independent

Monday 21 April 2014

Budget 2014: Unkindest cuts are kept till last

* Pensioners, savers, working mothers hit
* Boost for business, tourism, job creation
* Family health insurance costs set to rise

THE Government waited for the final Budget under the troika to implement some of the unkindest cuts of the entire bailout period.

Pensioners, medical card holders, working mothers, the young unemployed, savers and families with health insurance were all targeted in a series of painful cuts and tax increases totalling €2.5bn.

Low- to middle-income families with sick children are in danger of losing their medical cards as a result of a widescale 'review'.

The cull of more than 150,000 medical cards is emerging as a potential flashpoint of the Budget – overshadowing the move to give a GP-only card to every child aged under five.

The shock measure came on top of one in 10 pensioners over the age of 70 losing their medical card due to a change in income thresholds.

Health insurance costs for families could prove explosive. Premiums are likely to rise after the move to reduce the tax relief on policies and charge insurers more for using public hospitals. The measure is expected to indirectly affect 90pc of health insurance premiums.

Pensioners are also set to lose their telephone allowance, which will cost them €114 a year.

But the Budget did contain measures designed to stimulate the economy, create jobs and boost tourism, the construction sector and the property market.

The Coalition also began to crack down on the black economy and pledged to tackle the contentious issue of tax avoidance by multinationals.

Finance Minister Michael Noonan said the purpose of the Budget was to continue the progress already made, reinforce policies to grow the economy, establish the conditions to create jobs "and to prepare for exiting the bailout programme".

He added: "We are well along the recovery path and it is time now, as a nation, to begin to look forward."

But Fianna Fail finance spokesman Michael McGrath picked out the scrapping of the bereavement grant as an example of the cruel cuts in the Budget.

"Even the dead, Minister, are not safe from this Government," he said.

Budget 2014 contained a series of savage cuts, which the Government had previously avoided carrying out. The Coalition aims to push people out to spend by hiking up the tax on interest on savings from 33pc to 41pc.

And it was confirmed that PAYE workers will have to pay PRSI on any interest they earn. This means that almost half of every €1 earned in interest on savings will now end up with the taxman.

No change was announced to child benefit, but it had already been signalled that the rate for the fourth child and subsequent children will fall by €10 a child to €130.

Workers escaped a hike in income tax and there is no change to the controversial universal social charge.

But homeowners are facing a full year of property tax. This will effectively mean a doubling of the tax from January. The average home faces a bill of €300 for property tax next year.

Pension savers were also hit with a higher levy on private schemes next year and another levy in 2015.

Mr Noonan said he was lowering the tax relief on health insurance premiums, but he insisted this would only affect "gold-plated" policies.

However, the body that represents health insurers said the change to tax reliefs for policies would affect 90pc of all health insurance products.

Insurance Ireland's Michael Horan said the change would not just hit the more expensive policies.

The cost of a pint and a measure of spirits will rise by 10c each. Mr Noonan also announced a rise of 20c in the excise duty on cigarettes.

Wine was hit again this year. The cost of a bottle rose by 50c last night, a year after €1 was imposed on the tipple.

Women who have babies from next January will see the maternity benefit "standardised" at €230 a week for 26 weeks.

Most women get a higher rate of €262, so there will be a huge loss for new mums.

And the bereavement grant of €850 goes.

Mr Noonan promised to crack down on moves to "aggressively" lower corporation tax by multinationals.

A host of measures was announced to encourage people to set up in business on their own.

Some 26 "pro-business and pro-jobs" initiatives were announced.

And all the retail banks in the country will be hit with an annual bill of €150m every year for three years – a cost that it is feared will be passed on to consumers.

Homeowners will be incentivised to renovate their homes with a tax credit if they use a builder who is paying VAT.

The Home Renovation Incentive will give up to €4,050 for renovations and maintenance and can be claimed on home improvements costing between €5,000 and €30,000.

But the medical cards clampdown will have wide-ranging consequences.

More than 155,000 people are at risk of losing their full medical cards amid warnings that 2014 could be the toughest year yet for the health service.

Under the measures announced in the Budget, the income thresholds for the over-70s will see 35,000 lose their eligibility for a medical card and downgraded to a GP-visit card in a bid to save €25m.

Another 22,000 people who were unemployed and promised they could hold on to their medical card for three years after they got a job are also to be reduced to GP-visit cards as part of an €11m crackdown.

The Health Service Executive (HSE) has also been ordered to shave €113m from its medical card spending next year by pursuing people who are no long eligible for reasons such as employment, emigration or death.

Health Minister James Reilly, pictured, was unable to say how many this "probity" measure would remove, but Fianna Fail has estimated it could see 100,000 lose their medical cards on the basis that each card costs an average of €1,000.

By Fionnan Sheahan  and Charlie Weston

Irish Independent

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