FINE GAEL VIEW:TAXPAYERS WILL end up paying nearly €3 billion a year in interest payments to meet the costs of buying up Irish banks' property loans, Fine Gael has warned.
Under the plan, the Government will issue bonds – which currently earn about 4.75 per cent interest – to pay the banks for assets and loans bought.
“That would completely wipe out everything that was done yesterday,” said the party’s deputy leader and finance spokesman, Richard Bruton.
He said Minister for Finance Brian Lenihan had taken the wrong course by finding needed cash from extra taxation, rather than forcing through savings.
“The cost of running the Government will not fall. Since 2005, the costing of running it has risen by €11 billion,” he told journalists yesterday.
The Government’s moves before yesterday to restore the State’s finances have added €2.55 billion to the tax haul, and cut €2.99 billion from spending.
However, the Budget measures this week would, he said, add €3.621 billion to taxation, but cut just €1.2 billion from the exchequer’s spending.
Even by its own figures, the Government is failing to deal with the structural deficit – the sum identified as caused by domestic mistakes by the ESRI, Mr Bruton claimed. Just 23 per cent of this deficit “will be dealt with over the next two years. That is very slow”, said Mr Bruton, who said Fine Gael wanted cuts “front-loaded”.
“The interest bill on Irish debt last year was 12.5 per cent of taxation. One eighth, in other words. By the end of 2013, it will be 60 per cent of all taxation brought in,” he said.
“We have to cut State spending. It has to be cut by 20 per cent over the next four years, as we have said. The Government has bottled it.
“Five per cent a year is not much to ask. It would be accepted by most private companies out there trying to compete right.”
Public sector reform has been promised by the Government, but not delivered: “We need to close agencies and shift workers to where they are needed.”
Fine Gael, he said, would freeze the payment of all increments due to State workers for each of the next four years: “The effect of that on savings is cumulative. It is €400 million in year one; €900 million in year two, and so on,” he told The Irish Times.
“We have to pay according to production . . . We have to be willing to take on powerful interests in this society,” he said.
He said he believed that the members of the expenditure review group known as An Bord Snip had already lost confidence in the Government’s determination to follow through on their recommendations. “ are far from convinced about the Government’s commitment to this,” said Mr Bruton,
“I have said repeatedly that no economy can tax its way to recovery – this Fianna Fáil Government has just decided to do it anyway. As usual, when Fianna Fáil get it wrong, ordinary families pay the price.”
