MINISTER FOR Finance Brian Lenihan has dismissed as “not feasible” a suggestion by trade union leader David Begg that the Government should extend the five-year recovery plan for the public finances by several more years to minimise the impact of cuts on workers.
On the fringes of an informal meeting of EU finance ministers, Mr Lenihan made the case that the “crucial” risk to taxpayers was the rise in the interest bill on the national debt.
The plan to stabilise the public finances by 2013 had been agreed with the European Commission, he added.
He was responding to Mr Begg, general secretary of the Irish Congress of Trade Unions (Ictu), who said earlier yesterday that spending cutbacks should be spread over the next eight years – up to 2017, instead of 2013.
Mr Begg argued a five-year plan was “too brutal, too quick” and said Ireland had room to manoeuvre because Ireland had the lowest debt to gross domestic product ratio in the EU at the outset of the recession.
Warning of unintended consequences for the “whole social structure” from the reforms set out in the McCarthy report, Mr Begg said cuts could be introduced over a longer period so “you don’t annihilate people in the process”. While Mr Lenihan said he welcomed Mr Begg’s acknowledgment that the public finances were in crisis, he said there were two problems with his suggestion.
“First of all, the five-year period is the longest period ever given to a European country to exit out of its difficulties,” he said.
“But the more basic and fundamental problem is that the more we borrow the more interest becomes payable by the taxpayer year on year and this isn’t like the whole debate about the National Asset Management Agency (Nama), which excited so much debate.” Figures from the National Treasury Management Agency (NTMA), which manages the national debt, show that the interest bill on the debt is forecast to rise to 9.4 per cent of tax revenue this year from 3.8 per cent in 2008.
The interest burden is forecast to rise to 14.2 per cent of tax revenue next year, to 16.5 per cent in 2011 and 18.1 per cent in 2012.
“We’ve a huge debate on the risks to the taxpayer about Nama and these risks may or may not materialise in 10 years’ time,” Mr Lenihan said. “But we’re not having any public discussion about the clear and present risk to the Irish exchequer from the mounting interest bill that will accrue from the dramatic expansion in the public debt.”
He declined to say whether the 3.5 per cent pay claim in the health service was realistic or unrealistic, but said the Government had already settled not to pay the increase due under the last partnership deal with the unions.