THE GOVERNMENT has brought forward the 2009 budget by almost two months in an effort to reassure the public that it intends to deal with the crisis in the public finances and the decline in consumer confidence.
Minister for Finance Brian Lenihan said last night that taking decisive action now was critical to future sustainable growth.
The budget will be unveiled on October 14th and a number of initiatives designed to boost economic activity will also be announced over the next few weeks and months.
Mr Lenihan confirmed the Government will have to breach EU guidelines on borrowing this year and next year in order to deal with the deteriorating public finances.
The guidelines set down in the Stability and Growth Pact limit Government borrowing to a maximum of 3 per cent of gross national product (GNP).
This year will be the first time that Ireland has breached the pact which was agreed in Dublin in 1996 at the instigation of then minister for finance, Ruairí Quinn.
Mr Lenihan described the financial and fiscal position now facing the Government as the most challenging since Ray MacSharry was minister for finance two decades ago.
He added that circumstances were not the same as in 1987 when Mr MacSharry had to face high debt, high tax and unemployment. "We face it with a million more jobs, a healthy debt position and a tax situation that is one of the lowest in Europe but the challenge is similar; to manage the public finances," the Minister said.
Mr Lenihan emphasised that while the budget was being brought forward, it was not a supplementary budget but the annual budget for next year. Only the changes in excise duties will apply from the time of the budget.
The Minister accepted that a tax shortfall of at least €5 billion was now likely this year.
"In the budget, I will set out steps to stabilise and restore balance to the public finances, by amongst other things prioritising current and capital public expenditure to reflect the changed realities," he said.
The Government in a statement said that an unprecedented set of unfavourable international factors including turbulence in global financial markets, faltering economic growth in the major economies, exchange rate shifts and the sharp rise in commodity prices had put the Irish economy under considerable pressure.
"Domestically we are also faced with a contracting construction sector which is suppressing economic growth rates, and a rising cost base is eroding Ireland's competitiveness. In addition, the slowdown has resulted in a rapid deterioration in the public finances and falling consumer confidence," said the statement.
It added that the economic, fiscal and environmental challenges facing the country required that the Government take the necessary decisions to ensure stability in the public finances, while giving firm support for those aspects of the economy which are continuing to perform strongly.
"Accordingly, the Government have decided that the Minister for Finance will present his budget for 2009 on Tuesday, October 14th. This will reflect the necessary prioritisation of expenditures in the light of expected tax revenues.
"As such, it will give clarity and confidence to investors and taxpayers alike, and provide a sound basis for economic recovery."
Fine Gael deputy leader and finance spokesman Richard Bruton said the budget decision showed that the Government had finally woken up to the scale of the crisis facing the economy.
"This week's exchequer figures and the unprecedented rise in the live register has prompted a belated response from Fianna Fáil. But the Government has squandered valuable time and sabotaged Ireland's ability to weather the economic downturn," he said.
Mr Bruton maintained the announcement was designed to fill the publicity cycle.
"Fianna Fáil only has itself to blame for this debacle. Fine Gael has been warning for years that the Government's over reliance on a debt-fuelled housing boom was unsustainable," he added.
Labour's finance spokeswoman Joan Burton said yesterday's dreadful unemployment figures coupled with the disastrous exchequer returns appeared to have finally roused the Government from its summer slumber.
"The Dáil must now be recalled to meet next week for an on-the-record debate on the nation's finances and what the Government must do to restore financial credibility," she said.
