‘Budget from hell’ warning

Ministers in the 26-County government have admitted that tomorrow’s budget will be a tough one, impacting on everyone, and that major tax increases are on the cards.

The Minister for Finance Brian Lenihan is faced with a growing hole in the public finances as the state struggles to cope with a severe domestic downturn and an international crisis that still threatens to overwhelm the Irish banking system.

This morning, Transport Minister Noel Dempsey said the government would have to find money from somewhere to cover the cost of social welfare. He said that would mean tax increases for those who can afford it.

Tanaiste Mary Coughlan said that in the face of a twelve billion Euro shortfall, there was no doubt it would be a difficult budget.

Minister for Social and Family Affairs Mary Hanafin said the government had done its best to be fair, but that everyone would have to play their part in getting the public finances back on track.

“We will make the necessary tough choices so that we can chart a course for economic renewal,” Mr Cowen told the annual Fianna Fail Wolfe Tone commemoration at Bodenstown yesterday.

Reports have suggested an income levy of 1 per cent, with a possible 2 per cent for high earners, rather than an increase in the top tax rate of 41 per cent.

The current income ceiling of O50,700 for PRSI social insurance contributions will be raised or abolished altogether.

When it comes to the “old reliables” a massive increase in the price of cigarettes is expected with a more modest increase in tax on alcohol.

A major redundancy package for public servants and the merger or abolition of moribund State agencies is expected to save hundreds of millions in the long term.

In social and family affairs, the early childcare supplement of O1,000 for every child under six is to be cut, reports indicated.

In education, while the reintroduction of third-level tuition fees is unlikely in the short term, a big jump in registration fees has been signalled for some time.

Large infrastructural projects appear likely to be postponed, including the 4 billion Euro Metro to Dublin airport and, potentially the bitterly opposed M3 motorway through the Tara valley.

FISCAL FORESIGHT

Sinn Féin Economic Spokesperson Arthur Morgan TD today urged the government not to revert to type by falling back on shortsighted cuts in public services that would cause lasting damage on the economy.

The Deputy for Louth said Budget 2009 should be seen by the government as “an opportunity to take the first steps on the road to economic recovery”.

“Budget 2009 must aim to stabilise and re-invigorate the economy, prioritise job creation, deal with the needs of low to middle income earners facing unprecedented cost-of-living pressures, tackle unemployment and address the massive shortfall in public finances.

“The government’s decision to underwrite the banks means there will now be particular focus on any attempts to cut public spending. The Irish people will not accept government claims of an empty purse in the wake of such a momentous guarantee,” he said.

Despite some resistance from the party’s left-wing, Sinn Féin last week voted in favour of the government’s 440 billion Euro state guarantee for the six Irish banks and building societies as they faced potential ruin. The crisis move, the first in Europe, was extended this week to include the banking operations of British and other European banks in the 26 Counties.

Mr Morgan said the Dublin government’s intervention in the financial sector had now given the Minister for Finance “significant powers” over the Irish banks.

“It is essential that he uses those powers for the benefit of the state and ensures proper payback for the taxpayers who have funded this insurance scheme,” he said.

He called for a new bank levy to be introduced which could help homeowners in current difficulty.

Sinn Féin has made a number of proposals on tax reform, including the increase of the tax credit for PAYE workers by 5%, the removal of the PRSI ceiling, and an additional 1% health levy for those earning in excess of 100,000 euro to increase availability of medical card benefits.

“Tomorrow’s Budget must be used by the government as an opportunity to turn around the fortunes of the state whilst in tandem protecting the most vulnerable and a reprioritising of job creation and enterprise to ensure the economy’s sustainability into the future.”

* A detailed synopsis of the 26-County budget for 2009 will be published here as it becomes available tomorrow afternoon.

Urgent Appeal