Saturday 16 December 2017

Four-year budgetary plan: The main elements

THE Government's four-year budgetary plan is being driven by the need to show the EU the country can reduce its deficit (an eye-watering 32pc of national income this year) to just 3pc of national income by 2014.

And it will be one of the most painful documents yet seen by a public which has had to grow used to tough Budgets in the past two years.

The four-year plan will contain €15bn of spending cuts and taxation increases to achieve the 3pc deficit reduction target.

Given that the Government's term ends in May 2012 (and it could be out of office much earlier than that), it will not get to implement the plan in full.

Fine Gael and Labour are both committed to achieving the 3pc target by 2014 but not to implementing the exact plan drawn up by the Government.

Property tax to be introduced and stamp duty phased out

THE first phase of a property tax could be introduced as early as next year in the form of a "local services charge" of around €100.

This could be progressively increased each year until 2014 -- when the State should have enough information to introduce a property tax based on the value of people's individual homes.

Local authorities will be allowed to retain the funding from the local services -- the aim is to develop a sustainable source of revenue for them rather than relying on government grants. And the much criticised system of stamp duty will be phased out.

Water charges

THERE will be no water charges in the December Budget but there will be a pledge to introduce them as soon as the process of installing water meters is completed. That's expected to be in two years' time.

€1 cut to the minimum wage of €8.65 per hour

ALTHOUGH long called for by employers' groups, this will be one of the most controversial measures in the four-year plan, due to the severe effect it will have on low-paid workers. Department sources are adamant that a cut is included.

Brian Lenihan moved yesterday to lay the ground for a cut in the minimum wage by saying it had been "increased far beyond the rate of inflation" in the past decade.

Widening the tax net to take in more of the 50pc of workers who pay no tax

LOWER paid workers could be among the main "losers" in the next Budget, when the planned cut in the minimum wage is factored in as well. Department of Finance officials have been looking at the possibility of gathering taxes from the 50pc of workers who currently pay no income tax -- although they are being hit by the income levy.

5pc cut to child benefit and all other social welfare payments (except state pensions)

SOCIAL Protection Minister Eamon O Cuiv pointed out recently that the State is spending €120m-per-day on social welfare. Cuts to the €20bn-plus social welfare budget have been coming for a long time, and it appears the Government will make an across-the-board 5pc reduction in most social welfare payments, such as child benefit and job seekers allowance.

Last year, there was a 4.1pc cut with only pensioners escaping the axe. The Government is planning to leave the state pension untouched this time too.

Levy on public sector pensioners to bring in up to €200m

ALTHOUGH state pensioners are set to escape social welfare cutbacks, the Government is planning to target retired public service workers who receive an additional pension on top of the state pension. The bill for public service pensions is €2.8bn this year -- and it has been a target of the Department of Finance for some time now.

20,000 more public sector job losses

ON the face of it, this appears to be a large number. But around 11,000 jobs in the public sector have already been lost because of the moratorium on replacing those who retire or leave.

The Government is seeking 5,000 redundancies in the HSE and will have until 2014 to achieve the remaining number through retirements and "natural wastage".

The 20,000 target is higher than the 14,000 target set in the Croke Park agreement and the 17,000 called for by the Bord Snip Nua report.

Further cuts to legal fees

THE Public Accounts Committee heard earlier this year that the State spends up to €500m annually on legal fees, so the potential for savings is vast. Legal fees and other professional fees were cut by 8pc in last year's Budget, but it appears they will be cut further in the four-year plan.

Michael Brennan

Irish Independent

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