IRELAND’S WELFARE and pension bills are “on the table” in discussions on the four-year plan to be announced next month and in the December budget, Minister for Finance Brian Lenihan said yesterday in New York.
“We have already reduced public service pay by nearly 14 per cent on average . . . Likewise, we’ve looked at our welfare bill, at our pensions bill,” Mr Lenihan said in an interview on Bloomberg Television yesterday. “All of these areas will have to be looked at. They’re on the table.”
Mr Lenihan’s spokesman, Eoin Dorgan, said later that “the Minister was referring to the medium and long-term cost of pensions”.
The exchequer spent just over €9 billion on public sector pensions, as well as those paid through the social welfare system, this year. It is understood that measures might affect tax treatment of pensions, such as tax allowances given against pensions. The Government has already changed the rules for new entrants to the public service, and there may be a re-examination of what they qualify for in the future.
The Minister also said that tax “will have to play some part” in narrowing the deficit. Nevertheless, the Government won’t raise corporation tax from its current level of 12.5 per cent, a rate that has helped lure foreign companies.
“We want to encourage investment not discourage it,” Mr Lenihan said. “Exports have retained a lot of their strength.”
Mr Lenihan travelled to New York on Sunday, after attending the annual meeting of the IMF and World Bank in Washington, and will return to Dublin this afternoon.
He is preparing the way for sales of Irish bonds next spring, and is attempting to reassure the markets through interviews with Bloomberg, the Financial Timesand the Wall Street Journal.
The Minister lunched yesterday with representatives from five important international equity funds who have invested in Irish government debt. This morning he will make a presentation to other investors over breakfast. The Department of Finance explained that it was not customary to reveal the names of investors attending such meetings.
Mr Lenihan told Bloomberg he is “absolutely” certain that Ireland will not need to avail itself of the €750 billion rescue fund established by the EU and the IMF. “You have to look at the real Irish economy,” he said. “We’re not in a balance of payments deficit position. Our exports have retained a lot of their strength throughout this recession.” Mr Lenihan has repeatedly stressed the substantial presence of multinational firms in Ireland, which he calls a “bulwark” of the Irish economy.
The Minister is also trying to dispel the figure of €50 billion for the Irish bank bailout. The real amount of capital on which the Government is unlikely to get a return is €34.7 billion spent on Anglo Irish and Irish Nationwide Building Society (INBS), he says. The Government will receive a commercial return on monies from the pension reserve fund spent to shore up AIB and Bank of Ireland. Mr Lenihan was asked how subordinated bondholders will be compensated. He said the Government will make this clear through legislation. Boston law firm Bingham McCutchen yesterday announced a conference call for senior and subordinated bondholders of INBS, to be held on Thursday in London.
