Cabinet begins search for €3bn in cuts
Bond sale provides some breathing space
Published 22/09/2010 | 05:00
Ministers will tomorrow begin the task of finding €3bn worth of cuts and tax hikes for December's Budget.
The Cabinet will hold the first of a series of special meetings on Budget 2010 running over the next 10 weeks -- on top of their regular Tuesday meetings.
Finance Minister Brian Lenihan yesterday briefed his cabinet colleagues on the successful auction of €1.5bn of debt, helping to ease the pressure on the Government, but only after offering investors a yield of 6pc on the longer-term bonds.
However, the jobs crisis was reiterated as new figures yesterday showed long-term unemployment has doubled.
Taoiseach Brian Cowen said there had been excess demand for Irish bonds. And while the cost of borrowing has risen, taxpayers must be reassured the Government is continuing to work in their best interests.
"We are committed to running the economy and finances in such a way to bring more confidence in the investment market. That was evident today and I think we need to continue with that effort and that approach," he said.
Mr Cowen refused to be drawn on claims by the Governor of the Central Bank Patrick Honohan that more savage Budget cutbacks are necessary.
Instead, Mr Cowen simply claimed the Government is absolutely committed to ensuring the international markets understand that this country will pay its debts and put its public finances in order.
The Government has to ensure market sentiments remain positive toward Ireland in the coming weeks, he added.
The level of demand for the 2014 and 2018 bonds was strong at 3.6 times the amount on offer, with NTMA director Oliver Whelan describing demand as "firm".
The State is now fully funded for this year and has enough cash to get through the first half of 2011. Despite this, the monthly auctions of debt are expected to continue for the remainder of the year.
Meanwhile, a conference in Dublin yesterday heard that only the middle-class and better-off people will benefit from the welfare state if present recessionary trends continue.
Fr Sean Healy, director of Social Justice Ireland, warned that it would be poor people who would lose out if the challenges facing the welfare state were not addressed comprehensively by the Government.
Prof Tony Fahey, professor of social policy at UCD, predicted that while the welfare state would continue in the future, it could well be regressive rather than progressive.
"Tax breaks for 'a social purpose' are of benefit only to those earning taxable income and usually the more taxable income they earn, the greater the benefit they can derive from these measures," said Prof Fahey.
Those who benefit from public support for private health care, private pensions and owner-occupied housing, typically strove to maintain public subsidisation of those services through the tax system, Prof Fahey added.
But he said "the appeal of market solutions has been dented by the financial crisis and consequently the ground for a stronger public role in welfare distribution is more fertile than it has been for many decades".
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