New IMF list of cuts hits our pocket even harder
PENSIONERS, parents and homeowners are targeted in a stinging new report by the IMF.
The international monetary watchdog recommends a host of new taxes and cutbacks which would hurt ordinary households in the pocket.
But Finance Minister Michael Noonan said he would not follow their recommendation to impose a penal property tax.
Mr Noonan, who must find another €3.5bn when he announces the Budget in December, tried to play down the impact of the report.
The IMF wants him to impose:
- Reductions in the old age pension, including the merger of the contributory and non-contributory pension. This would knock €11 off the average weekly contributory pension payment.
- An annual property tax of 0.5pc of the value of a house. This is twice the Government's target and would push property tax to €835 on an average house worth €167,000.
- Changes to child benefit -- either by means-testing or income tax.
- Changes to the medical card regime to hand out fewer cards.
- The re-introduction of college fees and a system of bank loans for students.
- Closer scrutiny of the Croke Park Agreement.
The minister, who today begins a tour of European capitals to help secure a deal on our bank debt, said the IMF demands were "simply advice".
"It is not mandatory to accept any of the advice. It is simply advice. Of course, it is well- founded advice coming from the IMF," he said at Fine Gael's think-in.
He said the property tax was not going to be set that high. "I wouldn't intend making a proposal to Government at that level. I think it is too high."
The Government can afford to ignore IMF recommendations when they appear in an annual review. But the suggestions are likely to form the basis of future negotiations if the Government fails to meet the targets set out in the bailout agreement.
The Government still says it can meet those targets but many outside organisations, including the IMF, are not sure.
The IMF -- one of three organisations that makes up the troika that organised our bailout in 2010 -- said in its annual report on Ireland that the Government must find ways to save money as the economy slows faster than expected.
The IMF said yesterday that the targets were only possible if the international economy picked up and Europe agreed to some sort of deal on reducing the debt burden associated with the bailout of Anglo Irish and the other banks. The Government has repeatedly promised such a deal but has so far failed to deliver.
The report calls for a reduction in state pensions which have been exempted from cuts so far despite a fall in the cost of living. One approach would be to reduce or eliminate the premium -- currently 5pc -- on the contributory pension over the means-tested pension, it says.
The IMF's recommendations were contained in a 111-page report on the Irish economy.
The Government faces a series of difficult Budgets in the years ahead and the IMF and other troika partners want Mr Noonan to start explaining to people what will happen over the next few years. They don't like the Irish system where reforms are only announced in the annual Budget because it saps consumer confidence. The Washington-based organisation also complains that the public sector pay bill remains high and urges continued monitoring of the Croke Park Agreement.
The IMF also takes a swipe at the health and education sectors, which cost more than average but do not perform any better than average.
"In health, potential reforms could include new working models to minimise premium and overtime payments, greater use of primary care rather than hospital stays, and substantially increasing the currently low share of generic drug use."
In education, it wants new college fees and more vocational courses that lead to jobs.
"A new funding model for higher education can deliver broad access to high quality education without additional public investment by better taking into account skills priorities in course availability, and linking college fees to the costs and earnings potential of courses," the fund says.
The IMF also says European leaders must deliver on a promise to cut the €64bn cost of Ireland's bank rescues if the country is to escape the bailout.