Dole payment cuts could form part of recession plan, says report
The Government should consider cutting dole payments to reduce public spending, it was claimed today.
Goodbody Stockbrokers forecast that inflation will drop by 3% in 2009 and called for a similar reduction in social welfare payments.
The cost of unemployment benefits could top €5bn this year if the Live Register breaches the 400,000 barrier.
Goodbody economists said social welfare payments are the biggest expenditure area for the Government, apart from public pay.
“This area of spending is likely to be the most controversial to bring about savings,” Goodbody’s 35-page report said.
“However, given that it accounts for close to another third of overall Government spending, it simply cannot be ignored if a credible plan to manage the public finances is to be drawn up.
“Social welfare payments have risen strongly in recent years and with both consumer prices and private sector wages now in decline, reductions in benefits can be imposed without having the same real impact on the incomes of those individuals.”
Goodbodys have forecast the economy to contract by 6% in 2009 and 2.5% in 2010.
“Ireland is in the midst of one of the most severe recessions in the developed world in decades,” the report said.
Goodbodys have also urged tax increases and public service job cuts as the pay bill accounts for one third of total Government spending.
“While reductions in this category of Government spending has already proved controversial, it is not possible to meet the targets unless it is altered.
“This should include both pay levels and a reduction in numbers,” the document said.
Goodbodys also believe the Government may have to eventually recapitalise Bank of Ireland and AIB by a total of €9bn.
It claims the banks will incur bad debts of €28bn over the next three years.
Meanwhile a Labour motion in the Dáil tomorrow will call on the Government to scrap the introduction of the public service levy and to resume talks with the social partners on a more equitable arrangement.
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