The Dublin government is planning a new budget of cuts and taxes after the unemployment rate in the 26 Counties reached 10 per cent and is set to go higher.
Taoiseach Brian Cowen has warned dole queues could top 450,000 by the end of this year, but analysts believe the figure might reach half a million, or 14%.
Mr Cowen has claimed that the jobs crisis is not as bad as that of the 1980s, but the pace of job losses has shocked the political establishment.
Fine Gael leader Enda Kenny branded the figures “truly shocking” and called for the implementation of proposals such as reversing VAT [sales tax] increases to boose the economy.
But Cowen has instead vowed to institute new and broader taxes to keep the southern state afloat.
Disastrous exchequer figures have showed tax revenue has slumped back to 2004 levels and prompted the Taoiseach to announce an “emergency budget” for the end of this month.
The Taoiseach’s acceptance of the need to suddenly raise extra taxes came after figures for the first two months of the year revealed a 5 billion Euro hole in the state’s finances.
The figures were so bad that “a combination of revenue raising and expenditure adjustments” would have to be made by the Dublin government before the end of the month, Mr Cowen said.
Current spending this year is to be reduced by an extra 2.5 billion to 3 billion Euro in addition to the 2 billion Euro in cuts already in progress.
Minister for Finance Brian Lenihan told the Dublin parliament this week the 26-County State faced “a moment of national crisis” and he invited the opposition parties to play a constructive role by submitting their suggestions for dealing with the situation to the Department of Finance.
But at the Fianna Fail annual conference last weekend, Cowen declared that “everybody” would have to pay and income tax would be targeted in particular.
“Income tax rates are going to go up. Obviously we have got to look at other areas where we can broaden the tax base,” he said.
Figures showed that in the first two months of the year, the 26-County exchequer posted an overall budget deficit of more than 2 billion Euro compared to a deficit of just 125 million Euro for January-February 2008.
Pointing to the spiralling deficit problem, he said: “I have to say that the gap is so big that everybody will be asked to make a contribution”.
Mr Cowen denied he had squandered the economic boom as Minister for Finance over the past decade.
“A lot of people will ask [because] this has happened so swiftly and severely, how did this happen? We have to explain that. I do think that people are at that point where they realise that this is an international phenomenon,” he said.
But Fine Gael accused the coalition government of ‘sleepwalking’ after Cowen admitted today [Thursday] that he only learned of the disastrous exchequer returns for January and February on Tuesday morning.
“The admission today by the Taoiseach that he was unaware of the exchequer figures until Tuesday’s cabinet meeting is both astonishing and disturbing,” said Fine Gael finance spokesman Richard Bruton.
“It is intolerable that neither the Minister for Finance or the Taoiseach were not monitoring the trends in regard to the exchequer figures, given the grave state of the nations finances at present.
“Only a few days ago the Tanaiste claimed that the Government was in control, seemingly in denial as to the depth of the crisis we are in and now the Government has announced a new budget.”
Mr Bruton said the lack of attention to detail at the top of Government was not surprising and was “causing the country to lurch from one crisis to the next, with no clear plan to restore economic stability or to create and sustain jobs.”
The Taoiseach has also refused to rule out cuts in social welfare payments when questioned on the issue by Sinn Fein Dail leader Caoimhghin O Caolain.
He described as “ominous” the reply given to him by the Taoiseach Brian Cowen today in light of the “catastrophic” unemployment figures.
“Already arising out of last September’s Budget newly unemployed people have been penalised. They now have to have been in employment for two years before qualifying for Jobseekers Benefit, as against one year, before the Budget.
“Low-income families have also suffered disproportionately from VAT increases, health charge increases, the cut in Child Benefit for 18-year olds, and the cut-off of childcare supplement at five years of age.
“Newly unemployed people are facing very long delays before their claims for social welfare payments are assessed.
“Revenue must be raised through taxing those who can afford to pay, through eliminating waste in public expenditure and through job retention and job creation.
“We must ring-fence social expenditure to support all those who are on the threshold of poverty.”