Lenihan rules out tax hikes and mini-budget despite shortfall

MINISTER FOR Finance Brian Lenihan has categorically ruled out any tax increases or the possibility of a "mini budget" in the…

MINISTER FOR Finance Brian Lenihan has categorically ruled out any tax increases or the possibility of a "mini budget" in the wake of the end-of-year exchequer figures which show a revenue shortfall of €8 billion.

Mr Lenihan also identified the devaluation of sterling as a "huge factor" in Ireland's economic deterioration because it had put businesses and consumers under huge pressure.

Speaking on RTÉ's Morning Ireland yesterday, Mr Lenihan said there was no question of a new budget being drawn up.

"The taxation arrangements were finalised by the Dáil before Christmas. The income levy is now being introduced. There's no scope for further taxation. We are losing jobs . . . There is no scope for increasing the tax on labour, which is the only real tax."

READ MORE

He said that the Government intended to adjust expenditures plans for next year. His department was already reviewing State expenditure on an item-by-item basis.

"In addition to that, we have to discuss with the social partners the reality that we have a €10 billion tax gap between what we are getting as a State and what we are spending as a State," he said.

Asked about comments to the effect that Ireland's credit rating had fallen because of the inaccuracy of its forecasting and because spending was not under control, he said that spending was being brought under control and that Ireland was not alone in the inaccuracy of its forecasts.

"We really have to stop this business of thinking we are uniquely deprived in the world," he said. "In fact, we are not. If you look at the level of borrowing in the United Kingdom at present, it is far in excess of what we have been doing in Ireland."

Mr Lenihan continued: "That in itself has created a major problem for us because the sterling-euro differential impacts very adversely on our economy. That's been a huge factor in the economic deterioration, the fact that the euro has almost achieved parity with sterling. That is putting businesses and consumers under enormous pressure. The only way we can go as a country and as a nation is to get our cost base right."

Mr Lenihan said it was not correct either to say the Government should make an immediate decision now on pay cuts in the public service, without first consulting with the social partners.

"Social partnership in good times served this country very well. I think it deserves to be tested to see if it works in hard times."

The Minister also insisted that the Government would not be "jump-led" into making hasty decisions. "We now have to assess how much revenue we get next year. That's the most important calculation that has to be made in my department and I'm not going to rush into it.

"My department got its calculations for revenue projection wrong three times last year. I had to make decisions on the basis of that. I don't believe we should be rushing into rapid calculations overnight on what we should do."

He said that public payroll costs could not be immune from trends in the wider economy - where pay was being cut and workers laid off - but said he would not predict how the talks process with the social partners would end.

Harry McGee

Harry McGee

Harry McGee is a Political Correspondent with The Irish Times