Monday 27 February 2017

Cuts will be held at €5bn to 'avoid killing growth'

Michael Brennan Deputy Political Editor

Taoiseach Brian Cowen arrives for the talks at Farmleigh House, Dublin yesterday
Taoiseach Brian Cowen arrives for the talks at Farmleigh House, Dublin yesterday

THE Cabinet is working towards a cut of €4.5--€5bn in December's Budget in an effort to avoid killing the potential for growth in the economy next year.

Although there is recognition among ministers that such cutbacks could still affect growth, higher cutbacks of up to €7bn are understood to have been ruled out because of the higher risk of such cuts affecting economic recovery.

The revelation came as the Cabinet last night met in Farmleigh House in Dublin's Phoenix Park to discuss further details of the four-year budgetary plan.

A senior government source said there was a consensus emerging about a ballpark figure of €4.5--€5bn in spending cuts and taxation increases in the December Budget.

He said going higher was not favoured because it was recognised that every billion taken out of the economy could cut the growth rate by 0.25--0.5pc.

The source said it "didn't take a genius" to see the risk of introducing a Budget where there was no potential for growth.

Although the final figure has not yet been decided, this suggests the Government is planning around €10-€12bn in cutbacks over the next four years in order to meet the EU target of reducing the deficit to 3pc of GDP by 2014.

Yesterday evening's cabinet meeting started late because Finance Minister Brian Lenihan's return from an EU finance ministers' meeting in Brussels was delayed.

A government spokesman said no dinner was served to the Cabinet, adding: "It's a working meeting."

The Economic and Social Research Institute (ESRI) think tank has warned that attempting to reduce the budget deficit to 3pc by 2014 could tip the economy into a deflationary spiral of low growth and high unemployment. ESRI favours €4bn cutbacks next year.



Hope

It is understood the options being considered for the Government's four-year plan include a property tax, water charges, cuts to social welfare, cuts of up to €1bn to health spending, and cuts to the education and capital budgets.

But Green Party leader John Gormley is pushing strongly for the Metro North underground rail project to get the go-ahead.

A spokesman for Mr Gormley said the project was needed to "give a stimulus to the economy and hope to people".

Justice Minister Dermot Ahern said the Cabinet was going "line by line" through the budgetary situation.

"We have to ensure that whatever we do is fair and is seen to be fair," he told RTE.

Taoiseach Brian Cowen and his ministers ended their meeting last night in Farmleigh at 10pm after three and a half hours.

A government spokesman said the cabinet would be continuing their discussions at an all-day meeting today in Government Buildings.

Irish Independent

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