economy to contract by up to 8 per cent this year, the sharpest decline on record. However, consumer prices are expected to decline 4 per cent in 2000 and this should mitigate some of the impact of falling wages and higher taxes.
He has said he expects consumer prices to fall by around 4% this year, and will mitigate the effects on households of falling wages and higher taxes.
He said the measures announced in the Budget would aim to leave the Government with a borrowing requirement of 10.75 per cent.
Tax revenues – which are forecast to total €34.5 billion this year – have contracted far more sharply than the overall economy, illustrating that the State’s tax system had become over-reliant on “fast growing, construction heavy economic activity”, Mr Lenihan said.
The reductions on current spending agreed by the Government will have a full-year effect of €2.7 billion in 2010 and €4.2 billion in 2011, he added.
Capital spending will be reduced by €1.3 billion next year and by €2.4 billion in 2011.
An additional €1.75 billion in extra taxes will be sought next year with another €1.5 billion in revenue raised in 2011.
Mr Lenihan said options to raise this additional revenue includes the taxation of child benefit and the introduction of a carbon tax, some form of property tax and through the “elimination of unnecessary reliefs and a review of all areas of tax exempt incomes”.