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Families will bear brunt as the harshest Budget in our history is agreed

THE harshest Budget in our history was all but signed off on today as Fine Gael and Labour found a "middle ground".

A last-minute 'mansion tax' formed the basis for agreement after a weekend of tough negotiations.

But while Labour will try to sell the extra tax on houses over €1m as a "tax on the rich", it will be middle-income families who will bear the brunt of the cuts yet again.

Finance ministers Michael Noonan and Brendan Howlin have now agreed:

•A €10 cut in child benefit.

•A 15pc increase in motor tax.

•A property tax of 0.2pc on the value of the home with properties worth €1m and above slapped with a 'mansion tax'.

nA raft of cuts affecting pensioners, with fuel, telephone allowances and medical cards all in the firing line

•The reduction from 12 months to nine for payment of non-means-tested jobseeker's allowance.

•A series of cuts in the education system, including the raising of the pupil teacher ratio in private schools

They have also ruled out a series of proposals including:

•A higher rate of USC for earnings over €100,000.

•Any cuts to basic social welfare rates

•Cuts to the OAPs' free travel scheme

Government sources today admitted that consensus had been reached on "virtually all" budgetary decisions, with just a handful of measures set to be ironed out before Wednesday.

But after a series of heated Cabinet discussions, Labour backed down on its demand to hit those earning €100,000-a-year or more with a higher rate of Universal Social Charge (USC).

Fine Gael Ministers such as Michael Noonan said the party would only allow the USC hike in return for 3pc cut in all social welfare rates bar pensions.

The Cabinet eventually compromised on what is being dubbed a 'mansion tax' --- which will see homeowners of properties valued at €1m or more paying a super property tax of 0.5pc of market value.

Despite previous pledges to spare child benefit, the payment will be set at €130 for every child.

This will hit larger families the hardest -- who were previously paid up €160 per fourth and subsequent child.

The elderly are also set to be badly hit by Budget 2013 -- with a number of key allowances and entitlements set to be targeted.

It's believed that the thresholds for those entitled to medical cards will be significantly narrowed -- with a 'GP' card being introduced for those who fall outside the new income brackets. The telephone allowance for retired people is to be halved while there will also be cuts to electricity payments.

But Transport Minister Leo Varadkar has confirmed that the Free Travel Scheme will "will not be affected in the Budget" following weeks of speculation.


However limited fares for public transport are set to be slapped on pensioners and the disabled at peak hours.

Separately, Education Minister Ruairi Quinn is set to be strongly attacked over plans to increase the pupil teacher ratio in fee paying schools from 21:1 to 23:1.

The Cabinet will also sign off on plans to cut maternity leave for teachers by up to six weeks in a bid to save €20m.

The PRSI tax is set to undergo a major overhaul -- with the likes of rental income to be levied for the first time.

Some of the remaining PRSI measures were being ironed out today -- with take home pay set for all employees set to be hit.

Motorists will be crippled by a 15pc hike in motor tax as a result of changes to the current bank system. The Government hopes to save €150 m as a result of the tax hike.

Some 177 retired bankers who earn pensions worth more than €100,000 will the incomes slashed by up to 35pc.

See Pages 16 and 17