| 10.2°C Dublin

Cowen issues warning about hairshirt budget

TAOISEACH Brian Cowen last night set the scene for a hairshirt Budget by delivering a stark warning about the state of the public finances.

In an off-script address at a chamber of commerce event in Monaghan, he said he wanted to bring it down to "brass tacks", instead of talking about all the zeros and the billions.

He said the Government was trying to fix the "major hole" in its tax base, following the disappearance of one third of revenues due to the economic crisis.

"This year, we're spending €50bn and our revenue base is €32bn. Let's put that in context. One half of total revenue is being devoted to the health service presently," he said.

Mr Cowen went on to say that social welfare, including pensions, child benefit and disability benefit, accounted for two-thirds of tax revenue.

"So if you were to take health and social welfare alone, you would be borrowing some money -- and that's to exclude all the remuneration on wages we have to pay for our guards, for our teachers, for our Army, for IDA and in agriculture."

Mr Cowen is set to meet Fine Gael leader Enda Kenny and Labour Leader Eamon Gilmore to discuss the Government's four-year plan to reduce the public-finance deficit to 3pc of national output by 2014.

"I'd like to have a meeting so we can confirm that objective is shared by us all and obviously if there are other areas of agreement we can build on. I think it would be important, it would send a positive signal to the international community and help domestic confidence at home," he said.


At the Four Seasons Hotel on the outskirts of Monaghan town, Mr Cowen told around 100 guests of the Monaghan Chamber of Commerce that even without taking the cost of the banking crisis into account, the current situation was not sustainable.

"That situation has to be corrected. Unless that situation is corrected, we put at risk all of the advances that have been made," he said.

And he warned that it would mean having to introduce cuts in public spending and increase the taxation base because "€32bn would not be sufficient to provide services for the country going forward".

Mr Cowen said that if previous cost-cutting Budgets had not been introduced over the past two years, the Government would have to find an extra €7.5bn in revenue for December's Budget.

He warned that the bondholders and investors who were funding the budget deficit up until 2014 needed to be convinced that the country was facing up to the challenge.

"Unless we do that, we put at risk the very funding arrangements that provide services in this country today.

"That is the scale of the challenge that we face. Can we come through that challenge? Yes, we can. The Government has to look at ways we can generate more confidence, given the savings rate."

Mr Cowen said that even if there were only 100,000 people unemployed in Ireland, it would still be 100,000 too many. But he was confident that the country could come through its current difficulties.

He added: "Our plans will be allied to a growth strategy that will give us the very best chance of doing so, with the minimum impact we can. But to say it can be done without impact is not only to fool oneself, but to fool the people -- and that's not a currency in which I engage."

Irish Independent