Budget doubles levies and cuts child payments


Minister for Finance Brian Lenihan has doubled the income levy, doubled the health levy, scaled back mortgage interest relief and cancelled the December social welfare bonus.

Mr Lenihan delivered the toughest Budget speech in the history of the State in the Dáil this afternoon which also includes the abolition of pensions for sitting TDs and plans for means testing of child benefit as well as a possible carbon tax and a tax on property in the coming years.

Social welfare payments will not be reduced but a reduction may be needed in the future, Mr Lenihan said. The December bonus normally paid to welfare recipients will not now be paid in 2009 and the jobseeker allowance for the under 20s will be halved and rent supplements will be reduced.

The early childcare allowance paid in respect of pre-school children will be halved from May and abolished by the end of 2009 but a free pre-school year will be introduced. Child benefit paid to all parents will be means tested from next year.

He said in the next number of years taxation of child benefit, a carbon tax and a "form" of property tax would be looked at. He also said a reduction in payroll costs in the public sector was a "essential aspect" of the economic plan.

The income levy for those earning between €15,028 and €75,036 will increase to 2 per cent. Those earning up to €174,980 will double to 4 per cent and those earning over this will be subject to a 6 per cent levy. The health levy will also double to four or five per cent, depending on income.

All changes will take effect from May 1st next. A 1 per cent levy on life assurance policies will also be introduced.

Cigarettes are to increase by 25 cent a packet and diesel will rise by 5 cent a litre from midnight.

Mortgage interest relief for owner-occupiers will only apply for the first seven years of a mortage under new rules while the level of tax that investors can claim on residential rental properties will now only apply to 75 per cent of interest paid.

A National Asset Management Agency to take over bad debts from the banks also forms part of Mr Lenihan’s Budget. This will take between €80 and €90 billion off the banks’ books, thereby freeing up lines of credit, Mr Lenihan said.

"Fairness must be the cornerstone of all our efforts," Mr Lenihan told the Dáil. His speech was delayed for about 10 minutes as Opposition TDs objected to copies of the Budget being given to members of the press in the Dáil beforehand.

Starting his speech, Mr Lenihan said: "What is wrong in our economy can be fixed if we take the right course of action now." But he said that “sooner rather than later” he was confident Ireland would be in a positioned to take advantage of a global upturn.

He said six steps were needed to restore Ireland's economy. They are: to stabilise public finances, restore damaged banking system, boost exports, protect jobs we have and invest in retraining, to support and stimulate economic confidence and restore reputation abroad.

The minister said pensions for serving TDs would be discontinued and Oireachtas expenses would be cut by 10 per cent.

Mr Lenihan said that after measures announced in today’s Budget those on the minimum wage of €17,500 would pay additional tax of €350 per annum (2 per cent), those on €50,000 per annum would pay €1,500 per annum (4 per cent), while those on €300,000 would pay €15,655 every year, or 9 per cent of earnings.