€7bn cut-and-tax Budget on cards to plug deficit hole
Published 22/10/2010 | 05:00
HOUSEHOLDS were warned last night that the Government is looking at a package of cuts and taxes of up to €7bn in December's Budget.
And the Coalition is possibly only halfway through the task of filling the gaping hole in the public finances.
Taoiseach Brian Cowen revealed the adjustment so far over the past two years comes to €14.5bn.
But it is understood the Government estimates the worst-case scenario from now on is a further €15bn hole in the public finances.
The Cabinet is to step up its preparations for the 2011 Budget and the four-year super-Budget next week with two special meetings.
Mr Cowen and his ministers will meet at Farmleigh House on Monday and hold an all-day Cabinet meeting on Tuesday in Government Buildings.
A spokesman said both meetings will cover the Budget and the multi-annual plan.
The Government and main opposition parties alike have rejected a call from the ESRI to spread the budgetary pain over six years, rather than the four years agreed with the EU Commission.
Coalition sources conceded that while the reduction of the deficit might ultimately end up taking five years to complete, the Government would be setting out a clear four-year plan.
If the economy begins to grow steadily, then the view within Government is that it might be possible to ease off in the third and fourth years to spread the pain.
But from the start, the international markets need to be convinced the country can actually close the gap.
Mr Cowen said it was not possible to move from the target of reducing the deficit to 3pc of GDP by 2014. Fine Gael finance spokesman Michael Noonan also said the 2014 deadline was sacrosanct.
The Economic and Social Research Institute warned draconian cutbacks will wreck the economy for a decade.
The department has set out various scenarios on the seriousness of the problem.
During briefings with opposition politicians this week, Department of Finance officials did not give a definitive scenario as the preferred option as this was a decision for the Government to make.
"Given the current working macroeconomic forecast, indicative deficits were set out for consolidation packages of the order of €3bn, €4.5bn and €7bn," a spokesman said.
The Department said that at no point was any "specific target" given as the officials stressed that all the numbers were a work in progress.
Fine Gael continues to seek independent verification of the Government's predictions on economic growth.
Before the four-year plan, the Coalition will eventually have to decide upon how much it believes the economy will grow in the coming years.