herald

Monday 16 October 2017

'Nobody is safe' from savage €5bn Budget as talks resume

MINISTERS warned that nothing is sacrosanct today as they meet for a gruelling session of Budget talks.

The Cabinet reconvened this morning with sources now suggesting that they are targeting savings of €5bn on December 7.

Finance Minister Brian Lenihan has warned his colleagues that there is a major risk of stifling growth if they frontload the cost-cutting measure rather than spreading the pain over the next four years.

Health and education are expected to take the brunt of the hits with Mary Harney having already indicated that her department is facing a €1bn reduction in funding for next year. Before today's meeting, Minister Pat Carey repeated the Government mantra of: "Everything is on the table."

He refused to give any details of the discussions taking place but said that the decisions being taken will be "unpalatable" and "unpopular".

Today's meeting is aimed at setting out an initial template for four harsh budgets.

Department of Finance officials are now understood to be looking at net savings of between €4.5bn and €5bn.

There had been suggestions that the Finance Minister could look to shave as much as €7bn but officials agree with the Economic Social and Research Institute that such a large cut could stagnate recovery and slow growth.

WARNED

A briefing document was circulated to ministers at a meeting in Farmleigh House yesterday warning that every €1bn in cuts could reduce the economic growth rate by 0.25-0.5pc.

Budget discussions ended after 10pm last night with a spokesperson indicating that minsters would reconvene in Government Buildings this morning for an all-day session.

Ahead of that gathering, Minister Carey said that "very careful balances have to be struck" between growth, expenditure and taxes. "We've got to be sure that by taking significant savings out of the economy, we don't stifle growth," he said.

At this stage, the Cabinet is looking at a broad areas of cuts rather than specific measures, however the Herald understands that social welfare recipients are likely to face significant cuts.

Payments such as the jobseeker's allowance were cut by amounts like €8.30 last year but could be hit again.

The education budget will suffer a severe hit although the Cabinet wants to limit the direct impact on classroom activities.

Other opinions being considered as part of the four-year plan to reduce the national deficit to 3pc of GDP by 2014 include a property tax, water charges and the cancellation of capital projects.

The future of Metro North is expected to come under scrutiny but Green Party leader John Gormley has insisted that he wants the €5bn project to go-ahead.

Yesterday's meeting was delayed by 90 minutes because Brian Lenihan had travelled to Brussels to meet with the EU's economic and monetary commissioner, Olli Rehn.

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