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  • irishtimes.com - Posted: December 5, 2012 @ 12:16 pm

    Budget or fudge it?

    Harry McGee

    We’re almost within two hours of Budget 2013 being unveiled and already you can feel the nerves among Coalition backbenchers about the mesaures.
    It’s not the most savage Budget in recent years in terms of the quantity of ‘adjustments’ (the late Brian Lenihan took €6 billion out in one fell swoop in December 2010)) but the blunt reality is that all of the less painful cuts have been made and the changes being made later today will cut to the core.
    There has been a lot of Labour discomfiture about the fact that the party lost the battle over the 3 per cent increae in USC for higher earners on PAYE. I was away last week so wasn’t in a position to follow the events as they happened but it seemed to me that Fine Gael really asserted itself as the biggest party in Government. It’s counter proposal of a 3 per cent cut in social welfare rates was never realistic and was bullyish tactics. So Labour folded on that one.
    Then there are the cuts to child benefit, a really biting property tax (but there’s a stay of execution on that until July 2013) and the nasty sting in the tail – the loss of the €127 exemption for PRSI, which will only cost about a fiver a week but will affect those with lowest pay levels (above €352 per week) most.
    Labour has managed to get in a package of measures aimed at pensioners and those with high incomes which it claims will be worth €500m. It’s a bit harder to explain than the neat increase of 3 per cent in USC for those earning over €100,000 but explain it Labour will have to do, otherwise its members and supporters will begin to think that FG is getting it all its own way.
    I expect some unhappinness (private) among Labour backbenchers but no defections.
    “Mild jitters but not destabilising” was the view of one Labour minister of state in a text to me.
    Fine Gael TDs, especially in Dublin, are not going to be happy campers about the property tax. There’s no doubt that it’s a relatively crude bludgeon and those who will be affected most are people in relatively modest houses with relatively modest incomes in Dublin’s more affluent suburbs. When bills of €500 to €800 come in through the door, there will be a lot of gnashing of teeth.
    I did a calculation last night (very rough one) based on a couple with three children living in a house worth €250,000 who are running two middle of the range cars. I estimated that the changes in PRSI, child benefit, property and motor tax could end up costing that family about €1,430 a year.
    Now, there may be some compensating measures on the other side that will be of net benefit to them.
    But it seems that everybody is going to be affected and will be out of pocket.
    And I think this time, the sense of social solidarity, may not be quite as strong.
    People are beginning to really feel the squeeze.
    Maybe this will mark the moment when the Government’s prolonged honeymoon truly reaches its end.

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