Beginning by explaining the current economic conditions the country is facing, the Government stated:

"Economic growth is lower than anticipated due to a downturn in the global economy and the housing adjustment in the construction sector. As a result, the Exchequer Returns presented last week confirmed the trend already established this year of lower than expected tax revenue receipts. Tax revenue is down by 8% compared to the first half of 2007.

"The outlook for tax revenues is to remain weak for the remainder of this year. Consequently a tax shortfall in the order of EUR3bn has now been factored into the budgetary arithmetic for 2008.

"In terms of Government spending, expenditure is running at 11% ahead of the same period for last year.

"The deterioration in the Public Finances in 2008 means that the General Government Deficit, based on our current assessment, could be close to the Stability and Growth Pact limit of 3 percent of GDP in 2008 and, in the absence of corrective action, over that limit next year.

"For that reason the Government decided today on a number of spending measures to maintain a prudent fiscal out-turn for 2008 and to provide the basis for a sustainable approach to the financial situation in 2009.

"This action is a reasoned and measured response. It has been decided on by Government after careful deliberation. It seeks to balance the need for fiscal restraint to ensure domestic recovery with the need to protect the vulnerable and maintain overall Government spending and investment in the economy provided in Budget 2008. The economy is resilient and with this measured action, we will be well-placed to take advantage of a future recovery in the world economy."

The Government has announced the following measures to tackle these problems: -

1. All Departments, State Agencies and Local Authorities – other than Health and Education - will be required to reduce their payroll bill by 3% by the end of 2009 through all appropriate measures identified by local management in the light of local circumstances. Measures to be taken would include control of premium pay, management of vacancies, the organisation of work processes and the levels at which work is carried out, as well as control of numbers through recruitment and other measures.
   The parameters of this exception for the health and education sector are to be agreed by the Departments concerned with the Department of Finance.
2. All expenditure by Departments and Agencies on Consultancies, Advertising and PR will be significantly reduced for the remainder of this year and by at least 50% in 2009 compared to 2008.
3. Further savings in 2008 and in 2009 are to be secured by a range of measures including those identified as a result of the efficiency review initiated by the former Minister for Finance in the Budget for this year.
4. There will be targets for savings in expenditure by State Agencies, Boards and other Public Bodies. This will involve a review of activities, staffing and costs, including the scope for rationalisation, shared services and other economy measures. This will include proposals for the amalgamation and rationalisation of agencies where this is appropriate. The Department of Finance will engage with each Department to bring this about and to set targets for savings in 2009.
5. All capital projects will be examined and prioritised to ensure that resources are targeted in the first instance at construction-related investment in core economic infrastructure that adds to productive capacity, consistent with our international climate change commitments.
   It has also been decided by Government, in the light of the current Exchequer position, that further expenditure for the acquisition of accommodation for decentralisation will await detailed consideration of reports from the Decentralisation Implementation Group.
6. Minister of State Martin Mansergh will head up a joint public procurement operation between OPW and the Department of Finance to drive a programme of reform and to produce a business plan for purchasing savings to be achieved by Departments and other public bodies in 2009. Minister Mansergh will report in the Autumn with specific proposals to target at least €50m savings in 2009 on this front.