TAOISEACH BRIAN Cowen has said the Government will not shirk tough and unpopular decisions in tomorrow's budget as speculation intensifies about biting tax increases and spending cuts.
"We will make the necessary tough choices so that we can chart a course for economic renewal," Mr Cowen told the annual Fianna Fáil Wolfe Tone commemoration at Bodenstown yesterday.
Minister for Finance Brian Lenihan will spend today drafting his budget speech and will present the main points to his Cabinet colleagues at an 8am meeting tomorrow.
While Government sources refused to comment on the likely content of the budget, the indications are that middle- and high-income taxpayers will be asked to pay significantly more next year.
Speculation focused on an income levy of 1 per cent, with a possible 2 per cent for high earners, rather than an increase in the top tax rate of 41 per cent. An income levy would bite deeper into taxpayers' pockets and bring in more revenue than an increase in the rate. Any levy would come on top of the 2 per cent health levy currently in place.
The current income ceiling of €50,700 for PRSI contributions will be raised or abolished altogether.
The curtailment of tax relief for pension contributions has been the subject of detailed analysis in the Department of Finance.
When it comes to the "old reliables" a big increase in the price of cigarettes is expected with a more modest increase in tax on alcohol.
A major redundancy package for public servants designed to save a substantial sum in the long term has already been flagged by Mr Lenihan and is expected to be confirmed in the budget speech.
The merger or abolition of State agencies is expected to save up to €100 million in the long term but the immediate savings may be minimal.
Ministers have discussed taking a pay cut to set an example; Minister for Energy Eamon Ryan refused to rule it in or out yesterday.
Tax increases will be accompanied by significant spending cuts. The automatic entitlement of those aged over 70 to a medical card is under review although any change will not apply to current medical card holders.
Big changes in the refund of drugs scheme with the introduction of income thresholds and the raising of the qualification limit are also on the cards.
In social and family affairs, significant savings in child payments are being sought in the €2.4 billion annual bill. The early childcare supplement of €1,000 for every child under six is likely to be cut.
With something in the region of €30 million a year going to families who live outside the state, a cut in this supplement rather than a change in child benefit is likely.
In education, while the reintroduction of third-level tuition fees is unlikely in the short term, a big jump in registration fees is on the cards.
Some of the big infrastructural projects in the National Development Plan are likely to bite the dust. A big battle has taken place at Cabinet over the fate of the €4 billion Metro north to Dublin airport and it is not clear what will happen.
The school building programme is likely to survive intact, not only for education reasons but because it is regarded as essential to keep the construction industry going.
