Spending cuts not taxes - Cowen


Budget savings will be achieved mostly through cuts to current expenditure rather than new taxes, Taoiseach Brian Cowen indicated yesterday following the Cabinet meeting at Farmleigh House in Dublin.

Mr Cowen said the 2011 budget would also include initiatives to encourage domestic consumer spending, while other Ministers leaving the day-long meeting said there would be plans to tackle unemployment.

Of the €3 billion savings required this year, €1 billion will come from the capital programme. Mr Cowen suggested most of the remaining €2 billion would not come from revenue-raising taxes when he was asked about a possible taxation strategy.

"Predominantly we’re looking at obviously the adjustments on the expenditure side," said Mr Cowen. But he said "at the end of the day it will be a matter for the Minister for Finance to decide on any taxation matters".

Mr Cowen said domestic consumer spending was an important part of generating growth in the economy. "I think people increasingly are recognising that the confidence-building measures we are bringing forward, particularly in relation to rectifying the public finances, that that’s a crucial part of the recovery of the economy," he said.

"Obviously we will in coming months, in preparations for budgets and preparing for the autumn term, be looking at various initiatives in that area."

The Taoiseach said the broad budgetary approach had been agreed. The Cabinet had held a "very good" discussion and a number of bilateral meetings would take place between Ministers in September. Asked what additional elements of the McCarthy report the Government might adopt, he said: "It's there as part of our ongoing considerations."

Minister for Finance Brian Lenihan said there had been a modest recovery in consumer sentiment this year and VAT returns had begun to improve. "But joblessness remains a big problem and has to be tackled and the Government will be bringing forward initiatives in that regard," Mr Lenihan said. "We have to do everything in our power to increase jobs and to tackle the problems of those without jobs."

Mr Lenihan said the Government did not consider taxation measures yesterday.

"You’ll appreciate in the first instance we have to put our own house in order and look at our expenditures. Taxation is a matter that’s looked at much later in the year."

Minister for Justice Dermot Ahern described the preservation of jobs and helping unemployed people to find work as a "core issue" for the Government. "And obviously in the context of the tough exchequer situation we will be looking at areas where we can try and give people an added stimulus to get back into employment," Mr Ahern said.

The Minister described the mood at the meeting as "workmanlike".

Ireland had "reached the bottom" of its economic difficulties and there were now "hopeful signs" which had to be built on to give people confidence. He said the level of personal savings had risen from about 4 per cent to about 12 per cent.

"So what we really need to do as a nation is to try to get those people who are saving their money to spend their money in the economy."

The meeting began at 10.30am and finished at about 4.30pm. The €40 billion five-year capital spending programme was also on the Cabinet agenda. It is expected to be published on Monday. The Cabinet will meet again on Monday.

A spokesman for the Green Party said it wanted education spending and funding for the homeless to be protected.

Earlier, Fine Gael finance spokesman Michael Noonan said his party accepted the need for a €3 billion correction this year. "I would prefer if the Minister looked at cutting public expenditure rather than taxing."

Mr Noonan said the Government should not confine its agenda to the McCarthy report and should restructure public expenditure, "instead of taking cuts like slicing a salami across Government departments".