TAX REVENUES are set to fall by €2 billion more this year than the Government’s most pessimistic predictions so far, Taoiseach Brian Cowen has indicated.
Last week, Minister for Finance Brian Lenihan said the exchequer would collect €34 billion and not the €37 billion predicted in January, or the €41 billion actually collected in 2008.
Speaking after the latest Cabinet meeting to finalise next month’s emergency budget, Mr Cowen said: “We have basically 2009 living standards in terms of wages and services, on the basis of revenues that are more akin to 2002, 2003.”
Revenue in 2002 was €31.7 billion while in 2003 it was €32.8 billion. An average of these incomes would offer the exchequer just over €32 billion.
“It is a stark comparison. It is my effort to convey the magnitude of the problem,” said Mr Cowen, during a rare sit-down briefing with political correspondents. The Cabinet will hold another meeting this afternoon, and a number of other meetings later this week.
Speaking following Labour leader Eamon Gilmore’s proposals for a 48 per cent per cent tax rate on incomes over €100,000, Mr Cowen said he was willing to listen to ideas from any quarter, but he said the public “need to understand and know” that five years will be needed to bring the situation under control, with difficult choices occurring every year.
However, he ruled out a succession of emergency budgets this year: “We have to monitor the situation on an ongoing basis, but it isn’t our intention to return to this on a bimonthly basis.”
Expressing concern that some of the public has not yet realised the scale of the challenge ahead, Mr Cowen said: “Sometimes I think there is a view: let’s get this all over with on the 7th of April and get back to normal. This is a process of adjustment that must go on now for a period of years.”
Tough decisions will, however, be made on April 7th. “The challenge is huge, it is urgent and it is not going to go away. It will be difficult. We have to take these decisions now.”
Mr Cowen predicted that living standards would fall by 10 per cent over the next two years. He also rejected calls for a general election. “The electoral mandate that we work off is 2007. I don’t think this country wants, or needs an election to be honest.”
The Government, or any replacement, would have “to face the same realities that we have to contend with today. There are no soft options. There are no easy, pat answers”.
The financial crisis mirrors a fall in world trade for the first time in 25 years, while the 30 per cent fall in sterling’s value has hurt Irish exporters, he said. Small, open economies like Ireland – such as Taiwan, Singapore and South Korea – “are the ones that are taking the biggest clobbering”.
He expressed confidence that the Dáil majority held by Fianna Fáil and the Greens, along with Independent TDs, would hold on budget night.
Due to the collapse in property taxes and a decade-long drive to cut income taxes, Ireland has a €16 billion hole in the exchequer’s finances that will remain regardless of improvements in the world economy, he added. This deficit must be addressed over the next five years, while the remaining gaps would be filled by extra revenues generated from an international “pick-up”.
“That is the thinking behind this and people need to understand and know how we are approaching this,” said Mr Cowen. There is “some evidence” that the Government’s five-year, multi-pronged strategy is “engendering confidence in our ability to manage our own affairs”, he told The Irish Times. The costcutting inspection commanded by economist Colm McCarthy has already gone through the books of eight Government departments.
Much of the work of the body, known as “An Bord Snip Nua”, is destined for the 2010 budget in December, but “lessons” that can be learned more quickly will be learned, said Mr Cowen.
