The prospect of a second Budget in response to the rapidly widening deficit in the State's finances has been ruled out by the Minister for Finance Brian Lenihan, but he has strongly hinted that public sector employees face pay cuts.
"There is no question of a new budget. The taxation arrangements were finalised before Christmas we know the income levy is now being introduced. We are losing jobs in this economy at the moment and there isn't scope for increasing the tax on Labour which is the only real tax," Mr Lenihan said.
He told RTÉ's
Morning Irelandprogramme this morning that rather than seek to raise additional taxes to cover the deficit the Government will have to adjust its spending plans.
Mr Lenihan said the Government had to discuss with the "social partners the reality that there is a €10 billion tax gap between what we are getting as a State and what we are spending as a State."
Asked whether this would mean pay cuts for public servants, Mr Lenihan declined to be specific saying social partnership had served the country well during good times and "deserves to be tested to see whether it works in hard times".
He said private sector employees were being laid off and facing pay cuts and "pay roll costs in the public sector cannot be immune for the trends we are seeing in the wider economy".
The Minister said a process of reviewing expenditure "item by item" was underway in his department and where possible, spending would be adjusted downwards.
Responding to criticism that the Government's economic stimulus package - Building
Ireland's Smart Economy: A Framework for Sustainable Economic Renewal– was poorly thought out, Mr Lenihan said it was not a plan but a discussion document, and that a plan was be published later this month.
"It is not a plan, it is a framework for discussion with the social partners and a plan will be drawn up by the Government on the basis of those discussions," he said.
The Minister added that on the basis of the Exchequer returns released yesterday – which showed an overall deficit of €12.7 billion – the Government would make its forecasts for 2009.
"I am not going to rush into that because my department got its calculations and projections wrong three times last year and I had to make decisions on the basis of that."
He said the State would get spending under control and noted that "no one has been getting their forecasting right in the present climate".
Mr Lenihan added that the strength of the euro against sterling has created a huge problem for the Irish economy.
"The fact that the euro has almost approached parity with sterling . . that has put business and consumers under enormous pressures. That is why the only thing we can do as a country is to get our cost base right."
Earlier this morning former Labour Party leader Ruairi Quinn described the current Budget as "a work of fiction" and called on Mr Lenihan to introduce a new one based on the full-year Exchequer data.
"We need to have the Daíl back in business next Tuesday... we need to have a fullscale debate on the full extent of the crisis facing the country, and we need then to have a Budget about two weeks after that," said Mr Quinn.
"There is nobody, down to the local shopkeeper, can plan their year ahead unless they know what the budgetery arithmetic is for the whole country," he added.
Speaking on RTÉ radio, Mr Quinn said there was a need to wake up to the reality of the crisis that was facing the country and claimed that Taoiseach Brian Cowen wasn't up to the task of leading the economy out of recession.
"Quite frankly we've had optimism and fairytales since last June. As recently as last September Brian Cowen was saying to people like Eamon Gilmore and Joan Burton to stop being pessimistic and too get real, to
realise that we're in great shape," he said.
"This Government is sleepwalking into disaster and they are tired and incompetent," Mr Quinn added. "We have a Government which is in denial and which is so badly led that it is exhausted. They are not talking to each other, they are beaten... this is the worse Government I have seen in my entire 35 years in Leinster House."
Mr Quinn said that the country is facing a crisis not seen since the foundation of the State and claimed that the issue of pay cuts must now be looked at.
Also speaking on RTÉ radio this morning, Siptu president Jack O'Connor said that a major effort was required to manage the current economic crisis and restore consumer confidence.
He said that workers needed to see an integrated set of measures which would convince them that serious efforts are being made to address the economic situation and that this included seeing those who had benefited most from the boom years contributing more.