Cost savings must be matched by jobs package

It is being billed as the most crucial budget since the foundation of the State. There is no doubt that when Finance Minister Brian Lenihan stands up to address the Dail chamber this afternoon (Wednesday), the country will be hanging on his every word. But it is not only the citizenry of Ireland who will be listening in; taking a big interest also will be many outside interests like the European Union, the International Monetary Fund (IMF) and the international markets for a signal that the Government is finally prepared to take the tough action necessary to start getting this country back on its feet. Much of what is going to be in Mr Lenihan's speech has already been speculated about. A carbon tax on fuel is pretty certain, as is a cut of up to 10 per cent in child benefit payments, a reduction in social welfare payments and cuts of up to six per cent in public sector salaries - and perhaps more for those on higher wages in the sector. It is the latter issue which has grabbed almost all of the headlines in the past week as the nonsensical and unworkable suggestion of 12 days' unpaid leave for public servants was rejected by the Government. The minister needs to achieve a total of €4 billion in savings through a €1.3bn cut in public sector pay and pensions bill, €1bn in social welfare cuts, including child benefit; a further €1bn reduction in Government spending elsewhere as recommended by An Bord Snip, and €700m in capital spending projects. Predictably, public sector unions have warned that pay cuts will lead to serious industrial unrest - even riots on the streets, just like what would happen in Paris were the French government to impose such a thing, according to Impact's Peter McLoone, as he warned of a long and sustained campaign of industrial action. Meanwhile, those trying to survive from day to day in the private sector are looking on aghast at the drum-beating by the likes of Mr McLoone and his ilk. The attitude of the unions at this stage simply beggars belief. Those who do not have the luxury of permanent jobs and generous pensions and who have been losing their livelihoods at an unprecedented rate in private industry and services are becoming angrier by the day as they watch this carry-on from the sidelines. These are the people who have accepted pay cuts of anything up to 40 per cent in some cases and short-term working in return for keeping their jobs. They have accepted their lot and have not threatened strike action because they know very well that were they to go down that road, it could be the final straw for the company which provides them with their livelihood. Ireland is losing 315 jobs a day, we are borrowing €500m a week and the gap between what the exchequer takes in and what we are spending is €20bn. That gap has to be closed, one way or the other. Further income tax rises will only be counter-productive and would only serve to further depress spending, which cannot be allowed to happen. Public sector pay and pensions has been the elephant in the room for the past year and reductions quite simply have to be made in this area. It will undoubtedly make life more difficult for some on lower wages in the sector so Mr Lenihan must ensure that those at the lower end of the pay scales are not unduly burdened and that those on higher salaries take a proportionly bigger hit. However, fudging this issue will only lead to the belief abroad that the Irish Government does not have the bottle to take the hard decisions it needs to take. As well as wielding the axe, though, Mr Lenihan does need to give the people of this country some hope. He will need to give a signal to the Irish people that he has some kind of a genuine plan to get this country back to work after one of the most difficult economic years in living memory. The creation of a roadmap to lead the country back to the promised land of growth must be another crucial plank of today's budget. Credit needs to start flowing again, spending by consumers needs to be stimulated once more and Ireland needs to regain a competitive edge. An ambitious jobs stimulus package, protecting those in vulnerable employment and helping to support new employment, needs to be considered. A reduced rate of employers' PRSI on new jobs created in 2010 is something IBEC, for instance, believes could be helpful in creating new jobs. Too many jobs already have been lost and too many viable businesses remain on the critical list for further inaction by the Government. While Mr Lenihan must reduce public expenditure, it is also the right time to consider a substantive jobs stimulus package through the redeployment of some existing expenditure.