Cuts and tax hikes to be ‘far higher’ than €7.5bn

THE country faces a severe four-year package of spending cuts and tax hikes “significantly” greater than the €7.5bn already signalled, it was revealed last night.

Fine Gael finance spokesman Michael Noonan made the grim prediction after the opposition received government economic briefings.

Fine Gael, Labour and Sinn Féin were given a confidential look at the Finance Department’s predictions for the economy ahead of the December budget.

The looming budget is now likely to be even more harsh than expected with cuts and tax rises well above €4bn suggested as it is expected to be the most drastic of the austerity budgets needed to close the Government funding gap.

The opposition briefings, revealing poor growth forecasts and lower than expected tax takes, make the outlook for the December 7 budget appear even bleaker.

Mr Noonan would not be drawn on details, but insisted the €7.5bn tax and cuts level planned by the Government over the next four years to get the deficit down to 3% of GDP by 2014, would fall short.

“With lower growth rates projected, the level of adjustment is going to be significantly higher than that.”

Mr Noonan signalled a shift in his party’s position of keeping tax hikes to a minimum while cutting spending, saying a “quite severe” package of both extra tax rises and funding cuts was now unavoidable, as the Government had got into a “corner”. “The key factor in this situation now is whether the economy can grow or not, and at the last budget, the Government predicted growth rates of 3.75% for 2011 and we know from our briefing that their growth rates will fall well short of that.”

Fine Gael called on Finance Minister Brian Lenihan to “come clean” with the real level of cuts needed and warned the situation could deteriorate as the key October and November tax returns came in.

Labour deputy leader and finance spokesperson Joan Burton expressed concern at the scale of the crisis, saying “economic sovereignty” was at stake but insisted lower and middle income earners should not be forced to bear the brunt of the financial adjustments.

“There is a significant increase in the correction over what they had previously calculated. What they told us was very challenging,” she said after the Department of Finance briefing.

Social Protection Minister Eamon O’Cuiv has already warned welfare payments will be hit and refused to rule out cuts for pensioners.

Sinn Féin’s Arthur Morgan said the briefing had confirmed his view that getting the deficit down by 2014 was too fast a timetable for the economy to cope with. “We need to be doing things more slowly and with more care, otherwise we risk impoverishing a lot of people and hurting the economy more,” he said.

The briefings were part of a “consensus” initiative ahead of the December budget and will be followed by a meeting between the Taoiseach and the Fine Gael and Labour leaders later this week. Sinn Féin will not attend as they oppose the 2014 targets.