Welfare cuts not ruled out as economy slumps 8.5%

TAOISEACH Brian Cowen refused to rule out cuts in social welfare payments as figures showed the economy had suffered its biggest fall on record.

The economy shrank by 8.5% in the first quarter of this year compared with the same period in 2008, the Central Statistics Office figures revealed.

This underlines the scale of the challenge facing the Government as it aims to cut public spending by €4 billion in the December budget.

The final report of the Special Group on Public Service Numbers and Expenditure Programmes will be a key element in deciding where the axe will fall. There has been speculation it will recommend a €1.5bn cut in social welfare spending.

The group, commonly known as An Bord Snip Nua, met last night to finalise its report. Finance Minister Brian Lenihan is expected to receive the report next week, and will then bring it to cabinet.

But Mr Cowen said a Dáil debate on it was unlikely before the House rose for its summer recess on Friday week.

He also refused to rule out cutting social welfare payments, but stressed the Government would seek to protect the vulnerable to the “greatest extent possible”. The state was borrowing approximately €70m a day, he said, and it was “important to point out” that public service pay and social welfare made up two-thirds of its spending.

Social welfare payments had been increased in last year’s budget by up to 3.8% because prices had been expected to increase by 2.5% in 2009, he said. Instead, prices were falling by around 4%.