A SENIOR Government Minister last night warned that the International Monetary Fund (IMF) will be called in if the Government does not reduce public expenditure by at least 30 per cent.
Minister for Health Mary Harney said yesterday that the State is spending €500 million more each week than it is raising in tax revenues. She was one of a number of Cabinet members who yesterday publicly backed the stark assessment of the economy made by Minister for Finance Brian Lenihan on Thursday night.
“If the Government hasn’t the capacity to do what’s needed, then others will come in, like the IMF, and overnight they will make decisions,” said Ms Harney.
“Then they will immediately start cutting expenditure by maybe 30 or 40 per cent, and that is a fact.”
However, the Department of Finance later played down the likelihood of IMF intervention, pointing out that the fund could only come in if invited and if the Government had exhausted all alternative forms of funding.
“In order for us to avail of the IMF, we would have to invite them in and that would mean we are unable to access any alternative funding,” said a Finance spokesman. “Because we are a member of the euro zone, we are currently in receipt of funding from the European Central Bank and we don’t envisage any assistance from the IMF.”
Taoiseach Brian Cowen strongly supported Mr Lenihan’s view that cuts needed to be imposed now to prevent the necessity for the equivalent of two to three Bord Snip-style reports by 2013. “We have seen a reduction in tax revenue coming into the coffers of 30 per cent, and that means that we have tax revenues at 2003 levels this year,” said Mr Cowen, who was attending an event in Clonmel, Co Tipperary.
“Expenditure is in the region of €23 billion greater than what we are taking in. That is not a sustainable position.
“We have indicated that budgetary strategy is where you are spending €55 billion, and taking in €31 billion or €32 billion, you look at spending cuts as the primary means of doing that,” he added.
Mr Lenihan said yesterday that if tough decisions were taken now, he was convinced the country would pull out of the crisis.
Minister for the Environment John Gormley said all Government departments would be required to cut down on costs, but that no definitive decisions had yet been taken. “It is going to be a difficult budget. There is no reason why we should mislead people on that, we have to tell people the truth,” he said.
Labour deputy leader Joan Burton criticised Mr Lenihan’s refusal to look at increasing tax rates for higher earners.
“He has returned to [former minister] Charlie McCreevy’s war cry that there is no pot of gold at the top [from people] who are not paying their taxes. Those people must contribute too,” she said.
Fine Gael’s Enterprise spokesman Leo Varadkar, who was present for Mr Lenihan’s speech on Thursday night, said he agreed with his comments on public sector cuts, but profoundly disagreed with the Government’s solution of creating Nama to sort out the banking crisis.