Comment
This Budget is strongly deflationary. The Government over the past 18 months has made budgetary adjustments of more than €8 billion for this year.The budget will take another €3.8 billion out of the economy. Whilst it is undeniable that a further €4 billion in adjustments was required, the campaign to prepare public opinion -to accept harsh medicine- was ugly, petty and vindictive.
It particularly targeted Public Servants and Social Welfare. Public Servants will feel strongly aggrieved. They have been targeted for savage pay cuts. These latest are in addition to the 7% pension levy and other levies previously introduced. Indeed public servants have been subjected to a campaign of demonisation in recent months. Much of it bordered on incitement to hatred. They were attacked for having a job as private sector unemployment rose sharply. The government, builders and bankers contributed to this appalling financial mess. Whilst is it only fair to say that the international banking crisis was a contributory factor to Ireland's problems on balance most of the problems were domestically generated. There has been a sustained campaign to deflect blame from the real culprits onto public servants. It has weakened social cohesion. In short it is playing with fire. The decision to cut 5% for public servants earning up to €30,000 of salary is political dynamite. The FG alternative Budget here provided a far more equitable solution. It exempted public servants earning up to €30,000 from pay cuts yet has a far more coherent set of proposals.
There is an assumption that 3 billion in cuts can be expected in next year's budget including a further €2 billion in current spending. Somehow I expect that it may be more. In addition no mention has been made of the banks which will require further injections from the exchequer in 2010. Expect a new anti public servant campaign to start as 2010 progresses. This will prepare the way for more pay cuts and redundancies. This has the potential to trigger massive disruption.
Much has been made of the fact that the OAP was not cut in the Budget. The failure to pay the Christmas bonus to OAPs amounts to a cut of 2%
Budget Summary
•Social welfare payments will be reduced by 4.1% except for OAPs. No Christmas bonus.
•Child benefit will be reduced by €16 per month (welfare-dependent families not affected)
•Jobseekers' Allowance will be reduced to €100 a week for those aged 20 and 21 with no children, and to €150 for those aged between 22 and 24 and in cases where job offers have been refused
•Plans to introduce domestic water rates and rates on houses.
•Tiered pay cuts for public servants - 5% on the first €30,000 of salary, 7.5% reduction on the next €40,000 and 10% on the next €55,000 of salary
•Public servants' pensions will be linked to average salary across career, rather than final salary (for all new entrants to the public service from 2010 onwards)
•VAT rate reduced - 21.5% rate dropped to 21%
•Excise duty on alcohol reduced - 12c cut on beer and cider, 14c cut on a measure of spirits, 60c cut on a bottle of wine
•No change to tobacco tax
•50c charge for every medical card prescription from April
•Carbon tax of €15 per tonne - petrol to go up by 4.2c from midnight, and diesel up by 4.9c.
•Hospital consultants will see their pay cut by up to 15%
•People with a certain level of assets at home and abroad will have to pay €200,000 per year to maintain their Irish passport
•New 'universal social contribution', which will replace employee PRSI, the Health Levy and the Income Levy
•Taoiseach's salary to be reduced by 20%
•Mortgage interest relief - Extended to 2018 for those who now find themselves in negative equity. Abolition of Mortgage interest relief entirely by end 2017.
•Flood relief - More than €70m to be given to help victims and stop future floods
•National Solidarity Bond aimed at small investors to be launched
•Discounted rail vouchers to be given to senior citizen tourists to Ireland
•Scrappage scheme announced - Get around €1,500 off your Vehicle Registration Tax on a new low-emission car, if you trade in a car at least 10 years old
•The minimum pension age for new public servants will be increased from 65 to 66 - then linked to increases in the State pension age.
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