MINISTER'S DEFENCE:MINISTER FOR Finance Brian Lenihan said yesterday that the cost of living was coming down, albeit not as fast as he would wish.
Defending the Budget on Today with Pat Kennyon RTÉ Radio 1, during which he took questions from members of the public, he said: "We had to raise taxes because of course our tax base has declined."
Responding to a caller who had objected to the new income deductions in the Budget, he said: “The cost of living is coming down and all of the figures show that.
“It’s not coming down fast enough, I accept that. It will continue to come down this year, that’s what all the economic advice and analysis is suggesting.”
He continued: “There’s a lot of economic evidence that people have been saving money a great deal . . . The volume of personal savings has grown dramatically.”
Standing over the establishment of the National Asset Management Agency he said: “This is a tough deal for the banks, because what we are saying to the banks is, ‘Look, you’ve got all these losses from the bad loans you gave to people down the years, in particular to developers.
“We believe you must take the losses on these loans now because, if you don’t, you won’t lend into the economy.” He continued: “There will be tough negotiations about the valuation of these assets, but every business in this economy knows how hard it is to get credit, how hard it is to support jobs.
“If we don’t want to paralyse our whole economy, we have to reform the banks in a very fundamental sense.” Mr Lenihan said there were “a lot of irresponsible commentators talking about bail-outs – there will be no bailout of the banks”.
On the issue of income levies, Mr Lenihan said: “We have too many levies cluttering up our tax system. Because I had to repair the revenue base halfway through the year, I had very little option other than to use levies, but it is my intention as Minister to consolidate a lot of these levies and taxes into a more consistent, transparent system of taxation.”
He added: “We have to reconfigure our system because, if you look at levies, we have PRSI, the health levy, a training levy, the income levy, and clearly there are too many diverse levies.” These levies “have to be brought together and rationalised as a minimum”. He gave no indication as to how long the levies would be in place. On cross-Border shopping the Minister said: “I have never suggested it is unpatriotic to shop in Northern Ireland, it’s part of our country. What I have said is, that you don’t support the State when you buy in Northern Ireland, you don’t contribute to the taxation base of the State and you leave the State and the Minister of Finance with no option but to increase income tax to pay for the services that everyone wants in their own locality.”
Defending the five-cent increase in the cost of diesel, he said: “There was no increase on diesel in October and we did have to raise some revenue.”
He added: “The reason we didn’t increase petrol is because petrol on both sides of the Border is now aligned and it would be very foolish for us to increase it.”
