Minister for Finance Brian Lenihan has said shrinking tax revenues and spending pressures could push the Exchequer's fiscal shortfall this year to €4.5 billion over Government targets. Mr Lenihan was speaking as unemployment hit a 10-year high of 10.4 per cent today.
Mr Lenihan said next month’s supplementary budget will contain details of new spending cuts and taxation measures to address the shortfall and stimulate businesses. The budget would not simply address the falling tax revenues, but be presented in the context of a wider plan for economic recovery in the future.
"We have to show the wider world there is a path out of our financial difficulties and I believe we can do that," Mr Lenihan said. "The idea that we can borrow endlessly to stimulate economic growth is not correct."
Mr Lenihan told RTÉ’s News at One that the Government would prioritise measures to safeguard jobs, which were being lost at a “frightening rate”. In addition, was “vital” that spending was cut to avoid public finances getting “out of control”.
On taxation, Mr Lenihan said the top 12 per cent of earners currently pay two thirds of income tax. “That group will have to pay more, but everybody will have to pay something.”
Mr Lenihan did not rule out cuts in social welfare payments. “If the cost of living continues to increase, it will not be possible to provide for social welfare increases. Clearly, the whole provision of social welfare has to be linked to the cost of living,” he said.
Fine Gael deputy leader and finance spokesman Richard Bruton said the Government has finally accepted the approach it has taken up until now had failed.
Mr Bruton, who was briefed on the state of the public purse with Labour's Joan Burton by officials at the Department of Finance this morning, said Mr Lenihan’s tax shortfall estimates were “conservative”.
He said there needs to be a “serious reform” of how the country is governed. “We have to question the way we spend money, which has been far too loose for too long,” he said. However, he warned against “striking out at the softest targets”.
He said the Dáil did not need 166 TDs to function and ways of “shrinking” government should be considered.
Earlier, Taoiseach Brian Cowen warned that the number of people unemployed in Ireland could rise to over 450,000 unless drastic action is taken. Speaking in the Dáil this morning, the Taoiseach said the number of people signing on for jobseekers' payments hit a new record high of 354,400 in February.
Mr Cowen said if the present rate of job losses were to continue, then the unemployment rate could soar to “450,000 and more”.
Labour Party leader Eamon Gilmore said the plummeting Exchequer finances were “directly related” to the rising unemployment figures. He called on the Government to outline exactly how it proposed to stem the rising rate of joblessness.
Mr Cowen called on all parties to join together in finding solutions. He said the Government would act quickly and decisively. He said new measures would be introduced in the first week of April and warneed they would not be "painless".
“There is an economic convulsion taking place in the world economy and this country is not immune from that problem. In fact, a small open economy like ours is facing a greater turbulence because we don’t have the domestic market," the Taoiseach said.
“The Government, at the end of the day, has to make the decisions that are necessary. We will do so,” he said. “And we will do so in the full knowledge that what we are trying to achieve is to bring stability to the public finance position, to take on the challenge, the magnitude of which has not been faced in this country in this political generation or the previous one and we will take those decisions in the very best interests of the country regardless of the immediate consequences.”
Mr Bruton, Labour deputy leader Joan Burton and Sinn Féin finance spokesman Arthur Morgan attended a briefing by officials in the Department of Finance this morning on yesterday’s disastrous exchequer figures, which showed tax receipts for the first two months of this year were down €1.8 billion on the same period last year.
