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Andrew Lynch: One budget slip will lead to a New Year election

A top family lawyer has warned that a growing number of unhappy couples are still living together because they cannot afford to get divorced.

Brian Cowen and John Gormley must know exactly how they feel.

Fianna Fail and the Greens may be increasingly sick of each other, but they're even more terrified of facing the voters -- which is why the cabinet has already begun meetings exclusively devoted to making next December's budget as politically fireproof as possible.

With five months of rumour and speculation still ahead, here's what we know for certain. Brian Lenihan has publicly declared that he needs to find €3bn worth of savings, a third of which will come from a reduction in the capital programme on infrastructural projects.

The remainder will obviously have to be made up from a combination of tax increases and cuts in public spending.

After that, things start to get a bit hazy.

The Government has spent the last few weeks throwing up kites, including a property tax, water charges, a reduction of the old-age pension and the means-testing of child benefit. Every one of them has been quickly shot down -- which means that even at this stage, Lenihan's options are narrowing fast.

The Minister for Finance has indicated that he will give preference to cuts over taxes, which is why he's ordered his fellow ministers to scrutinise every single item of expenditure in their departmental budgets.

The reality is that €2bn is such a huge figure, however, that the Government will have no option but to increase its tax take as well as reducing its daily spending.

To reach the magic number, December's package is guaranteed to contain lots of nasty little surprises -- and if even one of them turns into a banana skin, we'll be looking at the nightmare scenario of a January general election.

Some of the big-ticket options are clearly off the table. With the Croke Park deal now passed, public sector wages are officially untouchable.

Many economists argue that there is a case for cutting the State pension, but the 2008 medical card fiasco means that taking on the "grey power" lobby would be political suicide.

Property and water charges are probably inevitable in the long-term, but can't happen this year because the Government hasn't even begun the long process of valuing houses and installing meters.

So what does that leave? With one euro out of every four being spent on health, it seems inevitable that Mary Harney will be asked to find even more savings from her own budget.

While this will inevitably hurt our already shaky frontline services, as far as Lenihan is concerned it's simply too juicy a target to resist.

Education is the other big spending department, but since most of this goes on teachers' wages, there isn't a lot of scope for big savings here. Social welfare may be slightly squeezed, possibly by cutting down on benefits such as rent allowance.

Last year's Bord Snip Nua report will be raided once again, with State agencies or quangos likely to be first in the firing line.

In other words, there are plenty of ways to find a few million here and there, but getting them all to add up to €2bn is a major headache.

That's why Lenihan will almost certainly have to eat his words and introduce some sort of income tax increase, probably by reducing the credits that are available to all workers.

He has consistently pointed out that almost half of the workforce pays no tax at all, a situation that does not exist anywhere else in the world -- but while bringing the lower paid into the tax net is the quickest way to raise a significant amount of cash, it will inevitably lead to charges that he is targeting the people who can least afford to take another hit.

When Charlie McCreevy was Minister for Finance, he was reportedly so secretive that he only allowed Bertie Ahern to see the budget for a few minutes before he introduced it to the Dail. Under Brian Lenihan, the process will be much more transparent and open to debate. For the Government as a whole, the bottom line is that there are no easy options on the road to December -- only an agonising choice between the lesser of several evils.

Even Santa Claus had better start tightening his belt.


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