Lenihan prepares to unveil scale of cuts coming in Budget
Published 03/11/2010 | 05:00
THE scale of what is expected to be the harshest Budget in the history of the State will be revealed tomorrow.
Finance Minister Brian Lenihan said yesterday that the Government would reveal the size of the spending cuts and tax increases next year after requests from the opposition for further information.
Full details will have to await the four-year budgetary plan, which is expected in two weeks' time, followed by the Budget itself on December 7.
At present, the adjustment next year is expected to be well above €4.5bn and possibly nearer to €6bn -- representing the first tranche of a €15bn package over four years.
The announcement came as new figures showed the public finances remaining on target during October.
One analyst said this might help reduce borrowing costs for the Government next year, but costs on the bond markets continued to soar to more than 7pc yesterday.
Mr Lenihan denied that he was providing the additional information because of the latest rise in the interest rate being demanded for lending to the Irish Government.
"I carefully read all of the opposition comments in the recent Dail debate and decided to respond to their requests for more information," he said.
Estimates of the economic growth over the coming years will also be divulged. This will enable analysts to assess whether the €15bn adjustment is likely to meet the targets of bringing the deficit to 3pc of GDP by 2014.
The Department of Finance will brief Fine Gael, the Labour Party and Sinn Fein tomorrow, after the Cabinet signs off on the projections today.
Mr Lenihan did admit that the rise in the bond spreads was "very serious", but pointed out that the Government was not borrowing at present.
"The four-year budget is likely to be €15bn in size: conservative, credible and well delivered, with the backing of the EU and ECB," said Brian Devine, chief economist at NCB Stockbrokers.
However, he added: "The problem for Ireland, though, is that market sentiment has deteriorated sharply on the back of talk on a sovereign restructuring mechanism for the euro area. A serious shift in market sentiment is needed if Ireland is going to be able to re-enter the debt markets at rates which do not make sustainability an issue."
The Exchequer figures show that the amount of tax taken in for the first 10 months of the year was marginally ahead of targets set out at the Budget last December, with strong corporation tax receipts on company profits making up for weakness in income taxes.
The figures show total spending 2.7pc below target. Most of this is due to a €1bn shortfall in capital spending. This is not expected to change significantly over the rest of the year.