Coalition signs off on bulk of budget

 

Most of the detail of Wednesday’s budget comprising €3.5 billion in cuts and tax rises was signed off at the weekend amid last-minute tension between Labour and Fine Gael.

Government sources said the spending side was “pretty much agreed”. However, some other elements of the budget, such as an extension of PRSI to cover more income, were still to be concluded.

Key elements in the package are said to include a property tax of 0.2 per cent of house value, with a higher rate or “mansion tax” for residences valued above €1 million; a child benefit rate cut of €10; a motor tax increase of 15 per cent; and a reduction from 12 months to nine for payment of non-means-tested jobseeker’s allowance.

Basic State pension rates are expected to remain untouched but cuts in electricity, gas and telephone allowances are likely. However, last night Minister for Transport Leo Varadkar confirmed through a spokesman the free travel scheme “will not be affected in the budget” despite a proposal to alter it.

Informed sources said fee-paying schools were likely to see a two-point increase in the pupil/teacher ratio, from 21:1 to 23:1, which comes on top of increases last year.

Maternity leave cut

In a separate move aimed at generating savings of about €20 million, maternity leave for teachers is expected to be cut by up to six weeks. Sources said this move would involve a rowing-back on an agreement with trade unions which provided teachers with an additional 30 working days’ maternity benefit on top of the standard 26 weeks which applies across the public service.

A proposed 15 per cent increase in motor tax comes on top of stubbornly high fuel costs for drivers. Low-emission vehicles will no longer be eligible for lower rates, sources said. The motor tax hike is expected to raise a further €150 million for the exchequer. A proposal to abolish the PRSI flat rate allowance of €127 is still to be decided.

Government sources said tensions between the Coalition parties were “pretty high during the week” with the main internal debate focused on Labour’s proposal for a 3 per cent increase in the universal social charge (USC) for those earning €100,000 or more per annum. Although Fine Gael regarded this as a gesture which would bring in little or nothing in extra revenue, it was prepared to concede it in return for an equal cut of 3 per cent in all social welfare rates except pensions.

Fine Gael argument

The Fine Gael argument was that this would bring in “massive savings” of an extra €600 million, allowing the Government to avoid cuts in health and education spending. However, Government sources said Tánaiste and Labour leader Eamon Gilmore took a stand against this proposal, which would have run contrary to its commitment not to cut basic welfare rates.

Increasing the USC on high-earners would have been seen as a breach of the Fine Gael commitment not to increase taxation levels. The parties are said to have secured agreement instead on an alternative proposal, to impose a mansion tax by setting a higher rate of tax on residences valued at €1 million or more.

Fine Gael sources claim to have blocked Labour proposals for cuts in the bereavement grant of €850 to cover funeral expenses and the half-rate carer’s allowance.

A Cabinet meeting took place on Saturday. The fact that no further meeting is planned until Wednesday morning is being cited as evidence the parties have reached agreement on most details of the budget.

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