Budget 'to tackle sense of despair'
'Sweeteners' for public sector cuts
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Sunday April 05 2009
In a last-ditch attempt to reverse the country's fortunes and restore confidence to the economy, the Government on Tuesday plans to bring in a budget which it hopes will encourage consumer spending and foreign investment.
According to senior sources close to the Government, the emergency Budget will finally address the "confusion and despair" which has engulfed the country. Finance Minister Brian Lenihan is hoping that his budget will remove the uncertainty that has decimated the country's retail sector this year.
In his second budget in less than six months, Mr Lenihan will outline a detailed five-year programme of recovery and reform to restore economic growth by 2013.
Mr Lenihan is set to announce radical reform measures aimed at reducing numbers within the public sector. Sources close to the Government have said that a system of "sweeteners" will be used to reduce bloated public service numbers.
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He hopes that his budget will be as well received at home as it was by his EU counterparts in Prague on Friday.
While Taoiseach Brian Cowen has said the Budget will contain no silver bullet, it is seen as the first in a series of multi-annual approaches to reduce Ireland's debt levels.
Mr Lenihan is under significant pressure to deliver a progressive budget which allows him to raise much-needed tax revenues without terminally damaging the economy. He is also under pressure to stimulate consumer spending and investment into Ireland, which have all but collapsed.
The Government hopes to raise over €5.3bn in savings and extra taxes by the end of this year by an increase in the tax levies introduced in the botched Budget last October. This figure includes €1.8bn already raised by the levy and other savings.
The tax plans include a 48 per cent rate for earnings over €100,000 while income levies for all other workers will rise by one per cent.
It is also understood that he will not reduce the generous social welfare payments, but will signal that if prices continue to fall he may look at reducing payment levels in 2010. Social welfare payments in 2009 will total €21bn -- by far the biggest drain on Government finances.
Many key projects in the National Development Plan (NDP) are to be delayed significantly to ease the pressure on the public finances.
Elsewhere, the early childcare supplement of €1,000 per child under 5 years is set to be curtailed or abolished completely this year.
However, despite the size of the deficit and the massive cuts in frontline services, Ireland will still borrow over €2 billion to inject into the National Pension Reserve Fund (NPRF), a decision that has been heavily criticised.
In tandem with the Budget, Mr Lenihan is to announce sweeping reforms of the banking sector, in which he and Mr Cowen will attempt to restore public and international confidence in Irish banks. Their efforts are being seen as trying to avoid the need to nationalise Allied Irish Bank and Bank of Ireland, which remains a possibility.
- DANIEL McCONNELL Chief Reporter
