UNEMPLOYMENT LEVELS have stabilised and jobless numbers will not now reach the 500,000 figure predicted earlier this year, Minister for Finance Brian Lenihan has told the Dáil.

He also said that 50 per cent of income earners would fall outside the tax net and the number of earners paying tax at the highest rate had dropped from 21 per cent to 10 per cent of taxpayers.

The Minister also insisted that exchequer returns were broadly in line with forecasts and tax revenue was back at 2003 levels, while expenditure had risen by 70 per cent since then, and they would have to borrow €22 billion this year.

During Dáil finance question time, Fine Gael finance spokesman Richard Bruton asked the Minister if the Government had changed its position that the bulk of the required €4 billion in savings would be from spending cuts, in light of suggestions from the social partners.

Mr Lenihan said the Government had decided “and made it clear at all stages, that the €4 billion must be found to comply with our obligations under the Stability and Growth Pact”.

Tax returns for the end of the year could finish in the region of €32 billion and, while the October figures showed that “the poor performance of tax revenue has continued, it is not out of line with what had been anticipated.

“To put this in perspective, overall tax revenue in 2009 is back to 2003 levels while gross voted expenditure has increased by about 70 per cent since 2003,” Mr Lenihan said.

Labour’s finance spokeswoman Joan Burton had asked Mr Lenihan if tax receipts for the year would be “closer to between €31 billion and €32 billion than the €34.4 billion he projected at the time of the emergency budget six months ago”.

“As I made clear at the end of September,” Mr Lenihan said, “I anticipated a €2 billion shortfall in tax. The tax receipts disclosed in the end-October receipt side are broadly in line with that forecast.”

Ms Burton pointed out that because exports were holding up, “there is a revenue crisis as much as there is a spending crisis in the public finances.

“If the Government keeps cutting key services and public spending, the deflationary spiral will get worse.”

Mr Lenihan pointed out, however, that “our estimation this year is that the number of income earners who will fall outside the income tax net will be of the order of half the income earners in the State.

“That will be an increase from the 39 per cent or 40 per cent forecast in the October budget last year.

“Equally, those on the top rate, some 21 per cent in the forecast last year, have fallen to 10 per cent.

“All that suggests a substantial wage adjustment has taken place in the economy in response to international developments.”

Referring to jobless figures, he said that while “we are seeing a sharp fall in employment, which is clearly a concern, it is not unexpected”.

“The CSO figures to the end of October will show for the first time that the Live Register has not increased in the month of October,” the Minister added. “There is clearly a stabilisation in the growth of unemployment at this stage.”

Mr Lenihan said that the 500,000 unemployment figure for the year “is no longer an official prediction”.

Fine Gael deputy finance spokesman Kieran O’Donnell asked if Ministers were taking the McCarthy report into account in their budget savings.

Mr Lenihan said: “Each department is being interrogated on the recommendations of the McCarthy report and on what contribution it can make to savings within public expenditure.”