MOST WORKERS face substantial tax increases, while social welfare recipients will have their benefits cut as part of the €6 billion adjustment announced in the Budget yesterday by Minister for Finance Brian Lenihan.
The wide-ranging tax changes in the Budget will bring some lower-paid workers into the tax net for the first time and will hit every income group up to the top earners.
The Budget passed its first test in the Dáil last night, with the Government having a comfortable majority of 82 votes to 77 on the first vote on the measure.
Former Fianna Fáil TD Joe Behan joined Michael Lowry and Jackie Healy-Rae in voting with the Coalition.
The Budget hit taxpayers hard through a reduction of 10 per cent in the tax credits and bands, a new consolidated social charge of 7 per cent and the abolition of the PRSI ceiling. The combination of measures will lead to significant tax increases for almost all workers, with more people paying at both the standard and the higher rate.
Cuts in the childcare allowance and increases in third-level college registration fees will impact on a wide range of families.
A middle-income family stands to lose as much as €300 a month. A couple with three children and a household income of €75,000 who contribute €4,500 to their pension pot annually will see their net income fall by €1,815, or €151.25 a month.
They will lose a further €40 a month in reduced children’s allowance payments. If they have one child in university, one in secondary school and one in primary school, a combination of increased registration fees and transportation levies will see their net monthly income fall by an additional €75 a month.
Pensioners are one of the few groups to remain unscathed, with no change in the State pension, but those on public service pensions of over €12,000 will also be subject to cuts. The unemployed will have a cut of €8 a week in their benefits, while a similar cut will also apply to the carer’s and disability allowance.
Excise duty on petrol went up by 4 cent a litre and there was a 2 cent increase in diesel. There was no increase in alcohol and tobacco duty.
The Government’s controversial €10 travel tax was cut to €3 in an attempt to entice tourists.
As part of a package of cuts for top earners in the public service, the Taoiseach’s salary is being cut by €14,000, bringing his total pay cut over the past two years to €90,000. Ministers are taking a further cut of €10,000.
Salaries in the public service and semi-State sector are to be capped at €250,000 for new appointments.
President McAleese has informed the Government of her intention to voluntarily reduce her salary in 2011 to the maximum rate of pay of €250,000 per year.
Reform of the system of State cars will see the cost of the fleet reduced by a third over the next two years.
As already announced in the four-year National Recovery Plan, the minimum wage is to be reduced by €1 to €7.65, but those on the new rate will remain outside the tax net.
A surprise element of the Budget is a fundamental reform of the stamp duty regime, aimed at stimulating the moribund property market. A flat rate of 1 per cent will be applied to all transactions of residential property valued up to €1 million and 2 per cent on amounts above €1 million.
Third-level registration fees will rise to €2,000, but families with more than one child in college will continue to pay the existing fee of €1,500 for the second and subsequent children.
Concluding his speech, Mr Lenihan said: “Today’s Budget is our first step in ensuring that we can get back firmly on our own feet.”
Fine Gael finance spokesman Michael Noonan said the Budget was the product of “a puppet Government who are doing what they have been told to do by the IMF, the EU Commission and the European Central Bank”.
