THE CABINET will today agree cutbacks that will save €400 million this year, and €1 billion next year to cope with the exchequer's sharply deteriorating fortunes.
Departments and State agencies will be banned from recruiting extra staff, with the strict exception of "the most frontline of frontline staff", sources said last night. Each of the Government's National Development Plan's capital projects are to be re-examined urgently to determine their value in jobs and future competitiveness.
Only construction projects in "core areas" that add to Ireland's productive capacity will be sanctioned, meaning that some will be scrapped or delayed.
Room exists for restriction this year since, traditionally, two-thirds of all State spending on capital investment is handed over in the second half of the year.
Already, departments have been ordered in recent months to demand fixed-price contracts from builders, which has delayed some major projects, including structural repairs to Leinster House.
Meanwhile, the Department of Finance has accepted the HSE's plan to offer managers, deemed surplus to requirements, a redundancy package to quit - even though it opposed the plan as late as last week. Ministers are also expected to announce that a number of non-statutory State agencies are to be abolished, or brought back under departments.
However, this move is unlikely to produce early savings, and, indeed, could lead to strong battles with organisations seeking to maintain their independence.
Administration budgets are also to be sharply squeezed, affecting travel expenses, office supplies and a host of other cutbacks.
So far, it is not clear if Ministers will sacrifice their already-deferred pay increases, though they will be pressed on the need for pay rise curbs for all State workers this year.
Speaking in Tullamore, Co Offaly, yesterday, Taoiseach Brian Cowen said: "There are no painless ways in which you can try and remove spending in order to maintain the spending limits that we have set."
Last week, Minister for Finance Brian Lenihan gave each of his Cabinet colleagues a target to which they would have to cut their spending, or else face directed cuts.
The exchequer is expected to be €3 billion short on tax take by the end of the year, and will have overspent by €500 million, according to figures last week from the department.
Mr Cowen and Mr Lenihan have already decided the budgets held by the Departments of Education, Social and Family Affairs and Health and Children will not be cut.
However, both are determined that the €400 million to be shaved off the State's spending plans today will not be once-off gains, but will result in €1 billion savings next year.
Even with today's actions, the Government's spending will rise by nearly 9 per cent, and the rate of increase next year is unlikely to match inflation, plus economic growth.
A State recruitment embargo has been in place since Charlie McCreevy was minister for finance, but it has been honoured more in the breach than in the observance.
Meanwhile, the Minister for Finance has published a report on last year's National Development Plan, which showed that €22 billion has been spent. In his introduction, Mr Lenihan says: "The Government remains firmly committee to the progressive delivery of the investment priorities to be financed under the NDP up to the end of 2013.
"NDP investment will help position the Irish economy to take advantage of a future upswing in the global economy and will help improve the quality of life in this country."
Meanwhile, the Government will review its decentralisation plan in light of concerns expressed by the Organisation for Economic Co-Operation and Development. However, radical changes are unlikely since the Office of Public Works, with the approval of the Department of Finance, has already bought, or leased, over 40 of the needed 50 offices.
In its report earlier this year, the OECD warned that the plan would change the public service landscape, and if not properly implemented, could contribute to further fragmentation.
