Warning as Dublin plans £1.2bn cuts

Enda Kenny addressed the nation to tell the public they are not to blame for the economic collapse (PA)

The Irish Government warned there is no hiding from difficult decisions that need to be taken in the interests of the State and citizens as €1.4 billion (£1.2 billion) spending cuts were outlined.

Brendan Howlin, Minister for Public Expenditure and Reform, detailed the first half of Budget 2012 with the stark assessment that the country's tax take is down one third in three years.

But he claimed that the economic crisis in Ireland has been stabilised.

"Twelve months ago we were Europe's problem. Now problems in the European and global economy threaten our recovery," he said.

Mr Howlin confirmed how spending will be dramatically reined in to balance the books - 1.4 billion euro (£1.2 billion) cuts in day-to-day expenditure and a 755 million euro (£648 million) reduction in capital spending.

As part of the savings, the public service pay bill will come down by 400 million euro (£343.3 million) next year.

The Government also set out its stall for the seven-step Action Plan for Jobs by improving competitiveness and intensifying competition in sheltered sectors; supporting indigenous start-ups; assisting their growth; attracting inward entrepreneurial start-ups; deepening foreign direct investment; developing community employment; and exploiting sectoral opportunities.

Some of the more hard-hitting social welfare cuts include changes to child benefit. While payments for the first and second child remain the same, the monthly rate for a third child falls from 167 to 148 euro, while for the fourth and any subsequent children it is being cut from 177 to 160 euro.

Mr Howlin said: "The sharp reality that this Government is facing is that the level of social welfare expenditure now in place cannot be sustained from the funding base now available. As unpalatable as it might be, we must make some difficult choices in order to contribute to the reduction of the budget deficit."

The Government will not reduce any weekly rate of social welfare payments, he said.

The vital fuel allowance scheme will be pared back with the season it operates down from 32 to 26 weeks, saving 51 million euro (£43.8 million) next year.

The one-parent family payment will also be reduced, giving headline savings of 20.7 million euro (£17.8 million), while employers will no longer be so heavily reimbursed for redundancy schemes as a special rebate is reduced from 60% to 15% to save 81 million euro (£69.5 million).

As expected, Mr Howlin revealed that the Government is to reduce the budgets of health, social protection and education by more than 1 billion euro (£858 million).

Elsewhere, the Department of Agriculture, Marine and Food will see savings of 105 million euro (£90.1 million); Transport, Tourism and Sport 45 million euro (£38.6 million); and Environment, Community and Local Government down by 34 million euro (£29.2 million).

The Government's decisions will cut public spending to 55.8 billion euro (£47.9 billion) next year compared with 57.7 billion euro (£49.5 billion) this year.

Mr Howlin said Ireland's budgetary system is old-fashioned and would also be radically overhauled, with emphasis on planning for three-year terms.

"The fact is that Ireland's traditional system of budgeting no longer works for us," he said.

"The old budgeting system that we have inherited from our past is secretive and opaque. It has not led to sustainable spending policies, to proper value for money, or to good outcomes for our citizens."

Mr Howlin, a Labour minister in the coalition Government with centre-right party Fine Gael, claimed the parties will maintain core social welfare payments including jobseeker's allowance and state pensions despite the massive cuts.

"This Government is in effect a national Government containing the two largest parties in the State. It provides the stability necessary to plan and work our way out of this crisis. It won't be easy, and we will not resolve our problems overnight," he said.

"No Government, whatever its numbers, wants to be the bearer of bad news. But our options are extremely limited. The public knows this. It is wary of those who offer simplistic options."

PA