Budget an impossible balancing act with only pain guaranteed

Published 29/11/2012 | 08:58

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THE GOVERNMENT has a difficult balancing act to perform ahead of next week's Budget.

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Faced with our inherited debt mountain, it has to bring in significantly more money through a combination of cuts and taxation, yet make this too onerous and any signs of the green shoots of recovery will rapidly wither.

Just how it will raise enough to balance the books is still officially under wraps, but there is little doubt about one thing: Most of us will be less well off after the Budget than before it.

It is unlikely that pensions will be affected, given the power of the grey lobby, but it's likely that pensioners, like the rest of us, will be hit in some way or another.

Those on social welfare too are likely to be hit, with the unpopular Household Tax likely to come straight from dole and other benefits while those in works will see it taken directly from their pay packets as the government works around the kind of people power boycotts which have made current and modest house tax unworkable.

But while the government collectively ponders its economic navel, there are areas which need investment, not additional taxation, and areas where cuts in taxation - for instance fuel duty and VAT on home heating oil - would bring relief to hard-pressed households which have seen their incomes plummet over the past few years.

Sometimes you can only be left wondering that this government is actually listening to the people that elected it. The harsh realities of the recession and the national debt are wearing away at people's resolve and many believe the coalition pays more heed to its creditors than its own people when it comes to deciding economic policy.

One of the big issues the coalition government is facing is trying to find middle ground for two very divergent views - Labour and Fine Gael are uncomfortable bed fellows.

At this time there are credible reports that Fine Gael is threatening to press for a cut in the dole if Labour pushes on with its campaign to increase taxes on higher earners. The question is who will blink first.

Labour wants to increase the so-called Universal Social Charge on those earning more than €100,000 by three per cent to 10 per cent, however, the Programme for Government agreed by the two parties commits them to no tax rises or cuts in basic welfare rates during the government's lifetime.

Most of the population - those fortunate enough to be in work - earn far less than €100,000 and the additional tax would only generate €71 million so it's hard to see why Labour is pressing so hard for it, other than as a sop to its traditional supporters.

So the next few days will see some tough negotiations between our Coalition partners as they try to come up with a Budget that will prove acceptable to the electorate and bring in enough in the shape of cuts and taxes to keep the country going, albeit it at a snail's pace.

Declan Malone is on holidays - his weekly 'Taking Stock column will return next week.

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