Lenihan Sets Out His Budget Stall
Deaglán de Bréadún
He could have been Madonna in that Evita movie. Screw the middle-classes/I will never accept them. Yes, folks, as expected the in-betweens – too well-off for many State benefits, not sufficiently monied to employ whiz-kid accountants – will bear the brunt of Budget measures. So what else is new?
Brian Lenihan delivers his Budget speech
Even before the Budget speech started we had a row in the Chamber, with Opposition parties complaining bitterly that members of the press were given copies in advance of TDs. Not very edifying and a symptom perhaps of the nervosity afflicting all and sundry in advance of a defining political moment.
We had been told ahead of time that the speech from the Minister would be considerably briefer than usual. One could not help thinking of the English philosopher Thomas Hobbes and his description of the life of the masses as “nasty, brutish and short”. Would that be an apt description fo the Speech? But the Budget oration went on for some 45 minutes which is pretty standard, as far as I recall.
First heckle came with Brian Lenihan noting that the country had become too reliant on the building sector. FF are of course noted for their political proximity to that element in the economy. Then the Minister pointed out that consumer prices had fallen four per cent so one had to wonder what conclusions he was going to draw from that.
The Government has been widely accused of inept handling in economic matters but, like the guy with boxing gloves trying to thread a needle, had they finally got it right? And would the political fallout be containable?
“We must lead by example,” he said. Ergo, a ten per cent reduction in expenses for TDs and Senators; no more long-service payments or increments; ministerial pensions for sitting Oireachtas members gone by the board; payments for Oireachtas committee chairs to be halved from the current €20,000; no more pocketing the difference between your former salary as a teacher and the amount being paid to your substitute.
As expected, significant increases in wage and salary levies were announced, the Minister getting over that part of the speech at flying speed. There was less emphasis on cuts in public expenditure than some might have anticipated. Like the old communist states we have a five-year plan except ours has been approved by the European Commission.
A fair proportion of the speech was somewhat vague and pertaining to the category of motherhood and apple pie. The pension levy had save €1.4bn this year and public sector numbers would be controlled. Staff aged 50 or over would be given incentives to retire almost immediately, applications to be open on 1 May, and the Minister gave a heavy hint that retirement lump sums could well be subject to a sizeable tax “hit” for those who don’t take up the offer.
Welfare payments are the elephant in the room but rates would not be reduced this time around. The December bonus would not be paid (who will be the first Opposition speaker to invoke the shade of Ernest Blythe and his notorious removal of a shilling from the Old Age Pension?) Child care supplement will be halved and then abolished. Meanwhile, child benefit will be taxed in next year’s Budget.
Discussions are under way with the pensions industry for investment in infrastructure where private money would be substituted for State funds. This has echoes of the Irish Congress of Trade Unions (ICTU) proposal for a National Recovery Bond.
The 12.5 per cent Corporation Tax rate would be retained. This has become the contemporary symbol of our sovereignty. But tax reliefs were in the Minister’s sights, e.g., in the property sector. Tax relief on mortgage interest would be foreshortened (bad news for those on fixed-rate house-loans). Capital Gains Tax would go up to 25 per cent.
Like a mouse with a block of cheese, the State is nibbling away. The Pay-Related Social Insurance (PRSI) ceiling is to be raised from €52,000 to €75,000. That will take a big bite out of take-home pay.
Cigarettes and diesel duties are to go up from midnight tonight but alcohol and petrol are to be left alone. There was a veiled hint about other forms of taxation e.g. on property.
Then there was vexed issue of the banks and the need for proper regulation. Structural changes would be made. A senior figure from the British financial scene, Sir Andrew Large would advise on choosing a new head of financial regulation.
An asset management agency (“bad bank” to you and me) would take over unhealthy debts and try to sort them out. They would be purchased for considerably less than their initial value by the State. So, a big clean-up in the banking sector – but at what risk?
So. what about job protection and creation? Mary Coughlan has an enterprise stabilisation fund of some €100m. Retraining and further education would be supported with a further range of measures including a work experience scheme for graduates.
“A strong message around the world,” was how Lenihan described his Budget. Ireland was open for business. He would be touring capitals around Europe to press the message home during the coming weeks. Oh, and while you’re at it, folks, he wants you to vote for Lisbon next time around.
I didn’t hear any reference to tax exiles and ways of tackling the wealthier, more evasive members of that group. “We are now facing the challenge of this nation’s life,” the Minister said, appealing for people to set aside sectional interests. That was it, but no standing ovation this time from the FF benches. The jury will be out on this Budget for some time.