Cabinet told no need for €2bn in budget cuts

The Cabinet has been officially told that €2bn in cuts will not need to be taken out of the economy next year.

But Brendan Howlin, the public expenditure and reform minister, has advised his government colleagues that savings in departments are still expected to be prepared.

The briefing from the minister came as Labour leader and Tánaiste Joan Burton yesterday warned an Oireachtas committee against expectations of a “giveaway budget”.

Mr Howlin brought a memo on expenditure and estimates to the weekly Cabinet meeting which said there was not a need for €2bn in savings and new taxes in next month’s budget.

The Government will not give a more definitive estimation of the budget until third-quarter exchequer figures become available. These will reveal how much in extra taxes has come in as well as possible reductions in social welfare spending.

They are expected on October 2, ahead of the October 14 budget announcements.

Mr Howlin said yesterday that a “broadly neutral” budget was planned.

This will mean that the Government will want to balance the books to keep services funded. It is hoped that extra taxes that are taken in will then help address the deficit costs.

However, a neutral budget also means that any extra spending for a department or area will need to be made up elsewhere in savings.

Similarly, if there are tax cuts or adjustments, these will have to be made up elsewhere.

A government spokesman confirmed the memo details but said ministers had still been asked to bring forward savings proposals.

Mr Howlin said at Labour’s think-in earlier this week that departments were asked to come up with savings of up to 5% but that some had come back with excessive funding demands.

Meanwhile, Joan Burton yesterday told the Oireachtas Committee on Education and Social Affairs that it was important there were not unrealistic expectations on the budget.

She cautioned against hopes of a “giveaway budget” similar to ones during the boom.