AN estimated 10,000 building-site job losses this summer could add a further €100m to the government’s €500m cutbacks bill, economists warned yesterday.

On Tuesday the cabinet will debate plans for voluntary redundancies across the civil service and state agencies in a bid to cut public spending by about €450m in the next five months and a further €1 billion next year.

But Tom Parlon, director general of the Construction Industry Federation (CIF), warned that job losses in the building industry could add another 10,000 to the live register in late August when the traditional builders’ holiday ends. This would put further pressure on government spending as tax revenues continue to fall.

Ministers are thought to be evenly divided between placing an embargo on recruitment to achieve a 3% cut in the public service over 18 months, or launching a redundancy programme in order to achieve an even greater reduction in numbers.

A ban on recruitment apart from frontline services — nurses, teachers, gardai — will be the main feature of this week’s spending cuts, a senior government source said. But ministers may opt to go further, with a public service-wide redundancy package to achieve staffing and pay reductions more quickly.

The cabinet will vote on a cutbacks package that will including merging or downsizing a number of state agencies, and slashing spending on advertising, public relations and office administration costs.

A 1,000-job redundancy plan for Health Service Executive administrators and middle managers will also be part of the “savings” package, according to cabinet sources, and departments will seek savings in telecommunications and IT costs by returning to centralised purchasing of administrative resources in the civil service.

Annual defence forces recruitment of about 600 a year — designed to keep the military’s standing presence at about 8,000 troops — will be halved.

The government is also under pressure from employers’ groups to seek a public sector pay freeze at the continuing social partnership talks.

Even as Brian Lenihan, the finance minister, finalises his cutbacks plan before Tuesday’s cabinet meeting — and a nine-and-a-half-hour Dail debate on Wednesday and Thursday — there are signs that €450m “savings” may not keep pace with the pressures being fuelled by surging unemployment.

Austin Hughes, chief economist at IIB Bank, said that the government’s forecast of an average of 210,000 welfare claimants for 2008 could be significantly short of the final figure, given the addition of 19,000 people to the live register in June, which brought the total to 220,000.

Only about two-thirds of those on the live register are actually unemployed — it also includes short-time workers and those on sickness benefit — but every 1,000 people signing on costs the government another €11m in a full year.

“The critical question is whether companies are laying off very quickly and therefore the bulk of the bad news is in, or if there could be more to come. Certainly the risks are all skewed towards a higher number,” said Hughes.

“The end of the builders’ holiday in August is another potential watershed, so it should become clear very quickly whether there is a worsening situation.”

Parlon is aware of a number of large construction companies actively planning for the downturn in the housing market and restructuring their operations, starting with reductions in their workforce. CIF is hiring expert consultants to advise member firms on how to “ride out” the downturn. Reducing costs, including making redundancies, is part of the advice.

Parlon said the seasonally adjusted rise in the live register in June was about 10,000 and he believed the vast majority of the 6,700 men within this group came from the construction sector.

Of the 201,000 people on the live register at the end of May, one in six was a migrant. More than 7% (14,700) were from the 12 newer EU states, half of those from Poland, while another 3.5% were from non-EU countries, 5% from Britain (including Northern Ireland) and 1% from the longer-standing EU states known as EU15.

Parlon has heard anecdotally that a lot of Polish construction workers are choosing to return home. The construction industry in Poland is experiencing something of a boom.

“They have paid their stamps here, they are entitled to sign on, but a lot of them have made a lot of money here and they are going back to build their own home or start their own business,” Parlon said.

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