Cowen demands more public pay cuts

THE Government has demanded that public sector workers bear more pain to achieve the savings necessary in next week’s budget as new figures showed the Exchequer deficit has mushroomed to €22 billion.

Taoiseach Brian Cowen and Finance Minister Brian Lenihan adopted a hard-line approach with the unions, insisting proposals to save roughly €800 million through unpaid leave did not go far enough.

Instead, they reiterated that their original target of shaving €1.3bn from the public sector pay bill would have to be met, as the Exchequer figures illustrated the scale of the problem the Government is facing.

The figures showed that the tax take for the first 11 months of the year came to only €30.7bn – €1.4bn less than the Government had predicted just last April.

But the full scale of the collapse in tax revenues is best illustrated by comparison with last year.

The €30.7bn take to date in 2009 is €8.1bn – or 20.8% – less than in the same period in 2008.

Capital gains tax has plummeted by almost 80% on 2008 levels while stamp duty has fallen almost 48% – illustrating the damage wreaked by the collapse in the property sector.

Corporation tax is down by almost 25%, while VAT is down more than 20% because consumers are spending less. Income tax is down 10% because of job losses and pay cuts.

As a result, the Exchequer deficit has grown to €22bn, almost three times worse than at this point last year.

But speaking in Brussels, Mr Lenihan expressed confidence the deterioration in revenues had “ended” and that the unemployment position was “stabilising”.

The Government is planning to reduce the gap in the public finances between now and 2014, starting with next Wednesday’s budget, which is supposed to cut €4bn from public spending.

Mr Lenihan insisted that figure would have to be met and said the unpaid leave plan put forward by unions to reduce the public sector pay bill was insufficient.

He also insisted the pay bill savings would have to be permanent and not a once-off measure. If unions could not produce satisfactory proposals, the Government would have to make pay cuts. “Real and measurable savings in public sector pay are required,” he said.

He was echoing comments by Mr Cowen, who earlier rejected suggestions he “caved in” to the unions by accepting the unpaid leave proposal. He told the Dáil the proposal would not generate the necessary savings, and said the target remained €1.3bn.

“These proposals in their present form do not provide the basis for an agreement.”

Unions continued discussions yesterday with the Department of Finance on the transformation of services as well as the €1.3bn in Exchequer savings in 2010. They said that the transformation agenda would easily cater for the required savings every year after 2010.