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Spending cuts in Budget vital to 'win markets'

Taking a sizeable chunk of the pain in December's Budget may dampen economic growth next year but is necessary to win over the international markets, Taoiseach Brian Cowen said today.

Mr Cowen said most of the savings for 2011 will be reached through cuts in spending instead of new taxes and warned nobody can escape the harsh measures.

A day after the Government revealed plans for €15bn in cuts and taxes over four years the Taoiseach said everyone has a part to play in restoring the crippled finances.

"It is the Government's judgment that, while a degree of front-loading may dampen economic growth in 2011, it will give the necessary confidence to the international markets and secure our funding position which is, of course, fundamental to sustaining public services for our citizens and achieving sustainable economic growth in future years," Mr Cowen said.

Mr Cowen told the Dail that the massive €15bn figure - twice the initial estimate - was decided on by the Government and not imposed by Europe.

He claimed that if the economy recovers faster than the estimated average rate of 2.75pc a year, the measures may not be as harsh as predicted.

"The important point is the €15bn is a forecast as is every forecast. If we do better than the 2.7pc annual average growth the level of uplift we have to take in terms of cutting expenditures and raising taxes won't be as great," Mr Cowen said.

The Taoiseach said nobody could forecast how well the economy would perform over the next four years but claimed the multi-annual budgetary plan, due to be published next month, would be a call to action for the economy and society.

"Our problems are so serious that no vested interest, and no section of our society, can escape from their consequences by trying to protect their narrow sectional interests," Mr Cowen said.

"Everyone has a part to play.

"We really are all in this together."

The Taoiseach said the gap between what the state is spending and taking in taxes was too great to allow people to be spared the burden.

But he claimed the Government would try to protect welfare as far as possible.

Labour leader Eamon Gilmore accused Fianna Fail of playing political games by not providing the Opposition with figures including the growth rate for next year, the projected savings from the Croke Park agreement and how the bank bailout is being treated in the national accounts.

"Frankly, after everything that has happened up to now, you would have to be naïve not to be sceptical about any figures that come from this Government," Mr Gilmore said.

The Labour chief said clarity was needed on the figures if the country was going to come out of the crisis.

"We will not solve this problem by resorting to ever greater and ever more crude adjustments," he said.

"We will solve this problem by having a strategy that combines reduction in the budget deficit with a programme of action on jobs and growth, and which puts in place reforms that signal to the wider world that Ireland is a serious country that will not allow this disaster to happen again."

Mr Gilmore said extra taxes were necessary, but there should be an even split between taxes and cuts in spending.

He called for a voluntary redundancy scheme in the public service, tailored to areas where there are too many staff but urged front-line services be left alone.

The Labour leader said there was scope to increase the tax on second homes and phase in water charges.

And he reiterated that the Government has no mandate for a four-year plan.

PA Media