THE TAOISEACH, Brian Cowen, warned yesterday that further cuts in public spending may be necessary later in the year if the financial situation facing the State deteriorates further.
The cuts already announced in health and education have provoked strong criticism of the Government.
As Ministers began to spell out some of the details of their proposed cuts to the Dáil it emerged that the 3 per cent cut in payroll costs for next year would apply to third-level education and to some aspects of VEC operations.
Minister for Education Batt O'Keeffe announced that he had written to both sectors spelling out the necessity for the cut in payroll costs.
Health is due to provide total savings of €135 million for the rest of the year with more than €100 million of that coming from the delayed introduction of the "Fair Deal" nursing home scheme.
The bulk of the €83.2 million in savings in the Department of Finance will result from a deferral of acquisition of land, buildings and projects by the Office of Public Works, totalling €75 million.
While a more detailed breakdown of the savings was provided yesterday by the Government no figure was given for the savings expected from the Department of Education either this year or next.
The Department of Social and Family Affairs is due to come up with savings of €25 million in the second half of this year. They are listed as coming from "additional control measures" involving a clampdown on fraud.
Mr Cowen told the Dáil that the savings of €440 million earmarked for the remainder of this year, which will amount to €1 billion next year, will be reviewed in the light of what happens in the coming months.
"We are saying that in the context of the Estimates for 2009 further decisions may be required to make sure that we have a sustainable public finance position going forward. That would be determined by information as it emerges during the course of the year."
Mr Cowen said that the Government would do whatever was required to make sure it worked within the Stability and Growth Pact principles, which were the basis of our membership of the euro zone. The pact limits borrowing to a maximum of 3 per cent of GDP.
Fine Gael education spokesman Brian Hayes said it had become crystal clear that frontline education services would bear the brunt of the Government's cutbacks with the quality of education suffering badly as a result.
While the Taoiseach and the Minister for Finance, Brian Lenihan, gave a commitment on Tuesday that frontline services in primary and second level education would be exempt from the payroll cut it does not apply to third level.
As teaching is not separated out from other services in the block grant to the third-level sector the payroll cut will apply across the board. Non-teaching areas of the VEC are not exempt and neither are areas of the health service not deemed to be frontline.
Fine Gael leader Enda Kenny described the decision to hold back money earmarked for the Fair Deal scheme as "heartless and sacrilegious" but the Taoiseach told the Dáil that it would have been delayed for legal reasons in any case.
Labour Party leader Eamon Gilmore maintained that the Government's figures did not add up. He told the Dáil that the 3 per cent cut in payroll next year would save €250 million but it was still not clear where much of the other savings would come from.
"The Taoiseach also needs to tell us exactly what is in his mind for round two," said Mr Gilmore.