Budget 2012: No income tax, public sector pay or social welfare cuts
Published 20/10/2011 | 05:00
INCOME tax, public sector pay and basic social welfare rates will remain untouched in the December Budget.
The Government has convinced the EU/IMF that it can hit next year's bailout targets without making changes in the three key areas.
The news will be presented as a political victory since the Fine Gael/Labour Coalition has publicly vowed to protect all three areas.
But some €4bn of savings will still have to be found in the Budget, and are likely to come from a range of stealth taxes and spending cuts.
Sources last night said that detailed talks on those savings would continue with the EU/ IMF in the run-up to Budget day on December 6.
Officials from Europe and the IMF are likely to face questions on the issue later today when they host a press conference on their latest review of Ireland's bailout.
At the conference, the officials will commend Ireland's progress in implementing the bailout plan laid down last December and say the country is on the right track to fixing its economy.
Sources said no major issues had been identified over the 10-day mission, though the international authorities would like to see more progress on the reform of Ireland's labour markets.
The bulk of the mission has focused on the public finances, and authorities have been extensively briefed on the Government's plans for a three-year budget statement and the upcoming Budget.
Many thought the Government would struggle to hit 2012's budget targets without touching the 'holy grails' of public sector pay, basic social welfare rates and income tax.
It is understood, however, that the EU/IMF teams have accepted "in principle" that the targets can be reached through other cuts and charges.
Sources suggested stealth taxes, like property taxes, were likely to feature and that some social welfare payments, like rent support, could be hit.
"That all has to be discussed in the run-up to the Budget," one source said.
Others pointed out that while the outlook was good heading into 2012, there were still "dangers" that could derail Ireland's economic progress, including the European financial crisis.
If that happens, it may not be possible to keep Ireland's public sector wages at their current levels or to protect income taxes and social welfare payments, they said.
Some within the international authorities would like to see Ireland go further in this year's budget, as recommended by the Fiscal Council last week, which called for €4.4bn of cuts.
It is understood that the Government gave the EU/IMF teams no indication that it will follow the Fiscal Council's advice in this regard.
The international officials also met with the bailed-out banks this week and were updated on their recovery.
No concerns were raised about their level of capital and sources said the banks appeared to be "on track".