THE GOVERNMENT may have to borrow more than planned for this year in order to cushion the impact of the emergency budget on the country, Taoiseach Brian Cowen told the Dáil yesterday.
Mr Cowen said the borrowing target of 9.5 per cent of GDP, or about €17.5 billion, might have to be exceeded. He added the Government planned to get back to the EU borrowing limit of 3 per cent by 2013.
There were angry exchanges in the Dáil last night when Labour finance spokeswoman Joan Burton accused Minister for Finance Brian Lenihan of introducing the bank guarantee scheme last October as “a bailout for your friends at the bank”.
A furious Mr Lenihan replied: “You have accused me of corruption on the floor of this House. How dare you. Repeat it outside.”
The exchange took place after Mr Lenihan responded to Ms Burton’s heckling during his speech in the pre-budget debate by saying Labour had acted irresponsibly in opposing the bank guarantee scheme, by contrast with Fine Gael which had backed the measure. In his speech Mr Lenihan welcomed some of the suggestions for dealing with the structural deficit in the national finances made during the debate by Fine Gael finance spokesman Richard Bruton.
“I believe that there is some common ground between us and I would be happy to engage further with him in the next week. I, of course, respect the role of the Opposition in holding the Government to account, but it would be helpful if we can reach some level of agreement,” said Mr Lenihan.
Earlier in the Dáil the Taoiseach told Fine Gael and Labour leaders the Government would seek to be as close as possible to the 9.5 per cent deficit, but the important thing was that it came back to 3 per cent by 2013. “We will emerge with an outcome that seeks to find a balance between the need for cuts in expenditure, the need to raise taxes and the need to revise capital programmes, all of which will happen, for several years hence in a way that protects to the greatest extent possible those whom people would like us to protect.
“That is not an easy task and, if necessary, based on a detailed consideration of the matter, it might involve more than the 9.5 per cent this year. The important point for the financial markets will be the Government’s determination to eliminate the structural deficit over the period concerned,” said Mr Cowen.
He added that the scale and magnitude of the task was so great, and would affect every citizen, that the Government wanted to reach the target in a way that everybody could bear. He said it was important in the context of the worst recession in decades that structural problems in the public finances were addressed and eliminated, as distinct from the cyclical elements of the recession. The Taoiseach has confirmed the Government may borrow more than originally planned this year.
The Cabinet will meet again today to consider the options facing it in the toughest budget in living memory. It will examine a range of scenarios involving spending cuts, tax increases and borrowing. Ministers will focus in particular on how to effect structural changes in the public finances in order to rebuild the tax structure so that it can generate the required level of revenue to run State services in the years ahead.
Irish Congress of Trade Unions leader David Begg warned yesterday against making savage cuts in spending that would crush the economy and cause a “deflationary shock”. He suggested borrowing should be allowed to rise to 11 per cent of GDP this year as a way of avoiding that prospect.
Ictu yesterday accepted the Government’s invitation to go back into talks on a new agreement with the other social partners. It deferred the day of strike action it had scheduled for next Monday.