Cowen vows to seal €2bn cuts deal but warns of tax increases
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Wednesday January 28 2009
TAOISEACH Brian Cowen last night promised to deliver €2bn in spending cuts within seven days.
But he warned that the cuts alone will not be enough to reduce our budget deficit.
He gave the strongest indication to date that a range of taxes will have to be increased to bridge the gap between spending and income.
The magnitude of the €16.5bn adjustment needed meant that the gap could not be closed by expenditure savings alone, he said.
Earlier, an angry Taoiseach announced the self-imposed deadline of next Tuesday for a final deal on spending cuts after being stung by opposition claims in the Dail that his Government was bereft of ideas and even the courage to govern.
The tax hikes are likely to come in a number of budgets over the next five years as part of a lengthy stabilisation programme.
"There is no section of society that can be immune from the changes that we are contemplating," he warned before he addressed the Irish Farmers' Association AGM dinner in Dublin.
But Mr Cowen faces an uphill battle to reach agreement on the €2bn cuts in a week as stalled talks among the social partners show no signs of a breakthrough.
He promised the Dail can debate the details of any agreed deal when TDs meet in just six days' time. He also spoke yesterday of finalising broad-front agreement "this week, and this weekend".
In bad-tempered Dail exchanges yesterday, Mr Cowen furiously told Fine Gael leader Enda Kenny: "As long as I am running this Government, I will run it as I see fit, as I believe in, based on my philosophy."
But he quickly softened his tone after Labour Party leader Eamon Gilmore reminded the Taoiseach he was answerable to the Dail.
"I am not suggesting I run this House other than by the authority of the Dail," Mr Cowen said. "I have a responsibility to do this job as I believe it should be done, for as long as I hold it. I am as committed a democrat as anyone else."
Late last night, the Government claimed "significant progress" on agreeing a framework that will see all sides buy in to an urgent new process. It is understood the Irish Congress of Trade Unions may today agree the formal terms of discussion.
Yesterday had earlier threatened to be another day of drift on the talks, as all sides were shown a draft framework for intensive talks. But late last night, sources suggested there had been "a huge step forward" with outline agreement on how to tackle specifics.
Clashes continue to loom over an expected demand for public sector pay cuts -- while the unions have counter-proposed a 48pc tax band.
Government sources insisted that Mr Cowen will now be stepping up his personal involvement. Ministers are also standing by.
Yesterday, as the Dail returned from the Christmas recess, Mr Cowen waded into the fight with opposition leaders. But he also used the word 'pact' and 'social solidarity', indicating that he is receptive to union calls for a 'social solidarity pact' that would see all sections of society make sacrifices.
Burden
"The burden of adjustment will have to be equitably borne by everybody. That means those who have a greater capacity to carry that burden will have to do so," he said.
It is understood an outline is gathering shape that would see a national recovery platform for the next five years -- the amount of time the Government has told the European Commission it will take to fix the economy.
Among other proposals to be discussed are:
- An eventual jump in the higher tax band from 41pc to 48pc.
- A cap on executive pay.
- A 10pc pay cut across the public sector.
- A hike of up to 5pc in pension contributions.
The Taoiseach further warned yesterday that spending cuts would have to be accompanied by a series of tax 'adjustments' over the medium term.
And Mr Cowen was clearly riled by suggestions that his social partnership approach equated to indecision. He said that, on the contrary, his method would maximise support for the measures that had to be taken.
But he appeared to accept union arguments that particular sectors could not be scapegoated, saying that "no constituency or cohort" could be immune to what was a huge challenge.
Mr Cowen added: "We'll know by the end of the week whether we can come to an agreement."
He foresaw "a pact that will bring stabilisation, be based on social solidarity, and allow us to take the opportunity for reform that this recession provides".
He added: "If agreement is reached, obviously a framework document will be published."
It is understood the protocol document commits the partners to a five-year economic recovery plan.
Meanwhile, the Dail today begins a two-day debate on the economic situation.
- Senan Molony, Anne-Marie Walsh and Aideen Sheehan
