ANALYSIS:Cuts to ministerial salaries will be part of Wednesday's budget
NEVER IN the history of the State has a budget been awaited with such trepidation.
Minister for Finance Brian Lenihan’s speech on Wednesday will feature cuts in public sector pay, including 15 per cent off ministerial salaries, child benefit and dole payments will be reduced and the new carbon tax will mean higher prices for petrol and home-heating fuels.
However, there will not be a third rate of tax and an increase in the income levy for higher earners is now unlikely, although the PRSI ceiling may be raised.
Plans to bring a greater number of lower-income earners into the tax net have been shelved because of concerns that this would encourage “replacement”, whereby workers on low pay decide to go on the dole instead.
Likewise, property tax and water rates will not be included in the package, although they may be mentioned as part of a longer-term agenda.
A cut in child benefit of “about 10 per cent” is on the cards. Payments currently start at €166 a month for the first child which would mean a reduction of around €16. Means-testing has reportedly been ruled out, for now at least.
The State old-age pension is likely to remain untouched but dole payments – both jobseeker’s benefit and jobseeker’s allowance – are to be cut from €204.30 a week to about €196.
Dole payments for those in the 20-23 age group are likely to be cut by 20 per cent. The jobseeker’s allowance was already cut to €100 for new entrants under 20 in April.
The €200 tax on second homes will not be increased.
The collapse of talks with the unions opens the door for the Government to impose public sector pay cuts of up to 6 per cent. A sliding scale will be used and the amount raised will be “not too far short” of the €1.3 billion target, say Government sources.
One certainty is that a carbon tax will be imposed. It is expected to put five cents a litre on the price of petrol and diesel. The cost of a bale of peat briquettes is likely to go up by 48 cents.
Home heating oil would increase by almost €54 for 1,000 litres. A tonne of coal would go up by €56. Gas prices would also rise but not electricity, because the price of carbon is already included in electricity bills. It is expected that the fuel allowance payment will be increased.
There have been reports that Mr Lenihan was under pressure from Cabinet to introduce a third tax rate. This has been ruled out. However, Mr Lenihan is said to be “toying with the idea” of raising the ceiling of €75,036 on PRSI contributions.
The renewed programme for government promises to introduce a single 33 per cent rate for tax relief on private pension provision. However, it appears that this is not likely to be part of the current budget package.
It is understood that VAT will not be cut and that there will be no further impositions on alcohol and little or nothing on cigarettes, because of concern that this will encourage further cross-Border shopping and/or smuggling.
A 15 per cent pay cut is expected for ministers, top civil servants and university presidents, with a 20 per cent cut in the Taoiseach’s salary. Ministerial salaries would fall to €191,417 and the Taoiseach’s pay would go down to €228,466.
These cuts would include the 10 per cent voluntary pay cut taken last year.