The Dublin government’s Finance Minister Brian Lenihan has this afternoon announced the harshest budget in the history of the 26 County state. He said the cuts and taxes announced today would “send a signal to the rest of the world that we are able and willing to put our house in order.”
Mr Lenihan revealed that the fall in the 26 County state’s GDP of 7.5% this year was the largest since records began, and that GDP would continue to fall next year.
In his third announcement of draconian cuts in little over a year, Mr Lenihan announced a billion euro in pay cuts for public service workers, ranging from 5 per cent for those on average pay to 15 per cent for the highest earners.
Blaming the need for cutbacks on a “traumatic” recession, Lenihan made only passing reference to the government’s recently passed 54 billion euro bailout for bank shareholders and real estate speculators via the NAMA ‘bad bank’. He also made no mention of a plan to pump a further five billion euro into the nationalised Anglo Irish Bank.
The cornerstone of the budget was the billion euro in cuts to the salaries of public service workers. He announced public sector pay cuts of 5% on first 30,000 euro salary, 7.5% on the following 40,000 euro and 10% on the next 55,000 euro. Those earning up to 200,000 euro will face a 12% pay cut, and 15% off those earning in excess of that amount.
A ‘universal social contribution’ is to be introduced to combine social insurance tax and the recently introduced health and income levies.
In a surprise move, all Irish nationals -- regardless of where they live -- are to be charged a levy of 200,000 euro per year if their worldwide income is above a million euro and maintain significant assets in the 26 Counties.
A carbon tax of 15 euro per tonne will mean a price hike of between 3% to 5% on fuels such as petrol, diesel, heating oil and natural gas.
The tax will apply to petrol and diesel from midnight tonight and to other fuels from next May.
Lenihan confirmed that water charges will be introduced and indicated that property taxes will follow once property valuations have been established.
Turning to social welfare, a cut of over 4% is to be broadly applied, although allowances for new applicants for job seekers allowance and supplementary welfare for those aged between 20 and 24 will be sharply cut.
Those between 20 and 21 will see benefits cut to 100 euro per week and 150 euro per week for those aged between 22 and 24.
He also announced a 16 euro cut in child benefit and a 50 cent increase on prescriptions under the medical card scheme.
Mortgage interest relief is to be abolished entirely by 2017.
An unusual new plan to provide discounted rail transport to pensioners from overseas was touted as a plan to boost the ailing tourist industry. Fro the motor industry, he revealed a car scrappage scheme to lower vehicle registration taxes for those scrapping a car more than ten years old.
In a nod to the threat to the southern economy from cross-border shopping, the minister announced a reversal of the most recent hike in VAT sales tax, dropping VAT reates by half a per cent to 21 per cent from January.
One note of Christmas cheer is the reduction in excise on alcohol of 12 cents per pint of beer or cider from January.
He has also anounced a 14 cent cut in the price of a half glass ofspirits and 60 cents off a bottle of wine.
Mr Lenihan warned vintners to “play their part in making cost of alcohol more competitive” and said if reductions were not passed on that he will reverse them. There would no change in tax on cigarettes, he added.
Inishing on an upbeat note, Mr Lenihan urged the 26-County public to recover their “optimism and belief in themselves” and declared the state had “turned the corner”.
Speaking in advance of today’s budget announcement, Sinn Fein President Gerry Adams has said that the Dublin government’s solution to the economic crisis would further depress the Irish economy.
He said that now more than ever Ireland needed political leadership based on the republican values of fairness, decency and equality “the values that were missing in the corridors of power during the ‘Celtic Tiger’ years.
“And they are still missing in the corridors of power. But these are the values of the vast majority of the Irish people.”
“And what are the so-called solutions of the Fianna Fail/Green Government to the economic crisis? They are bailing out the developers and the banks with tens of billions of taxpayers’ money through NAMA, they are cutting health and education services again and they are about to cut social welfare. Their so-called solutions will depress the economy further, target the most vulnerable and put future generations in massive debt.
“But there is an alternative and Sinn Fein has put it forward. We have shown in our Pre-Budget 2010 proposals that it is possible to raise the finance needed to maintain frontline public services, protect those in need, reduce the deficit in state finances and provide an economic stimulus package to create jobs.
“All this year people have been on the streets campaigning for a fairer, better way out of the economic recession. Sinn Fein’s task is to show an increasingly politicised population that the way forward does not lie with a conservative Fine Gael government propped up by Labour any more than it lies with a conservative Fianna Fail government propped up by the Greens.
“We need a new type of politics based on community, on solidarity and on the republican values of fairness and equality. ‘Me feinism’ has failed. It is time for Sinn Feinism.”