Friday 18 January 2019

Charlie Weston: Cowardly Budget hits old reliables -- mum and dad

Charlie Weston

Charlie Weston

FAMILIES with children got clobbered yesterday by a Cabinet that seems hell-bent on hitting what it sees as a soft target.

Households with young children and a mortgage are under huge strain from the recession and hikes in levies in the past two Budgets, while also suffering job losses and pay cuts.

Yesterday's cut of €16 a month in child benefit will remove €192 a year per child from the family budget.

Families with children under five are already reeling from the removal -- from the end of this month -- of the early childcare supplement, which was worth €1,000 a year.

Now the household income is to take more knocks from a rise in petrol and diesel prices, higher home heating prices, from May, and cuts in dole payments.

Those families spending a lot of money on medicines will also lose out from changes to the drugs payments scheme.

Up to now, the State was picking up the tab for expenditure of more than €100 a month on prescription medicines. The threshold is now €120.

If the family has a medical card, it will now face a 50c prescription charge.

The changes in child benefit will hit families hard, particularly as it was tax-free income. A family paying tax at 41pc would need to earn an extra €30 a month to make up for the €16 cut per child in the benefit.

Remember too that childcare costs in this country are among the highest in the world.

It takes around a third of the household income of a two-income couple to pay the childcare costs of two children here, the Organisation of Economic Co-operation and Development (OECD) has found.

Finance Minister Brian Lenihan said the cut in child benefit would save €760m from the €2.5bn spent on the payments.

Again, families are proving to be the soft target. Indeed, it would not be unfair to say that the Cabinet has carried out another cowardly attack on families.

Far braver would have been to go after those on public sector pensions -- one of the few groups who are benefiting from the bust.

But the hysterical reaction of pensioners last year to the move to take away medical cards from the over 70s seems to have made this group untouchable in political terms.

But 90,000 people on public sector pensions are costing €2bn a year, a figure not dissimilar to what child benefit will cost after yesterday's cuts.

Those with a public sector pension will have retired on half their final salary, and have received a tax free lump sum of one and a half times that final salary. They are benefiting from one of the finest pensions in the world.

Untouchable

This means that a retiring principal officer on €100,000 will have retired with a lump sum of €150,000, and an annual pension of €50,000.

By contrast, a person still working as a principal officer will no longer be earning anything like €100,000 after the imposition of the pensions levy last year and yesterday's pay cut to public servants.

The retired public servant is now sitting pretty -- as the value of their pension has shot up.

The cuts to the pay of those still in the public service mean some retired public servants are now commanding a pension of 60pc to 70pc of their final salary.

And deflation has left retired public servants with huge amounts of disposable income.

Unlike our young family, they will not be burdened with a large mortgage and childcare costs of €700 to €800 per child a month.

Retired public servants are the real winners in the downturn, but families are less able to stand up for themselves.

That is why the 'untouchable' retired public servants have been spared, but the 'easy-touch' families got hit in this Budget -- just as they did in the last two.

Irish Independent

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