The Government could scrap the Special Savings Investment Account (SSIA) schemes to save the Exchequer over €2 billion, according to sources in both legal and banking sectors.
But the prospect of such a move - which was mooted yesterday by the Minister for Transport, Mr Brennan - has been dismissed by the Department of Finance.
Mr Brennan made his comment on RTÉ's News At One yesterday when he was being interviewed about the state of Government finances - cuts of €900 million are to be sought next year, according to the confidential memo released at the weekend.
The Department of Finance insisted yesterday it had "no intention" of reviewing the scheme. Banking and legal sources suggest, however, there is nothing to prevent the Government from reducing or abolishing its contribution if it wished. This would be a huge disappointment to the 1.2 million savers who opened accounts.
The Minister for Finance, Mr McCreevy, who introduced the scheme as a means to dampen spending in a booming Irish economy, has been defending its continuance in a less buoyant environment. Yesterday a spokeswoman at his Department told The Irish Times that the scheme "stands as it is" but admitted any Government measure could be reviewed.
However, Mr Brennan said the SSIA scheme, which will cost €500 million a year for five years, could be reviewed in the future. He noted Mr McCreevy viewed the scheme as a success and added it was not something the Government would "tamper with lightly".
Under the scheme the Government has pledged to contribute €1 for every €4 paid into one of these accounts for five years. But with huge cutbacks in spending now being demanded, its continuance may be increasingly questioned.
Savers who have opted to participate in the scheme will have signed contracts with financial institutions, undertaking to lock up these funds for five years.
Most contracts do contain a clause to allow for any changes in legislation that would impact on the likely return to the investor after five years. This is a standard proviso and is not unique to SSIAs. It would allow the accounts to continue while reflecting the impact of any legislative changes.
Previous savings schemes introduced by the Government were amended at various stages through changes in the Finance Act. Aspects of the Special Savings Account scheme, for example, were altered.
One legal source believes that if the Government were to withdraw from the scheme it would be unlikely to be able to claw back any of the money it had already contributed.
It is also likely that savers would have to be given access to their money at the same time as the Government contributions stopped and that it would be very difficult to legally require them to forgo their funds for five years. "If the Government withdraws, then I would think all bets are off," the lawyer suggested.
There would be huge political ramifications of any decision to abolish this scheme, as it would undermine public confidence in the Government. But banking sources suggest the scheme could be easily changed if there was sufficient political will to do so.
One banker said the Government can "do what it likes" with the scheme and that savers would be forced to live with it. A spokesman for AIB said that any pull-back by the Government would be very disappointing for savers.
The first year of the scheme's operation is expected to be the most expensive, as some of the account holders may decide to reduce their monthly contributions in the future.