TAOISEACH Brian Cowen and finance minister Brian Lenihan will this week brief cabinet ministers and the social partners on the detail of a radical new plan to restore order to the public finances and stimulate the economy.

The Sunday Tribune understands the so-called 'Plan for Economic Renewal' will involve:

? A complete overhaul of the projected budgetary figures setting out revenue with tough new spending targets for the next few years to reflect the collapse in tax receipts.

? A cap on the annual €2bn public service pension payments, limiting increases to inflation and not the national pay deal.

? A refocusing of the National Development Plan to concentrate on labour-intensive schemes such as school building, housing insulation and energy infrastructure at the expense of "non-essential" projects.

? Tax incentives and grants to entice foreign companies to establish research and innovation centres here.

? An audit of all state companies and assets to see if money can be raised from sell-offs.

? Cuts in public sector numbers as identified by An Bord Snip Nua.

? A package of measures to minimise the expected sharp rise in unemployment, including a radical new 'apprenticeship programme' to keep skills in the country.

? A cap on business rates charged by local authorities at 2008 levels.

? Quicker payment schedules from the state to private companies on state contracts.

Taoiseach Brian Cowen and his officials have been working on this plan since the summer. Senior government figures say the aim of the plan is to be "proactive rather than reactive", adding: "firstly, [we want to] get public finances back in order and secondly, give some element of hope. We are looking at a targeted stimulation of the economy. You won't see a cut in VAT rates as happened in the UK. That wouldn't work at all here as the economy is too open. We are looking at something a lot more focused."

Public sector pay will be a central feature of the negotiations with the social partners. With tax revenues dropping to 2005 levels, there is an acceptance within government that the overall public sector wage bill has to come down.

Increments – the increases given to public sector workers as they move up the pay scale – could be frozen for 2009 and beyond, saving the exchequer €250m annually.

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Ministers also believe there is no way that the next round of the national pay deal, a 3.5% rise next September, can be paid until well into 2010. And there is an expectation that An Bord Snip Nua will come up with initial proposals for cutting public-sector numbers early in the new year.

The government hopes the plan will spell out
clearly to the public the huge challenges that lie ahead
and bring a level of reality to the debate.

By setting out the new budget parameters, the intention is to end the constant downward revision of economic and budgetary figures. By bringing the social partners into the process, the government wants to avoid what is seen as 'knee-jerk' opposition from vested interests to every cutback, no matter how small.

The unions, while aware that significant pain will
be involved, are understood to be keen to be involved,
to show how social partnership can help rescue the economy.

While the plan will not
be formally unveiled until early January 2009, Brian Cowen is due to brief the unions, employers and farming organisations this week. "This needs to be done quickly. I wouldn't rule
out things moving before Christmas," one industry source said.

"People have been shouting for leadership. Well, this plan will set out the context, the new ball park. Now we have to stick to it," one
senior government source concluded.