€6bn cut and run
Published 08/12/2010 | 05:00
FAMILIES are reeling from a savage Budget that will take €3,000 from the average household.
Income tax rises, cuts to child benefit, higher petrol prices and a string of other charges will leave low and middle-income families much worse off.
However, Finance Minister Brian Lenihan's €6bn Budget -- Fianna Fail's last for some time with a general election rout likely -- did not contain any root-and-branch economic reforms.
Rather than going for more wide-ranging public sector reform, the Government stuck to the Croke Park deal and failed to announce any dramatic new job initiatives.
The passage of early Budget votes also failed to bolster embattled Taoiseach Brian Cowen's position, with widespread speculation circulating about his leadership.
Senior Fianna Fail sources indicated Mr Cowen may have to stand down or else face a challenge before the Dail returns in the second week in January.
But Mr Cowen last night denied he is planning to resign today, and vowed to fight on to lead Fianna Fail into next year's General Election.
"From my point of view, yes, I'll lead Fianna Fail into the next general election," he said.
The income tax changes in Budget 2011 will leave a family on €55,000, with one income, around €1,250 worse off.
This is due to cuts in tax credits, which pushes most earners into paying more tax. And tax bands have been lowered, which means people will pay tax at the higher 41pc rate on more of their income.
The combined changes in the tax credits and the tax bands will mean an estimated 300,000 more people will be brought into the tax net.
A family with three children will be €480 a year down from the reductions in child benefit.
And it will cost some €300 a year more to provide for a pension. Households will also be hit by higher petrol and diesel prices, in a move that will cost drivers around €72 a year. And the tax on interest on savings is to rise by 2pc to 27pc.
If the family has a child in college, the cost will rise by another €500 in college fees to €2,000 a year for the first child.
The charge for a private bed in a public hospital will go up by 21pc, a measure which is likely to result in an increase in the cost of private health insurance of as much as 10pc.
Retired people with a private pension have also been hit.
From next year, tax along with the universal social contribution will be paid on income over €18,000 for the single pensioner and €36,000 for couples. This will mean over-70s with a medical card, will be paying an additional €1,000.
The Government began the passage of the draconian Budget with a series of comfortable victories on Dail votes.
The coalition's majority increased to four after independent Joe Behan weighed in behind the Budget.
Mr Lenihan hailed the fact that the first Budget vote had been passed by 82 votes to 78.
Aside from Fianna Fail, Green Party and so-called 'gene-pool' TDs, the coalition was also supported by independents Michael Lowry, Jackie Healy-Rae and Mr Behan.
Defending the changes made to the income tax system, Mr Lenihan explained away the decision not to impose a salary cut on TDs, saying they would now be subjected to a special 4pc PRSI contribution after previously having paid a zero rate.
And he confirmed Dublin-based ministers might have to pool their state cars "subject to security considerations".
Mr Lenihan refused to say he felt "shame" on behalf of his Fianna Fail party for having to bring in a draconian Budget.
But he accepted "serious mistakes" were made by the Government prior to his appointment as Finance Minister in May 2008.
Fine Gael raised the prospect of an early Budget next year if the Government's actions are failing to produce the savings ordered by the IMF and EU.
Party finance spokesman Michael Noonan said the Budget flunked the job-creation challenge, and hit the most vulnerable and lower and middle-income earners.
The Labour Party last night claimed the multi-billion package of cutbacks was the "last vicious sting" from the outgoing Fianna Fail-led Government.