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... while warring ministers do U-turn on child benefit cutbacks

MINISTERS Michael Noonan and Brendan Howlin have dramatically abandoned two key Budget cuts at the eleventh hour, following an angry backlash from government backbenchers and the public over 'scaremongering' by ministers.

Persistent 'kite-flying' by some ministers over potential painful cuts has enraged members of both coalition parties, "reflected badly on the Government" and forced Mr Noonan and Mr Howlin to intervene.

As a result, the plan to cut €10 off child benefit has now been abandoned for those with one or two children -- but those with more than two will suffer some cuts.

Also, the plan to make employers pay the first four weeks of their staff's sick pay has been taken off the table for the Budget.

The last-minute abandonment of the cuts comes in the wake of deep disquiet and anger over several ministers' use of highly emotive 'megaphone diplomacy' in the run-up to the two Budget announcements tomorrow and on Tuesday.

While it has been the norm in recent years for ministers to soften the ground before Budget day, the extent of the scaremongering by ministers attempting to protect their departmental budgets this year has been exceptional.

That considerable anger -- throughout both the Fine Gael and Labour backbenches -- is primarily directed at Health Minister James Reilly, who is seen as the worst offender.

Of particular offence has been his threat to close 40 public nursing homes, with the loss of 842 beds for the elderly, which has caused deep consternation.

The Social Protection Minister Joan Burton has also come in for criticism for continuing to "operate without due regard for her cabinet colleagues".

Politicians from both coalition parties were "spooked" by a wave of anger and upset when they returned to their constituencies last weekend, and they in turn made that anger known to their party leaders.

Tonight's state of the nation address by Taoiseach Enda Kenny is seen as an attempt to calm the public's fears.

According to sources, it was Mr Howlin who sought to have the child benefit cut reversed, while Mr Noonan demanded the €150m employers' sick pay proposal was abandoned.

The proposed savings have been found elsewhere in the Social Protection budget, where there will be "some very real pain", according to one senior government source.

It has been confirmed that the child benefit rate of €140 a month per child for those with one or two children will not now be cut by €10.

However, those with more than two children, who to date have received additional amounts, will now only receive €140 for each child.

At present, those with three children receive €447 a month and those with four receive €624. Under the new plans, those with three children will lose €27 a month and those with four will lose €64.

On sick pay, Ms Burton had proposed that employers would pay the first four weeks of their staff's sick pay in a move to save €150m a year.

That plan sought to transfer responsibility for paying sick pay from her department to individual employers.

Ms Burton has argued that the current system under which the State picks up the tab for most employee sickness is an anomaly and differs sharply from the practice in many other countries.

The Sunday Independent understands that there may still be moves on this sick pay measure in the New Year, but will not feature in this week's Budget.

It has also been confirmed that the third-level registration fee is to be increased again, despite vocal opposition from students in recent weeks.

The two per cent increase in VAT will, as expected, come into force on January 1 and a host of additional indirect taxes, such as household charges, will further impact on families' disposable income.

"The level of kite-flying this year has been extraordinary and has reflected badly on some members of the Cabinet, who have gone too far," according to one senior government source.

Jim Power, chief economist with Friends First, said yesterday that the whole budgetary process was "utterly depressing" and had scared the "absolute bejaysus" out of people.

He added: "The current way we do budgets dampens spending in the most crucial month of the year.

"It is crazy. But there has been considerable scaremongering this year, and it is a charade."

The decision to drop both controversial measures came during a crunch meeting between Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin on Thursday night, senior sources have revealed. They spoke to Mr Kenny and Tanaiste Eamon Gilmore at a full meeting of the cabinet's Economic Management Council, which lasted for two hours on Friday, where the decision to drop the cuts was confirmed.

Asked yesterday if tonight's televised speech was an attempt to assuage the public concern, Mr Kenny's spokesman said it was about providing clear communication and leadership.

Sunday Independent