Savings of up to €4.5bn in December's budget and total "adjustments" in excess of €10bn over the next four years will have to be found by the government as part of its revised fiscal plan currently being drawn up to rein in Ireland's massive deficit.
This level of cutbacks will be required to reassure the financial markets and the EU that Ireland is serious about getting its budget deficit down to manageable levels by 2014, informed sources told the Sunday Tribune.
While the new four-year plan is far from finalised, it will include:
* €4bn-€4.5bn in savings for 2011 – up from the earlier target of €3bn – and additional savings of at least €6bn-€7bn in the next three budgets.
* The introduction of a property tax – with the possibility of a levy being introduced in the December budget not being ruled out – and water charges.
* Moves to rein in the public-sector pay and pensions bill by cutting staff numbers and ending the system linking public sector pension increases to pay rises.
* Further cuts in capital projects well above the €1bn already pencilled in for next year, with key projects such as the Dublin Metro potentially being reconsidered.
* As much as €1bn in new taxes in the upcoming budget through a widening of the tax net to include many lower-paid workers, higher earners being targeted with measures such as the abolition of the PRSI ceiling, a targeting of the generous tax credits available to over-65s and a universal social contribution.
* Further cuts in, and reforms of, the social-welfare budget running to hundreds of millions of euro, with cuts in rates not being ruled out.
* Cuts of €1bn-plus in health and education for 2011 alone.
* Ministers, TDs and senators are also believed to be facing significant pay cuts. There is a feeling that in order to sell the budget, politicians have to be seen to share the pain.
Ministers acknowledge that there is a serious risk that such drastic cuts could damage the economy's growth prospects. But they say that they have no option but to "front-load" the cutbacks because failure to do so would result in higher borrowing costs and, in turn, even greater cutbacks.
Government figures also say that, while the country's 12.5% corporation tax rate is "sacrosanct", if Ireland is forced to seek assistance from the EU then it could be threatened. "In that scenario, they would set the conditions," one source admitted. Others say this threat is exaggerated and a source close to the Minister for Finance stressed there had been no approach made from Europe about Ireland's corporation tax rate.
Former Taoiseach Garret FitzGerald yesterday called for cross-party agreement on the "main parameters" of the new four-year plan. Neither the government nor the opposition ruled out such a move yesterday but both sides claimed it would take a change of approach from the other.