Business The Budget

Monday 22 September 2014

How Budget will affect pensioners and young families

Cuts to child benefit and old-age pension ruled out

Published 09/10/2013 | 04:00

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Joan Burton

CHILD benefit and the old-age pension are safe from cuts in the coming Budget, but a raft of smaller allowances will be hit to make up €300m in social welfare cuts.

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The dole and core social welfare rates will also be maintained in Budget 2014.

But Fine Gael is demanding tough measures to target the so-called "welfare culture" of people being paid so much in benefits they have no incentive to work.

As the Budget negotiations intensify, the Cabinet has gone to war over where the axe will fall.

As revealed in yesterday's Irish Independent, the Coalition has agreed that the package of spending cuts and tax hikes will be €2.5bn, down from €3.1bn.

But Fine Gael and the Labour Party are now squabbling over the use of the 'spare' €600m.

The Government is looking to safeguard the key social welfare payments – the benefits that go to parents and the elderly.

After last year's €10 cut, the headline child benefit rate won't be hit again. However, small savings within the overall child benefit scheme can't be categorically ruled out.

Likewise, the pension is protected but this doesn't mean additional allowances won't be touched.

Social Protection Minister Joan Burton is also coming under intense pressure from Fine Gael to deliver social welfare reform and tackle the culture of entitlement.

But Health Minister James Reilly is also being blamed for holding up the entire budgetary process with his failure to estimate the spending requirements for his department.

The uncertainty over the health allocation has knock-on effects for the plans in other departments.

PROTECT

Labour believes Fine Gael is trying to protect Dr Reilly's Budget by putting the squeeze on Ms Burton.

The Social Protection Minister has provisionally had her level of cuts for next year brought down from €440m to "the general ball park of €300m".

But this figure is not set in stone and there is a risk of it being moved upwards if more funding is required for the health budget.

Tanaiste Eamon Gilmore and fellow Labour ministers are backing Ms Burton's demand for her cuts to be reduced.

Public Spending Minister Brendan Howlin says there is "room for manoeuvre across all big-spending departments".

But a government spokesman said no assumptions could be made at this stage.

The new Budget target will result in €400m less spending cuts and €200m less tax hikes in Budget 2014.

The Coalition will bring in up to €600m to make up the balance of the adjustment from some once-off sources, including:

* €20m in Central Bank profits.

* €150m from the sell-off of Bord Gais.

* €200m savings on the cost of debt repayments.

* €150m from reductions in the Live Register.

* €80m from other once-off measures.

The Government is also relying on the economy to grow by 2pc next year to ensure that it hits its Budget targets.

But it now admits the economy will hardly grow at all this year – although it believes unemployment is falling faster than expected.

The Department of Finance made the admission last night as it scaled back growth projections for this year and 2014, in the economic outlook underpinning the Budget.

Gross domestic product is seen expanding by just 0.2pc this year and will rise 1.8pc next year.

However, the figures presented by the department are skewed by the fact they were based on the old €3.1bn figure, and not the €2.5bn adjustment.

Meanwhile, the ESRI, maintained its view the Government should stick with the plan to take €3.1bn out of the economy in the Budget through tax hikes and spending cuts.

The ESRI said the Government "may get away" with its reduced €2.5bn adjustment, but it echoed concerns from the IMF that more might have to be done in 2015 than expected.

By Fionnan Sheahan, Michael Brennan and Colm Kelpie

Irish Independent

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