PUBLIC SERVANTS and social welfare recipients took the brunt of the €4 billion in spending cuts announced in the Budget yesterday by Minister for Finance Brian Lenihan.
Maintaining that the country was now on the road to economic recovery Mr Lenihan said: “We have turned the corner.”
Key elements in the Budget were cuts of more than €1 billion in public service pay, a reduction of €760 million in social welfare, just under €1 billion on day-to-day spending and the same amount on capital projects.
From January 1st public servants will suffer a cut of 5 per cent on the first €30,000 of salary, 7.5 per cent on the next €40,000 and 10 per cent on the next €55,000. Social welfare recipients face an average reduction of 4.1 per cent with those under 25 facing much more substantial cuts.
Child benefit will be cut by €16 a month with families on social welfare being compensated through an increase of €3.80 a week in the qualified child allowance.
Pensioners were exempt from the welfare cuts and public service pensioners decoupled from the cuts in pay. However, Mr Lenihan announced his intention of ending the link between public service pay and pensions in the future, making a link instead with the cost of living index. A cut of 20 per cent in the Taoiseach’s pay and 15 per cent in Ministers’ pay was also announced.
By contrast with April’s budget there were no significant tax changes this time around though Mr Lenihan announced a domicile levy of €200,000 a year on Irish nationals and domiciled individuals whose income is more than €1 million and whose Irish located capital is greater than €5 million.
Mortgage interest relief was also extended until 2017, when it will be abolished. Mr Lenihan said: “As a support to homeowners who now find themselves in negative equity, I am providing that where entitlement to the relief would expire in 2010 or after, they will now continue to receive it up to the end of 2017.”
Full details of the cuts across Government Departments will emerge in coming days. They include measures such as a 50 cent charge per item on prescriptions and an increase in the monthly threshold for the drugs payment scheme from €100 to €120. Savings of €400 million are to be made in health.
In an effort to curb cross-Border shopping Mr Lenihan reduced excise duty on alcohol by 12 cent on a pint of beer, 14 cent on a glass of spirits and 60 cent on a bottle of wine. He also announced a reversal of the half per cent increase in VAT imposed in his first budget last year.
As expected there was a carbon tax of €15 a tonne. It will result in increases of 4.2 cent in the price of a litre of petrol and almost 5 cent in a litre of diesel from today. It will apply to home heating oil and gas from next May. Other measures include a car scrappage scheme and extra funding for Fás training programmes. Some €70 million was allocated to help the victims of flooding as well as flood protection measures.
Fine Gael deputy leader and finance spokesman Richard Bruton said Mr Lenihan’s claim that the worst was over was like George Bush’s announcement of “mission accomplished” when he went to Iraq.
Mr Bruton noted an office cleaner in the Department of Finance would take a greater proportionate pay cut than Mr Lenihan.
Labour Party leader Eamon Gilmore said the way in which the cut was announced “was a scam designed to mislead the public”. Green Party leader John Gormley said: “Given the difficult choices we had to make, I believe it is, in the main, a fair Budget.”
The Government had a decisive majority of 13 in the first Dáil vote on the measure last night. The reduction in excise duty on alcohol was carried by 88 votes to 75 with Independents, Michael Lowry, Noel Grealish and Jackie Healy Rae voting with the Coalition.
Peter McLoone, leader of the State’s biggest public sector union Impact warned 350,000 workers would now prepare for industrial action. “All existing and former public servants must now mobilise to protect their incomes,” he said.
But Mr Lenihan signalled he was prepared to face down unions and even raised the spectre of further cuts if reforms proposed in last week’s pay talks were not agreed.
KEY CUTS
€16
Child benefit cut by 10 per cent to €150 a month.
€8
Unemployment benefit cut by 4.1% - to under €200.
5-8%
Public sector workers on salaries of up to €125,000 will have wages cut by between 5-8 per cent. Workers on salaries of up to €200,000 face further cuts of between 8-15 per cent
€8.20
Weekly carer’s benefit
50 cent
charge on every item on prescription
KEY TAXES
4.9 cent
Carbon tax - diesel up 4.9 cent a litre and petrol up 4.2 cent
€200,000
Domicile levy on all Irish nationals whose income exceeds €1m