MINISTER FOR Finance Brian Lenihan has announced plans to save €440 million this year and committed the Government to saving a further €1 billion in 2009. The Minister ruled out resorting to large-scale borrowing to deal with the shortfall in tax revenues.
This year's savings, announced yesterday at a joint press conference by Taoiseach Brian Cowen and Mr Lenihan, will come from a range of measures including a cutback in health spending, a scaling back of decentralisation and the cancellation of special pay increases for Ministers, senior civil servants and judges.
Mr Lenihan said that a big element of the savings next year would come from a reduction in the public service payroll bill by 3 per cent across all departments, with the exception of health and education. It would probably require a cut in the number of public servants by about 5,000 to achieve this target.
Mr Lenihan told a press conference the Government was determined to achieve the savings and all departments had been directed to stay within budget.
"These measures are designed to minimise the effects on users of services in the areas of health, education and social welfare. They seek to protect the vulnerable. But they are the minimum we need to get back on track as soon as possible," he said.
The Minister added that even with the savings of €440 million this year and €1 billion next year, the fiscal position next year would be demanding and all spending would have to be rigorously controlled.
"In framing the 2009 budget, the Government is determined to maintain the right economic and fiscal conditions for sustainable growth," said Mr Lenihan.
The breakdown of the plan for this year shows that the Government hopes to save €50 million through an efficiency review; €21 million from a cut in the budget for public relations, advertising and consultants; €10 million from the decision not to take the ministerial special pay award and the cancellation of the remaining part of that award for senior civil servants, State agency chiefs and judges.
Another €360 million is due to be found through departmental savings. The biggest element of this will come from the Department of Health and Children, where savings of €144 million will be made, with about €80 million of that coming from the postponement of the Fair Deal nursing home scheme. Further cuts will be announced by the Health Servuce Executive next week as part of its drive to keep within its budget.
In other departments, the biggest savings are planned from the Office of Public Works with €75 million coming in the area of public procurement, particularly through the row back in the decentralisation programme. A reduction of €45 million in the Overseas Development Aid budget, a cut of €40 million in the Gateway Investment Fund and savings of €10 million from Fás are also planned.
Mr Lenihan announced that Minister of State Martin Mansergh would head a joint public procurement operation between the Office of Public Works and the Department of Finance to devise a programme of savings to be achieved by departments and other public bodies in 2009.
He also announced a review of State agencies to examine whether they could share services, and whether it would be appropriate to absorb some of their functions back into their parent departments or whether some agencies should be amalgamated or abolished. The outcome of this will also be considered by the Government in the autumn.
Mr Cowen said the Government's plans would be managed within the framework of the social partnership process which had served the country so well for the last decade and it was incumbent on all to make the compromises necessary to ensure that Ireland remained undamaged by the difficult global environment.
Fine Gael deputy leader and finance spokesman Richard Bruton described the plan as a "cobbled-together response to their self-generated recession" from Mr Cowen and Mr Lenihan.
"It must rank as one of the weakest and most uncertain performances from a Taoiseach and a Minister for Finance in recent years. There was no evidence of a thought-out plan, no detail provided on where the cost savings being proposed were going to come from and no answers on how frontline services were going to be safeguarded," he said.
Labour Party leader Eamon Gilmore said the plan was full of headline-grabbing measures designed to restore confidence in the Government rather than in the economy.
He said there was nothing in it for 54,000 people who had lost their jobs in the last year, but he added that there were some prudent measures such as the abandonment of the ministerial pay awards.
There will be a Dáil debate on the Government's plan today and tomorrow.