Cowen and Lenihan divided on pay cuts
Saturday January 10 2009
THE first signs of division between Taoiseach Brian Cowen and his Finance Minister Brian Lenihan over how to deal with the economic crisis began to emerge last night.
As the Government was battered by a new wave of dire forecasts and figures, Mr Lenihan warned he would have to implement drastic public sector job and pay cuts within "a matter of weeks".
But sources close to Mr Cowen insisted there were "no firm deadlines" to reach agreement with the social partners.
Ministerial colleagues have played down any suggestion of a rift between the Taoiseach and Mr Lenihan.
But public suspicion of their competence to manage the economic crisis has heightened concerns on the backbenches. The differences emerged as the Government told Brussels it would cut another €2bn from public spending this year, and that decisions on how to achieve this would be taken before the end of this month.
Mr Lenihan, who sees reductions in pay and numbers as the only way to save the extra €2bn, told the Irish Independent in an exclusive interview that he wants the cuts implemented within a matter of weeks.
The scale of the task facing the Government, to convince public sector unions to accept savage cutbacks, became apparent yesterday.
Peter McLoone, leader of the largest public sector union, IMPACT, warned: "I do not have, will not get and will not seek a mandate for pay cuts from our 60,000 members."
Cutbacks
The Government revealed the need for an extra €2bn in cutbacks in the document sent to the EU Commission.
The deteriorating economic situation means the amount the Government will have to borrow every day this year has soared from a projected €45m to €55m, in the space of just a few days. Mr Lenihan regards that as unacceptable. But the plan sent to Brussels also sees €4bn extra in higher taxes and spending cuts having to come off the budget arithmetic in both 2010 and 2011.
Mr Lenihan will use the forthcoming report from the Commission on Taxation to introduce new taxes and raise existing ones next year.
The Finance Minister is anxious to move quickly and begin cutting costs immediately, rather than postpone action until the slowest of the social partners is prepared to move.
He is understood to have told Cabinet colleagues on Tuesday that "immediate" cuts were required to spending plans for 2009 because there was little scope to raise new taxes this year. He said both numbers and pay in the public service would have to be looked at to produce rapid savings.
"I don't want to pre-empt what the Taoiseach will say to the social partners, but what is clear is that there is an urgent need for action. We cannot wait longer than a couple of weeks," he said.
Conservative
However, Mr Cowen favours a more conservative stance, waiting until every argument is exhausted to gain wider approval from the trade union movement before finalising any cost-cutting plan.
A spokesman said Mr Cowen "hopes to have a deal by the end of January, but there is no firm deadline set".
The worsening state of the public finances means the budget deficit for 2009 will be €20bn, with €11bn of this borrowed to pay for current spending and €9bn borrowed to pay for capital spending. Overall, 20pc of Government day-to-day current spending will have to be paid for by borrowing.
A Government source last night said the figures were being provided to show the seriousness of the situation to the unions, which are currently resisting demands for public sector pay cuts and redundancies.
"We need to lay it on the line. The social partners are being given one last chance," the source said.
- Brendan Keenan and Sam Smyth
