MINISTER FOR Finance Brian Lenihan has introduced a series of cutbacks to reduce public expenditure by €440 million by the end of the year and reduce spending by a further €1 billion in 2009.
The measures include a postponement of pay increases to Government Ministers, a 3 per cent payroll cut in the public service, a voluntary redundancy scheme in the Health Service Executive (HSE) and other public agencies, a halt to the decentralisation initiative and the likely abolition of some State agencies.
In his press briefing yesterday, Mr Lenihan did not quantify the specific fiscal savings he is seeking from any of these initiatives.
Citing a projected shortfall of €3 billion in tax revenue for 2008 and an 11 per cent rise in expenditure in the first half of the year, he said there was additional pressure on the public finances due to the rise in unemployment.
He warned of a "demanding" fiscal position in 2009, and said the situation facing the Government next year would be more difficult "if we do not act now".
The Government has put on hold pay increases due in September for Ministers, parliamentary office holders, judges, and senior civil and public servants.
"The issue will be reviewed September 2010, but without commitment at this stage to the outcome," Mr Lenihan said.
An instruction to Government departments, State agencies and local authorities to reduce their payroll bill by 3 per cent by the end of 2009 will not apply to the Departments of Health and Education, whose pay budgets are the largest in the public sector.
Mr Lenihan declined to quantify the likely level of job losses as a result of this measure, nor did he put a figure on specific savings that could be achieved through restrictions on overtime, recruitment and replacement of departing staff.
The parameters of the exceptions from the 3 per cent payroll cut in health and education are to be agreed with the Department of Finance. In addition, preparations are being made for a "targeted scheme" to reduce surplus staff in the HSE as soon as possible. "We will also consider extending this scheme on a selected basis to other public service agencies where staff surpluses are identified," Mr Lenihan said.
All expenditure by departments and agencies on external consultancies, advertising and public relations will be significantly reduced for the remainder of this year and by at least 50 per cent in 2009 compared to 2008.
Further unquantified savings in 2008 and 2009 are to be secured by additional unspecified measures, including those identified in an efficiency review initiated by Brian Cowen before he left the Department of Finance to become Taoiseach.
Such savings will apply equally to State agencies.
In addition, the Government will consider in the autumn a review of whether some agency functions should be absorbed by their parent departments "or whether some agencies would be amalgamated or abolished".
The acquisition of office accommodation for the decentralisation has been put on hold pending reports from the group in charge of the project.
A €45 million cut to some €900 million in the Government contribution this year for overseas development aid follows projected revisions to gross national product and other unspecified factors.
Mr Lenihan said Ministers would review the costs of operating the tribunals of inquiry with a view to minimising expenditure in 2008 and 2009, given that the end of their work is now near.
He also said capital investment will remain a top priority for the Government, and said there were no plans to shelve any major projects.
"Capital projects will be examined and prioritised to ensure that resources are targeted in the first instance at construction-related investment in core economic infrastructure that adds to productive capacity," he said.
