State to borrow €26bn to plug tax gap
The gloomy outlook was confirmed by Finance Minister Brian Lenihan on the same day the EU predicted Ireland would be among the last member states to emerge from recession.
Exchequer figures published yesterday showed the tax take is falling back to 2003 levels, with just €26.8bn raised in the first 10 months of this year.
That represents a 17% drop year on year, and is €1bn below the target set by Mr Lenihan just last April.
Discussing the figures in the Dáil, Mr Lenihan said that by year’s end, the tax take was expected to reach just €32bn in total – €2.5bn below the €34.5bn target set in April.
He said that while the tax take was now back to 2003 levels, public spending had increased by about 70% since then.
As a result, Mr Lenihan said the Government would have to borrow about €26bn this year to plug the gap between income and spending.
It came as the Government made clear to the trade unions that a reduction in the number of public sector workers would be necessary to cut the state’s pay bill by €1.3bn.
Unions had hoped the Government would last night spell out how many public sector jobs it would like to see removed over the next three to five years. However, IMPACT general secretary Peter McLoone said that in the discussions, the Department of Finance did not go into the level of detail unions wanted.
Instead, the Government spoke of a “bridging arrangement” in which savings would made over a three- to five-year period.
This would be in addition to the existing moratorium on recruitment in the sector, which will be maintained for the foreseeable future.
However, as those measures would produce insufficient savings in 2010, the Government said additional savings would have to be found elsewhere next year.
Union sources said those savings could potentially come through temporary cuts in premium pay and overtime, with the cuts to be rescinded if enough people left the service over the three- to five-year period.
However, premium pay and overtime comprise up to 20% of emergency service workers’ pay and they will staunchly oppose any such move.
Meanwhile, Labour leader Eamon Gilmore claimed the Government was opting for conflict by seeking to force through such measures rather than seeking co-operation. Speaking of the looming union strikes and protests, he warned the country was “hurtling headlong into a period of conflict, strife and considerable social division”.
But Taoiseach Brian Cowen insisted he was not seeking confrontation with anyone.
“No one is seeking confrontation... Anger is not a policy and does not provide a panacea.”
