The Government has announced a series of spending cutbacks in what Minister for Finance Brian Lenihan has said is the “minimum required” to get the economy back on track.
A three per cent cut in the public payroll bill by the end of 2009 will form the major element of the €1.5 billion cutback package. Taoiseach Brian Cowen said that "difficult decisions" agreed by Cabinet earlier today would yield savings of €440 million this year and a further €1 billion next year.
However, the opposition quickly charged that the figures did not add up and that there were no details to show how the savings could be achieved.
The reduction in pay costs – designed to save over €250 million – will effectively mean a recruitment freeze in the public service, as well as new controls affecting pay, and work process.
However, the two departments with the largest salary budgets, Health and Education are excluded from the requirement pending local negotiations. Mr Cowen said that this exception was to protect front line services in both areas provided by medical staff and by teachers. Health and Education together absorb €14 billion of the State's annual €19 billion public pay bill.
The measures also included the anticipated announcement that ministers will forgo the pay increases recommended by a review body last year. Mr Lenihan said that none of the 2,000 senior office holders in the State – including judges, higher civil servants and other senior state employees – would receive the recommended awards.
While the saving from this decision will not be significant – running to only €16 million – Mr Cowen has long signalled this move in order to stave off any criticism that Government ministers were immune from austerity measures.
Another eye-catching aspect of the package is a decision to stall any further acquisitions for the controversial decentralisation programme. When asked if decentralisation was now being abandoned, Mr Cowen responded by saying that there "a pause in the programme at moment" and it was prudent not to proceed with the acquisition of any further sites until the government considered the recommendation from any further sites."
While there will be a reduction of €45 million in the funds provided for Overseas Development Assistance (ODA) this year, Mr Lenihan argued that it did not amount to a reduction in the Government commitment. Because Gross National Product (GNP) will be lower this year than anticipated, it means that the commitment to provide O.54 per cent of GNP in 2008 will be "honoured", even though it is a lesser amount.
Mr Lenihan also signalled that a number of state agencies will be abolished or merged but said that a final decision would be taken in the autumn.
"The review will examine whether they can share services, whether it would be appropriate to absorb some of their functions back into their parent Departments or whether some agencies should be amalgamated or abolished," he said.
Mr Lenihan also said that the Departments of Finance and Health would draw up joint proposals for a "targeted scheme to reduce surplus staff in the HSE as soon as possible". While no further details were given, this was taken as a signal that the Government want the HSE to go ahead with its plan to reduce its staff numbers by 1,000.
There were also measures in relation to the Tribunals of Inquiry. Mr Lenihan emphasised that the Tribunals had "indicated their intention to conclude their public hearings this year", suggesting the Government will not be minded to grant any further extensions for the Moriarty or Mahon tribunals. He also said that the "costs of their operations" would be reviewed with a view to minimise their overall costs.
Mr Lenihan also told the conference that contrary to speculation there were no plans to shelve any of the major capital programmes. He specifically referred to Metro North and to the Western Rail Corridor, saying that no decision whatsoever had been taken. He said he wanted to remind the public that the measures announced today were mainly in relation to current spending and not capital investment.
In his remarks, Mr Cowen conceded that the corrective measures were necessary following the publication of last week's exchequer returns which showed a possible shortfall of €3 billion in revenue this year. Government spending is also running at 11 per cent of the same period for last year.
"There is no disguising the fact that these are difficult circumstances. They require difficult decision now and for 2009," Mr Cowen said.
"While the current circumstances are challenging, I want to be absolutely clear that I am personally determined to take decisive action that is in the best interests of the people of the nation."
The immediate response of opposition leaders was highly critical. Fine Gael leader Enda Kenny said that the measures had been "cobbled together in a haphazard fashion."
Both he and Labour leader Eamon Gilmore said that Mr Cowen had given no breakdown of how the €440 million cutbacks were to be achieved.
Mr Gilmore said that some of the measures were "headline grabbers" but there was little of nothing in the measures to give any comfort to the 54,000 people who have lost their jobs over the past year. He also claimed that the figures for savings did not add up.
