The 26 County Minister for Finance Brian Lenihan has confronted the Irish people with the toughest Budget announcement in the history of the State.
His emergency budget to tackle the economic collapse in the state was introduced in the Dublin parliament this afternoon.
He has doubled the income and health levies, scaled mortgage interest relief down to nothing and cancelled all Christmas social welfare payments.
In addition, he introduced the means testing of child benefit to all parents. The early childcare allowance paid in respect of pre-school children will be halved from May and abolished by the end of 2009.
The income levy for those earning between E15,028 and E75,036 will double to 2 per cent. Those earning up to E174,980 will double to 4 per cent and those earning over this will be subject to a 6 per cent levy.
The health levy will also double to four or five per cent, depending on income. All changes will take effect from May 1st. A 1 per cent levy on life assurance policies will also be introduced.
Mortgage interest relief, a social welfare payment, will be scaled back to 75 per cent of interest paid and relief on primary residences will be allowed for seven tax years only.
He said in the next number of years taxation of child benefit, a carbon tax and a “form” of property tax would be introduced as required. He also said a reduction in payroll costs in the public sector was a “essential aspect” of the economic plan, without giving details.
A National Asset Management Agency to take over bad debts from the banks also forms part of Mr Lenihan’s Budget. This will take between up to E90 billion off the banks’ books, thereby freeing up lines of credit, Mr Lenihan claimed.
“Fairness must be the cornerstone of all our efforts,” Mr Lenihan told the Dublin parliament.
Speaking ahead of the budget announcement, Fine Gael leader Enda Kenny said that people were being “penalised” for the mistakes of Fianna Fail and challenged Brian Cowen to call an election.
Responding, the Taoiseach Brian Cowen said people were aware of the challenges facing the country and that the Budget was “another step in making necessary adjustments”. People were ready to “make whatever sacrifices necessary” to restore the economy and the public finances, the Taoiseach said.
“That’s the usual, you don’t answer questions, Taoiseach,” Mr Kenny told the House. Irish people “know well” who created the problems and are lying in wait for the Government, which will not give them opportunity to have their say, he said.
- Tax increased to generate extra E1.8bn this year alone
- Government to cut current and capital spending by total of E0.8bn
- Capital allocation reduced to E7.3bn for this year
- Mortgage interest reliefs to be curbed ahead of its abolition
- Early child care education supplement to be abolished by 2010
- Child benefit will be means tested from next year
- Christmas welfare payments will not be pai
- Public service staff aged over 50 to be alowed retire early
- Government planning further property and carbon taxes
- Five junior Ministerial positions to be cut
- Excise duty on cigarettes to rise 25 cent
- Excise duty on diesel to rise by 5 cent
- Deposit interest tax to be increased
- Income levy rates to double, entry rates to be lowered
- Health levy doubled to 4 per cent and 5 per cent
- New levy on life insurance policies to be introduced
- Capital gains tax to increase to 25 per cent, thresholds to fall
- Corporation tax rate of 12.5 per cent to remain unchanged