THE GOVERNMENT and the country have no option but to face up to the need to save €4 billion in the budget, Minister for Finance Brian Lenihan said last night.
Speaking at the publication of the pre-budget outlook, he said there was a duty on all those in public life to outline how they would deal with the need to restore order to the public finances.
“I welcome the broad support for the need to make an adjustment of €4 billion next year, because taking decisive action now will bring immediate benefits to our economy,” said Mr Lenihan. He emphasised the task facing the country was to stabilise the national debt so that it did not grow to unsustainable levels.
“There is an onus on all citizens and all political parties to reflect on these realities,” said the Minister, who repeated the Government’s commitment to finding the bulk of the €4 billion from spending cuts.
Mr Lenihan said Ireland was not the only country with severe problems and he pointed out the European Commission had identified the UK, Spain, Latvia and Greece as states with similar problems to Ireland.
“We are in a group of five countries that are seen to have critical problems at present,” said the Minister, who added the actions proposed in the budget would lead to improvements from the middle of 2010.
Responding to questions about potential cuts in social welfare, he said there had been a full discussion in the Fianna Fáil parliamentary party and he expected his party’s TDs and Senators would support whatever measures emerge.
Mr Lenihan pointed out that figures from the Central Statistics Office yesterday confirmed there had been a substantial drop in the cost of living over the past year, including basic items like food and clothing.
The pre-budget outlook from his department forecast that the Irish economy would contract by 1½ per cent next year following a decline of 7½ per cent this year, with unemployment predicted to peak at an average of 13¾ per cent of the labour force next year. This forecast is lower than the 15½ per cent rate contained in the April supplementary budget, but Mr Lenihan said the downward revision left no room for complacency and creation and protection of jobs remained the over-riding objective .
“The last year or so has been exceptionally difficult for us all. And there are significant challenges ahead. But I am pleased to note that the outlook for the economy is now improving. The consensus now is that positive growth will return during 2010, although it will be 2011 before we experience positive growth for the year as a whole. My department’s pre-budget outlook outlines the emerging macroeconomic and fiscal outlook for the coming years.” Mr Lenihan said the Government would take the necessary decisions in the budget .
“Our resolve as a Government to do the right thing has boosted international confidence in Ireland. Without international confidence, our economy will not recover.”
The Minister stressed his determination to stabilise the budget deficit in order to limit the increase in public debt, restore confidence in our public finances and stop the drain on scarce resources by an ever-increasing interest burden.
“Now is the time to stabilise the deficit: falling prices and lower interest rates are cushioning the impact of the necessary adjustments on families. The decline in prices this year and the prospect of a further, albeit more modest, decline next year is restoring our international cost competitiveness. Nominal income levels must be seen in the context of declining prices.”
Taoiseach Brian Cowen also referred yesterday to the impact of falling prices. “The latest inflation figures out today show that prices fell by 6.6 per cent in last 12 months. This means that the real value of take-home incomes has increased by that amount.
“If prices had increased by that amount, there would be loud calls for compensatory pay increases. Equally, the fact that prices are falling must be taken into account when assessing the potential impact of wage and welfare adjustments.