Cabinet to make choice cuts to save €440m in public purse
Civil service jobs will be lost, public contracts scaled back, pay frozen, quangos scrapped and decentralisation put on hold.
The measures, which are designed to make savings of €440 million in public spending this year and €1 billion in 2009, follow confirmation last week that tax revenues would be €3bn short of what was expected by the end of the year.
Introducing the cuts, Taoiseach Brian Cowen said responsible action was essential to secure the long-term future of the economy in what he described as “difficult circumstances”.
“It is incumbent on all of us to make the compromises necessary to ensure that Ireland emerges undamaged from the difficult global environment we are now in,” he said.
Mr Cowen placed a heavy emphasis on day-to-day spending by government departments and signalled a no-excuses efficiency drive across all sectors.
With the exception of health and education, all departments, state agencies and local authorities are to cut their payrolls by 3% by the end of next year and the Health Service Executive will also have to shed surplus staff.
“There are areas in central administration, in local government and healthcare, and in the wider public service where there is very considerable scope for improved efficiency,” he said.
“These will now be pursued vigorously in ways which encourage management and staff at local level — who know best how their services could be improved — to devise the most effective ways of meeting the efficiency gains which must be achieved.”
Mr Cowen pledged to keep his hands off the least well-off in society.
“We will manage the challenges in ways which seek to protect the most vulnerable and to minimise the impact on those who are dependent on vital public services,” he said.
He also steered away from depicting disaster scenarios, pointing out that economic growth in Ireland was still better than most other European Union countries.
“We have a much stronger economy, a more competitive enterprise sector, a more capable workforce, and a substantially better position on the public finances than on any previous occasion when we confronted economic difficulty,” he said.
“We must not overstate the difficulties.”
Mr Lenihan, who delivered the details of the cuts, echoed that view. “Our remarkable economic progress has not been reversed overnight. Our economy continues to be strong and dynamic,” he said.
However, he also said government spending was running at 11% ahead of last year at a time when tax revenues were down and he warned: “If we do not act now, the financial situation facing us for 2009 will be more difficult and the action needed more urgent.”
Ruling out borrowing to make up the tax shortfall, Mr Lenihan said the measures were the “minimum” required to get spending back on track.
“Even with these savings, the fiscal position in 2009 will be demanding and all spending will have to be rigorously controlled.”
MINISTERIAL PAY FREEZE: The 12%-14% pay hikes due to government ministers, judges and 1,500 senior civil servants are scrapped and the issue of future pay rises will not be considered until September 2010. The savings are not significant in money terms but the move is symbolically important as the Government urges wage restraint.
PAYROLL CUTS: All government departments, state agencies and local authorities apart from the Departments of Health and Education must cut payrolls by 3% by the end of next year. The cuts would require 5,000 job losses but the savings are more likely to be made by a mix of job cuts, non-replacement of retiring or sick staff, overtime bans, promotion freezes and scrapping of bonuses. Savings of €250m are expected.
HSE STAFF: Despite exempting the Department of Health from the 3% blanket payroll cuts, the HSE is under orders to dump surplus staff. The HSE itself is believed to have identified 1,000 surplus employees but no official figures will emerge until the Departments of Health and Finance work out a staff reduction scheme. Redundancy packages will put a dent in any short-term savings from the scheme.
DECENTRALISATION DOUBTS: No more land or buildings are to be bought for the decentralisation of government departments and agencies until a review by the Implementation Group is received in the autumn. Mr Cowen described it as a “pause” in the programme but it looks more like the death knell for the proposal. No figures for likely savings are given. In fact, decentralisation was supposed to raise public funds by selling valuable Dublin city properties and replacing them with cheaper regional buys.
CONSULTANCIES AND ADVERTISING: Public contracts for consultants, advertising and public relations will be “significantly reduced” for the rest of this year and spending on these areas must be cut at least in half next year. Departments will now be under pressure to avoid crises and blunders which makes the drafting in of outside experts hard to avoid. Savings of at least €10m are expected on the hire of consultants alone.
DEPARTMENTAL PURCHASES: Minister for Office of Public Works, Martin Mansergh, is directed to make savings of €50m next year by vetting general purchases by public bodies. He is to produce a “business plan for purchasing savings” by the autumn.
QUANGOS: A review of the several hundred specialist state agencies is under way with a view to amalgamating some, abolishing others and absorbing some back into the Government departments which spawned them. The review is due in the autumn and Mr Lenihan said there was unspecified but “substantial scope for savings“.
OVERSEAS DEVELOPMENT AID: €45m will be trimmed from overseas aid, leaving this year’s budget at €900m. Next year’s budget will depend on the strength of the economy as ODA is a percentage of national wealth (GNP). With this year’s cut, Ireland is still meeting its commitment to make a contribution equal to 0.54% of GNP.
TRIBUNALS: The Mahon, Moriarty and Morris tribunals are all due to finish this year but are likely to give rise to expenditure for years to come as disputes over legal costs drag on. The Government is to review the situation so that “expenditure is minimised” but no figure is given for likely savings.
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