The Budget – First Thoughts
There have been so many leaks in the past week that there were very few surprises when Brian Lenihan unveiled his second (unscheduled) Budget within 10 months of becoming Minister.
The Government was never going to go for a borrowing requirement of 9.5 per cent of GDP.
Still, the 10.75 per cent target will be attacked as being too high and the fact that the cut-backs will amount to almost the lowest possible level, €3.25 billion, will also come under fire from Fine Gael… and with some justification. It all seems a long way from the €5 to €6 billion that Brendan Smith blurted out only three weeks ago.
The other area which will come under scrutiny is the bias towards tax increases rather than public spending cutbacks. Sure, the scalpel was applied earlier this year. And Lenihan has promised harsh medicine ahead in the coming years (changes in tax bands, carbon tax, property tax, means-testing of child benefit). But the cuts that will be applied this year are modest (with a fair whack being taken from the capital side).
Lenihan pushed the boat out for TDs and Senators first. And with one fell swoop most of the controversial perks and allowances have fallen.
That was necessary. The new asset management agency will need to be looked at closely. Lenihan said that the assets will be bought for considerably less than thier book value. The critical question, of course, is for how much? Privately the Government has been saying it will be low. But how low is it prepared to go?
Social Welfare has been left largely untouched. The abolition of the Christmas bonus will be a big topic on Joe Duffy tomorrow but Fianna Fail TDs are saying that it’s still a long way away and politically survivable.
Those on middle incomes are taking a big whack between the new income levies and a doubling of the health levies. There are also increases in insurance levies. And the PRSI ceiling has been increased to €75,000. Everybody earning over 50 grand a year will a couple of grand worse off tonight. Of the old reliables only diesel and cigarettes have taken a hit because of the threat posed by cheaper prices in Northern Ireland to petrol and alcohol sales.
Another measure that wll require a closer examination is the incentive to allow public servants retire at 50. I suspect that many teachers will take up the offer to retire early and get 75 per cent of their pension. Of course, their jobs are unlikely to be replaced, which will have serious implications for pupil-teacher ratio.
Nothing on the stimulus side. Little on reform or on jobs.
The Commission for Taxation is being portrayed as the Big Bad Wolf that will come huffing and puffing at our doors later on in the year!