Cowen: Scrooge or Santa?

What's the story with the Budget?With the Budget just two days away, we are waiting to see what treats the Minister for Finance, Brian Cowen, has in store for us this year. He will be able to increase spending by more than 10 per cent and, while he has promised prudence, with an election in the offing it is hard to imagine the Government not offering at least a couple of headline-grabbing breaks to consumers, writes Conor Pope

Reformation of stamp duty on property to offer some relief to first-time buyers at the very least and tax breaks on childcare costs are expected to accompany the much-flagged higher spending on education, policing and healthcare.

According to lobby groups, however, such changes will not make much difference to people's spending power unless the Government is willing to tackle the twin scourges of indirect taxation and inflation which have seen the power of Irish people's pay packets diminish in recent years, despite the fact that wages have climbed and income taxes have fallen.

The Government is always quick to point the finger when it comes to rip-offs in the Republic. Before the Ryder Cup rolled into town last September the Minister for Arts, Sport and Tourism, John O'Donoghue, warned the service industry that if it inflated prices too much, irrevocable damage would be done to the tourism industry.

Meanwhile, the Minister for Enterprise, Trade and Employment, Micheál Martin, put many of his eggs in one basket earlier this year when he expressed his conviction that the abolition of the Groceries Order would bring money-grabbing retailers to heel. For her part, Mary Harney, when she was in Enterprise, famously suggested that all shoppers really needed to do was shop around and watch prices tumble.

It is, critics were quick to point out, hard to shop around when many of the costs confronted by citizens come directly or indirectly from the Government in the form of higher energy bills, increased motor tax, higher refuse charges and increased healthcare.

Energy prices have recently been to the fore. Over the last six years the price of electricity in Ireland has increased more than four times faster than the EU average, and we have gone from being at the bottom of the EU price league to being close to the top.

Following a dramatic fall in oil prices on international markets in recent weeks, the energy regulator is currently reviewing a decision taken in September which provisionally approved a 20 per cent price hike in electricity charges. Consumer groups believe more needs to be done and the Government needs to act in this week's Budget to ensure people are not priced out of the heat and light market.

According to the Consumers' Association of Ireland (CAI), recent increases in energy costs have made it difficult for people to manage their household budgets, while the "plethora of indirect taxes" stealthily imposed by the Government explains why so many consumers are falling deeper into debt.

"I regularly hear the Minister for Finance make the point that the Government has dramatically reduced income taxes, but the burden on disposable income has increased even more dramatically," CAI chief executive Dermott Jewell told PriceWatch last week.

"The purchasing capacity people have now is considerably less than it was even five years ago. The benefits of lower income taxes or increased social welfare payments are being offset by hidden taxes," he said.

The CAI submitted a formal pre-budget submission to the Minister for the first time this year. It says it was forced to do so because of the "very significant number of consumers" who have contacted it to highlight "difficulties and concerns about the affordability of many basic and essential goods and services".

It favours a flat rate of VAT of 5 per cent on energy prices. Alternatively, it wants Cowen to apply a zero-rating to a proportion of each utility bill, with the balance liable to a full 13.5 per cent VAT, giving relief to those who do not incur a usage charge yet still have to pay minimum and standing charges at the top VAT rate.

Alongside the Irish Bankers' Federation and the chambers of commerce, the CAI has also been lobbying hard for the abolition of stamp duty on ATM, credit and debit cards, which costs users up to €40 per card each year. "Why would anyone put a tax on credit and debit cards?" asks Jewell. "Because they could and they recognised that everyone had them and it would be a handy revenue stream." At the very least, lobbyists want the tax to be applied on a per account basis as opposed to individual cards.

Despite his criticism of the Government's underhanded manner of parting us from our money, Jewell is upbeat about the Budget and is confident that Wednesday might offer some relief for Irish consumers.

"There would be something wrong if we weren't optimistic ahead of the Budget, given the current circumstances. Something needs to be done to improve the consumer's position. It should be done and perhaps, with an election coming next year, it will be done," he says.

Some are not so optimistic, however. One economist PriceWatch spoke to said he wasn't holding out for much in the way of relief this Christmas.

"Inflation is on the way up and, coming up to an election, anything that has an adverse impact on it is bound to be frowned upon. It will be a very neutral budget."

At least there will be an increase in funding for consumer advocacy and protection announced in the Budget.

"The allocation for consumer issues in 2007 will amount to just under €8.4 million," Mr Martin has said. The National Consumer Agency will have an additional €1.1 million in its war chest, a 147 per cent increase in funding since 2004 when the allocation for the Office of the Director of Consumer Affairs was just €3.4 million.

According to the Minister: "This additional funding will allow the new Consumer Agency to continue to establish itself as a forceful advocate for the consumer and to ensure that the consumer's voice is heard."

And not before time.