Although the Budget medicine tastes nasty, at least we have a care-plan now, says ISABEL MORTON

GULP! IT MIGHT take us some time for us to digest Tuesday’s dinner. It seems to have been lodged irmly in our throats and refuses to be swallowed.

Although, painful as it is, at least we are no longer speculating about how bad the Budget might be. At least we now know.

And what’s more, we’ve even been given advance warning about what’s to come further down the line.

Of course, there are limits. Just about.

There is only so much tax you can charge people before the nation considers itself to be starving to death rather than just suffering and “taking the pain”.

Given that the property market has already suffered a dramatic drop, there were limits to the amount of money the Government could manage to squeeze out of it. But whatever they could do, they did do.

Having once actively encouraged property investment, the Government is now actively discouraging it in whatever way possible.

Tax relief on investment residential properties is down to 75 per cent of interest paid and mortgage interest relief for owner-occupiers will only apply for the first seven years of a mortgage and will eventually be abolished altogether.

Capital Gains Tax, which had been increased from 20 per cent to 22 per cent in the last Budget, has now been further increased to 25 per cent.

Ditto for Capital Acquisitions Tax and DIRT. So one way or the other, whether you buy, sell, invest or save, you will have to pay more for the pleasure.

We have been told that although property taxes have yet to be introduced, they are most definitely on the cards.

However, there was no clarification as to whether this property tax would supplement or replace stamp duty or, indeed, how the tax might be implemented.

It is curious to note, in the middle of all this economic turmoil, that the Irish public’s feelings and general mood is noted and recorded.

You might imagine that it would all be rather obvious, but apparently not. There are subtle changes in our general demeanour and mindset from one month to the next depending on various influences.

A recent survey and report compiled and issued by KBC chief economist Austin Hughes (the KBC/ESRI consumer sentiment index, March 09) shows that despite the increase in unemployment, the (at the time – forthcoming) Budget and the way in which our household finances have developed over the last year, the mood of the nation was pretty much stable in March, but consumers remained cautious.

In other words, we were feeling low last month, but no lower than we had been feeling the previous month.

Austin Hughes commented that: “A steady reading in March is a very encouraging result given an array of job losses and the announcement of an emergency Budget during the survey period.

“This probably reflects the fact that Irish consumers are already very gloomy but it also seems clear that lower interest rates and falling prices are helping sentiment.”

The “steady reading” was down to a number of factors, including the recent cuts in interest rates, price reductions across the board (like the cost of electricity) and the fact that inflation has turned negative for the first time in half a century.

Apparently higher ECB (European Central Bank) rates began to impact on our household budgets in early 2006 and the all-time low of the consumer sentiment report coincided with the final ECB interest rate rise in July of last year.

You might imagine that we would have reached our lowest ebb post-September 29th when we realised how bad the global meltdown was likely to be, but apparently not.

Our recorded sentiment last July accurately reflected our gut feeling, which was that all was not well with the economy.

The KBC/ESRI report goes on to note a surprising aspect of the March results, which was an improvement in the “buying climate”, which they put down to the reduced interest rates and general price cuts.

However, they also noted that Irish consumer savings (their ‘rainy day’ money) “continued to rise even in what can only be classified as a monsoon”. This, they reported “implies that Irish consumers fear even stormier economic conditions ahead”.

Naturally we did, as the Bold Brians were issuing frequent warning in advance of the emergency Budget.

And indeed the public held off on spending their rainy day money until they knew what was ahead of them. And now they do.

It will be interesting to learn what the KBC/ESRI consumer sentiment index, April 09 reports on our mood this month.

I suspect that despite having been hit with the worst Budget ever, our sentiment will be one of relief that the worst is over and that, despite the fact that the medicine is truly appalling, it may make us better.

And, let’s be honest, at this stage, we are truly sick of being sick.

Talking Property