Ministers have been ordered to identify potential spending cuts worth €10.5bn from their departmental budgets, including reductions in staff numbers and social welfare.

And government departments have been instructed not to hold back from coming up with ways to reduce the number of workers in their area.

Although the Government is due to reduce expenditure by €2.1bn next year, departments are being asked to come up with a menu of cuts five times as big. Cuts which are not implemented in December’s Budget 2012 are expected to feed into reductions to be brought in over the following three years.

The instructions are to find savings worth 15pc to 20pc of spending, or €1 in every €5 spent, under the Fine Gael and Labour Party review of all departmental spending.

The revelation comes as Public Expenditure and Reform Minister Brendan Howlin publicly admitted some of his colleagues were not pulling their weight in coming up with cuts. But Mr Howlin is refusing to name the cabinet ministers involved.

The admission indicates that Mr Howlin is failing in his task of ensuring his colleagues realise the difficult job facing the Government in bringing in next year’s Budget.

Finance Minister Michael Noonan is due to publish a plan in the coming months that will show the reductions in spending by departments over the next four years.

Next year, Budget 2012 will contain a package of €3.6bn in tax hikes and spending cuts — €1.5bn in tax and €2.1bn in cuts.

However, a memo from the minister’s office says each department must come up with savings “by reference to the ‘rule of thumb’ 15-20pc level”.

The letter from the Department of Public Expenditure’s secretary general, Robert Watt, says the overall budget targets are subject to final government decision.

“You should bear in mind that to afford the Government maximum scope for decisions about prioritising resources in certain areas, we should not be constrained from putting forward a full and comprehensive set of savings options, even where this goes beyond the indicative ceiling,” he said in the letter sent two months ago.

Mr Watt said departments should “put forward options for achieving reductions in staff numbers”.

Among the ways to reduce numbers listed were “rationalising schemes and programmes, moving to e-payment rather than traditional processing, outsourcing, and identification of specific areas where incentivised exit schemes may be appropriate”.

“The question of how to deal with surplus staff identified in this way — e.g. costs of exit packages where necessary — will be dealt with centrally by the Department of Public Expenditure and Reform, and should not in itself be a bar to your full consideration of this important aspect of the comprehensive spending review,” his memo says.

Getting rid of the quangos already in line for the chop is described as “early wins” being put forward by departments.

“On balance, it may be appropriate to put forward a more comprehensive overall package of agency rationalisation measures — both a speeding-up of existing proposals and announcement of some new proposals — as tangible ‘early wins’, while signalling that broader issues around agency rationalisation will be looked at critically in the comprehensive spending review,” the memo says.

The level of detail shows Mr Howlin and his officials have had extensive contacts with his colleagues in other departments over the past number of months.

Yet he is now complaining that some departments are failing to present adequate spending reduction plans.

The minister has repeatedly talked up his involvement in the spending review.

A spokesperson for Mr Howlin said last night the minister would not be naming the departments concerned.

Taoiseach Enda Kenny’s spokesman said the spending review was an ongoing process.

“The Government remains determined to bring it to a successful conclusion,” he said.

– Fionnan Sheahan and Michael Brennan

(Irish Indepdent, 25th August 2011)