Thursday, April 09, 2009
THE Government hammered the middle classes, brought the lowest-paid back into the tax net and cancelled Christmas bonus payments for the unemployed in what was described as "the Budget from Hell".
At the same time as he hit taxpayers with €3.25 billion of levies, stealth taxes and spending cuts, Finance Minister Brian Lenihan announced a further bailout of the banks which could expose the State to e90bn of developers’ bad debts.
Controversially, however, Mr Lenihan took no action to tackle tax exiles, and deferred cutting his and other ministers’ pay until later in the year.
Instead, he doubled the income levies on workers and also doubled the health levy — taking a sizeable chunk from pay packets in the process.
As well as doubling the levies, Mr Lenihan lowered the thresholds at which they apply, thereby bringing minimum wage earners back into the tax net. The changes mean:
* Those earning between €15,028 and €75,036 will hand over 2% of their pay packet from May 1, in addition to the tax they already pay;
* The levy will rise to 4% on income over e75,036; and
* To 6% on income above €174,980.
He also increased the ceiling for PRSI, meaning anyone earning over €52,000 will have to pay more, and scaled back tax relief on mortgage interest — a move that will hit homeowners and landlords.
Basic social welfare payments were left untouched, but the Jobseekers’ Allowance for those under 20 will be halved to €100 per week from May.
Mr Lenihan left child benefit untouched but warned it would be means-tested or taxed from next year.
The Christmas bonus payment for all welfare recipients has been scrapped, in a move which will save e156m but hit needy families particularly hard.
The Early Childcare Supplement — currently e83 per child per month or €996 per year — will be halved from May 1 and abolished completely at the end of the year.
There will also be a €100m reduction in overseas development aid, while capital expenditure on roads, schools and other infrastructure has been cut by €624m. Mr Lenihan cut expenses for TDs and senators and announced that former ministers would no longer be paid ministerial pensions while still serving in the Dáil or Seanad.
An early retirement scheme for public servants over 50 was also introduced.
The Government will amend the public service pension levy to ease the burden on the lowest-paid public servants, in what was seen as a concession to the trade unions.
Mr Lenihan also announced a €100m fund to help struggling businesses, although employers’ lobby group IBEC said this was far too little.
Despite the €3.25bn package of tax increases and spending cuts, the Government will still have to borrow €20bn this year.
And Mr Lenihan warned a spate of further taxes would be introduced next year to address the ongoing crisis, with a carbon tax and property tax particularly likely.
He unveiled the budget just hours after junior minister John McGuinness claimed the Government had made "a bags" of the previous emergency budget in October — a sign of the anxiety within Fianna Fáil about yesterday’s package.
But Mr Lenihan insisted the package was "fairly balanced" with the pain spread across every sector of society and called on likely protestors to "pause for thought", adding: "We are now facing the challenge of this nation’s life."
The Opposition, however, claimed that families were being asked to "pay back" for the past 10 years of wastage by the Fianna Fáil-led Government.
Fine Gael deputy leader Richard Bruton said it was a "bookkeeper’s budget" with no imagination or emphasis on stimulating the economy and protecting jobs.
Labour deputy leader Joan Burton described it as "the Budget from Hell".
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