Lenihan bluntly tells his colleagues spending cuts are better than tax hikes
BRIAN Lenihan had a blunt message for his cabinet colleagues: keep the faith and cut government spending before increasing taxes.
Cutting €3bn from the Budget in December is a priority, but the Finance Minister was even more concerned about keeping the coalition in government.
None of those present know if they will attend the cabinet meeting in Farmleigh next year, but the mood was more upbeat yesterday than it was last summer.
The all-day cabinet meeting in July is about the Budget in December and the macro-economy was the headline topic as they spoke in big brush-strokes.
"There was a sense that some of the big-ticket issues such as banking are being addressed and coming to a conclusion," said one minister.
"The Bank of Ireland is coming through but the jury is still out on Anglo." The minister added that no one should be too surprised if something drastic is done to Anglo. But the same minister said he expected the bank guarantee scheme to be continued when it comes up for renewal in September
The Cabinet sat looking on as Mr Lenihan leafed through the 50-page memo dealing with the €40bn capital programme circulated before the session.
It was withheld from ministers because experience has taught the Department of Finance that it would have been leaked if it had been distributed before the meeting.
Around €1bn will be cut from the capital programme for projects, but ministers had already been asked to prepare another list of programmes to be shelved.
All of the ministers had been asked to prioritise cuts in their own department, but there were a number of lively exchanges and passionate contributions.
Ministers were told what the EU Commission, the OECD and the IMF expected of them and that they all want the budget deficit slashed.
A property tax is in the Programme for Government, but it is more likely to be a flat tax like the charge on a second home rather than based on the value of the property.
But nothing has been decided and after the cabinet members were told about how income tax revenues have fallen and are expected to fall, ministers fell silent.
From another memo, ministers learned about the rising numbers of unemployed and that an increasing number are highly skilled young people. "That was really depressing and worrying," said a minister later.
Creating jobs is to be fast-tracked, although Mr Lenihan acknowledged that no government could create jobs.
And anyone not taking up a job offered to them can expect to have their welfare payments cut, said a source: "There could be punishing sanctions if jobs are refused."
Yesterday was only the beginning of a political journey that ends in December and whatever happens, it will be the public who pays for the tickets.