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Ireland to present four-year austerity budget to secure bailout

The Irish government is likely to make £8.5bn of spending cuts

The Irish government will present a four-year austerity plan on Wednesday in order to facilitate a €80bn-€90bn rescue package from Ireland's European Union partners and the International Monetary Fund.

The plan is expected to maintain Ireland's low tax rate, cut the €8.65-an-hour minimum wage by 12 per cent and cut €800m from the welfare budget.

The government has no choice but to raise taxes and cut spending as this year's budget deficit has been running at 11 per cent of gross domestic product. The government aims to bring the budget deficit down to the target of 3 per cent of GDP by 2014.

The Irish government is likely to make £8.5bn of spending cuts and collect an additional £4.2bn in taxation between 2011 and 2015, as part of the austerity measures.

The four-year plan, a precondition for the financing by the EU and IMF, is expected to include income tax increases, deep cuts in social welfare expenditure and a reduction of 10 per cent or more in the minimum wage.

However, financial markets were concerned that the fiscal consolidation could adversely affect the real GDP.

The austerity measures may prove self-defeating and worsen the deficit, causing tax revenues to fall, increase unemployment benefit payments, and mount losses at the state-guaranteed banks.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.