November 24, 2010 / 2:22 PM / 7 years ago

Ireland lays out four-year austerity plan

DUBLIN (Reuters) - Ireland on Wednesday set out its four-year plan to make 15 billion euros in savings to bring down its record deficit.

Below are highlights of the plan.

OUTLINE

* “The adjustment will be made up of 10 billion euros in spending reductions and 5 billion euros in tax and revenue raising measures. These are demanding but realistic targets. With a concerted national effort, they can be achieved.”

* Spending savings to include current expenditure cut of 7 billion euros and capital investment by 3 billion euros. * 40 percent or 6 billion euros of the adjustment in 2011.

WAGE CUT/Labor MARKET

* Reduction of minimum wage by 1 euro to 7.65 euro.

* “Other labor market regulations are preventing job creation -- especially in sectors where unemployment among younger and less-skilled workers is most prevalent. Decisive reform is required.”

TAXATION

* Revenue-raising measures will contribute one third of the overall budgetary adjustment.

* “The Government remains committed to the 12.5 percent corporation tax rate: it will not be increased under any circumstances.”

* Tax receipts in 2010 to be around 33 percent lower than in 2007. Seen at 31.5 billion euros, or 450 million euros above the level forecast in last December’s Budget.

* “In 2010, it is estimated that 45% of taxpayers will pay no income tax. This is not sustainable.” Measures will broaden the tax base, abolish or curtail a range of tax exemptions and relieves, and introducing a new site value tax.

DEBT/DEFICIT TARGETS

* General Government Gross Debt to GDP ratio forecast at 95 percent of GDP at end-2010.

* General Government deficit in 2010 now expected to be 11.7 percent of GDP, vs Budget 2010 target of 11.6 percent. The gap between Government receipts and spending will come to almost 19 billion euros in 2010.

* Deficit will be reduced to 9.1 percent of GDP in 2011, 7.0 percent in 2012, 5.5 percent in 2013 and to 2.8 percent by 2014.

* “General Government Gross Debt is expected to be 95 percent of GDP by the end of 2010 and will peak at 102 percent in 2013, before falling to 100 percent by 2014.”

GROWTH

* Real GDP will grow by an average of 2.75 percent in the years from 2011 to 2014.

* Unemployment to fall from 13.5 percent to below 10 percent in 2014.

* “Recent data suggest that economic recovery is slowly taking shape. It is now expected that GDP will record a very small increase this year on the back of strong export growth. Exports in turn are being driven by improvements in competitiveness and a strengthening of international markets.”

* The adjustment will weigh on domestic demand, but its overall effect will be mitigated by the economy’s high propensity to import and by the positive impact of budgetary adjustments on competitiveness and confidence.

SAVINGS DETAILS

* Savings in social welfare expenditure of euro 2.8 billion by 2014 through a combination of enhanced control measures, labor activation, structural reform measures, a fall in the Live Register, and, if necessary, further rate reductions.

* Cut public service staff numbers by 24,750 over 2008 levels, back to levels last seen in 2005;

* Reduce the public sector pay bill by about euro 1.2 billion between 2010 and 2014;

* More effective use of staffing resources with redeployment of staff within and across sectors of the public service.

* Reformed pension scheme for new entrants to public service and reduce their pay by 10%.

* Introduce a pension deduction for public service pensioners to yield euro 100 million in savings;

* Reduce non-pay and non-social welfare spending by euro 3 billion over the period;

* Increase the student contribution to the costs of third level education;

* Introduce water metering by 2014; and reform and update the existing budget system beginning in Budget 2011.

Reporting by Dublin bureau; London Treasury Desk

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