Taoiseach Brian Cowen has announced the steps the Government is taking to deliver €2 billion in savings this year.
He told the Dáil €1.4 billion would be saved through a new pension-related payment from public sector workers. He said this would be graduated to take account of different pay levels in the public service.
The Taoiseach told a news conference later he recognised that the decision to introduce a pension levy was unpalatable and not immediately welcome. But Mr Cowen said he believed that people understood that we all had to make a contribution commensurate with people's ability to do so.
Mr Cowen also told the Dáil public sector pay rises due to be paid in September this year and June next year would not now go ahead. This will also save €1 billion next year. €75m of savings will also come from a reduction in the early childcare supplement. This will fall from €1,100 to €1,000 a year and be restricted to children under the age of five.
Read a roundup of how the measures announced today could impact you and your finances.
Further savings of €80m are to be achieved by an 8% reduction in professional fees. Overseas development aid is to be cut by €95m. There will be €300m in savings through cuts in capital spending. Mr Cowen said tenders for projects had been coming in at 20% lower than previously, and this saving could be made while maintaining output.
A further €140m will come through efficiencies and savings in areas such as advertising and public relations
The Taoiseach made the statement after the breakdown of the talks with the social partners early this morning. He said the breakdown did not mean partnership had failed, and the measures being announced today took views expressed at those talks into account.
He said the social partners had indicated a willingness to continue to talk to the Government about implement the savings.
The marathon economic recovery talks collapsed just before 4am this morning. Among the main obstacles was the proposed pension levy for 350,000 public service employees.
The Taoiseach later explained the pension levy rates. He said a person earning €15,000 gross would pay a pension levy of 3%. The levy then rises gradually, to 5% on a salary of €25,000; 6.4% on €35,000; 7.2% on €45,000; 7.7% on €55,000; 8.1% on €65,000; 8.5% on €85,000; 8.8% on €100,000; 9.2% on €150,000; 9.4% on €200,000; and 9.6% on €300,000.
Government accused of 'denial and delay'
The Fine Gael leader Enda Kenny said public trust had been betrayed as the Government proceeded with secret talks from which the parliament and the people had been excluded. Instead of seeking popular support, he accused the Government of pursuing a strategy of denial and delay.
Mr Kenny said €3 billion had been added to the national debt in two months because of Government indecisiveness.
Labour leader Eamon Gilmore said the Taoiseach's plan had added to the uncertainty, confusion and difficulty of the current situation. He said Mr Cowen had not shown leadership and had failed to provide a roadmap forward. Mr Gilmore said the Taoiseach's statement was a big disappointment.
Welcome from IBEC, but SIPTU unhappy
Employers' group IBEC welcomed the Government measures, with director general Turlough O'Sullivan saying the move to reduce public sector pay costs would go some way towards stabilising the public finances.
But he warned that more would need to be done, and called for measures to support business and job creation.
SIPTU general president Jack O'Connor said working people were again are expected to carry the entire burden of a crisis created by those at the top of society. 'Ironically a worker on €30,000 a year will now be paying €33.52 a week for their pension, slightly more than they will actually get out of it after 20 years service,' he said.
But Mr O'Connor said the union was still available to discuss an agreement which was 'fair and reasonable'.
