Cuts to social welfare payments, an increase in the basic rate of income tax and new levies on property are included in the Government’s four-year financial plan, published today.
The 140 pages of fiscal adjustments detail the measures required to make €15 billion in savings by 2014.
The adjustments outlined €10 billion in spending cuts and the remaining €5 billion in tax increases. €6 billion of the savings will be included in the 2011 budget.
€2.8 billion of the cuts will be in social welfare, which will mainly affect unemployment benefits and child income supports.
The Government justified the decision to target social welfare with its aim to reform the system so as to “incentivise work and eliminate unemployment traps”.
Although there is no immediate plan to change the current State pension rate, there will be changes in ages people qualify for the pension in future, increasing it to 66 in 2014, 67 in 2021 and 68 in 2028. However, pensions for public sector workers will be reduced.
There will also be a large cut to the capital spending budget, which will be cut by €1.8 billion in 2011. This is almost twice the amount set last July.
To encourage an increase in employment, the minimum wage will be cut to €7.65, a reduction of €1, as the Government said the current rate is too high and is hindering job creation.
The introduction of a property site value tax in 2012 is estimated to produce €180 million that year and a further €175 million in both 2013 and 2014.
The plan also includes the controversial increase in university registration fees from €1,500 to €2,000.
It also proposes to have water meters installed in all homes and businesses by 2014 when a system of water charges will be introduced.
Unspecified income tax changes will raise €1.9 billion, which is expected to see the marginal rate of tax returning to 42 per cent or higher, a reduction in tax credits and the widening of tax bands.
The current figure for income earners outside the income tax net is currently 45%, which is “unsustainable”. The Government proposes a reduction of entry into the tax system for a PAYE worker from €18,300 to €15,300.
The basic rate of VAT will be raised from 21% to 22% in 2013, and to 23% in 2014, which will generate €620 million for the Exchequer.
It has been agreed that the 12.5% rate of corporation tax is to remain unchanged, with hopes that it will continue attracting foreign direct investment into Ireland.
Plans also include job cuts in the public sector, bringing staff levels back to the 2005 figure of 24,750. Public sector pay will also be reduced by €1.2 billion overall during the four-year period.
The Government added that half of this staff reduction has already been achieved and the further reduction will enable the €1.2 billion cut in public sector pay during the four-year period. The job cuts will be by voluntary redundancies.
A further €330 million will be raised through carbon tax charges, which will double to €30 a tonne over the next four years.
Prime Minister Brian Cowen stated that Ireland would have to “take some steps back to go forward again”.
"Those who can pay the most will pay most, but no group can be sheltered," he added.
“Postponing these measures will lead to greater burdens in the future for those who can least bear them, and will jeopardize our prospects of returning to sustainable growth and full employment. It’s a time for us to pull together as a people,” he said at a press briefing in Government Buildings.
Minister for Finance Brian Lenihan said the four-year plan is a sensible and rational route out of “the steep downturn”.
Tax receipts for this year will be 35% lower than in 2007, which reflects “the over-dependence on property and construction-related revenue sources during the boom years”, the Government claimed.
The Government said the plans would be like the tax structure of 2006, and rejected suggestions that it would see tax burdens return to the harsh levels of the 1980s.
The Government stated that the economic plan would see the deficit reduced to 9.1% of GDP in 2011. It is expected that Ireland’s debt to GDP ratio would reach 102% in 2013 and will fall to 100% in 2014.
Yesterday, the European Commission said that the four year fiscal plan was a “cornerstone” of the bailout package under discussion with Europe and the IMF.
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Switch to the desktop site to post a comment.jacersagain | Nov 25, 2010, 05:32 PM EST
(... cont’d) Well, next would be that the spoils of these raids would then mysteriously re-appear in the accounts of charity groups like Social Justice for Ireland, or St. Vincent de Paul Society and others who give freely to the poor and needy. These charity groups will be secretly encouraged into cooperating with the new breed of Robin Hoods in the re-dispersal of the Irish people’s money. The robbers of the Irish taxpayers will lose everything. The Irish people will get their tax money back and lodge it to a new Citizens Co-op Bank formed for the purpose by the Robin Hood guys and Maid Miriam gals and operated by them for the good of the Irish people. Retribution is delivered, the tables are turned, nobody goes to jail for debt and there won’t be a left-winger in sight. Problem solved.
jacersagain | Nov 25, 2010, 05:28 PM EST
I see on Irish news sites today that a group of left-wingers have united to form a new “United Left Alliance” to stop the 4-Yr plan’s savage cuts. I have a better idea than to form protest groups like this bunch of left-wing wasters. How about that we resurrect the Robin Hood principle and form specialist groups to surreptitiously attack those who really (surreptitiously) caused the debacle. These specialist groups would have to be secret, like Robin Hood and his men, operating out of secret “lairs” spread around Ireland and the foreign places where these ball-breakers of decent Irish families have scarpered off to, like yer man David Drumm, former chief executive of Anglo Irish Bank, skiving away in the Massachusetts area and Sean Fitzpatrick, the bank’s former chairman. The secret groups would have to be highly specialised in IT, money markets and the workings of banks (plenty of those are available in Ireland as banks and stock exchange brokers let staff go). They would raid the accounts of the Irish super-rich, tax exiles like the members of U2, the unscrupulous developers who took our banks loans and never repaid them, the money-sucking lawyers of the Mahon, Flood and other Tribunals, the creditors of Irish Banks, of those who buy bonds from NAMA and charging ridiculous interest rates, and those of the Standard & Poor and Moody 'experts' who, by ‘their’ judgements, continually downgrade Ireland’s credit ratings. The secret group would steal their cars, homes and hotel and pub-group deeds and whatever else they can. So what happens next? (Cont’d...)
jacersagain | Nov 25, 2010, 05:19 PM EST
Nah, it seems it didn't go through... I'll re-edit and re-post..
jacersagain | Nov 25, 2010, 05:05 PM EST
Pardon my double posting below.. I thought the first one didn't go through because of the http link inserted and I re-editted & re-posted. Let's ee how my next post on this Savage Cuts topic goes down.
GeorgeDillon | Nov 25, 2010, 03:23 AM EST
LoyalCitizen: Garbage. I don't know why you bring England into this, since I never mentioned that country. Are you one of these Irish who don't have an original thought but start every topic with the phrase "Well in the the UK they ..." I don't know how often I've heard that unthinking mantra in Ireland. Listen, Mr CopyCat, I know Ireland, North & South. Relative cost of living goes up and down according to the euro-pound exchange rate. At some times, one thing is cheaper on the northern side, at other times it becomes less expensive in the South. For a long time gasoline was more expensive in the North--that may have changed because of Southern government taxes. Housing was more expensive in the South--sure ain't now! Plus, a lot of welfare that is given out in Ireland is not spent in Ireland. It goes straight back to countries like Latvia, Poland etc. It's a scandal that the Irish were too lazy and disorganized and dopey to catch those Polish fraudsters.
jacersagain | Nov 24, 2010, 10:00 PM EST
Propery taxes, carbon taxes... Did anyone see the report of the latest new tourist attraction to surface in Ireland, developed by one of the country’s biggest potato buyers, co-incidentally also one of Ireland’s biggest owners’ of large unused farmland? The Irish Times reported on the opening of Tayto Park, near Ratoath in Co. Meath yesterday. I’d call it “Taytoland” instead. Read of it if you ‘google’ or ‘bing’ “Crisp brand character is park’s star attraction”. It reportedly includes free-wandering American Buffalo on our Irish soils. I wonder what Property Taxes and Buffalo Carbon Taxes this rich farmer will pay in the future. Good luck to him anyway, maybe he will give the EU bureaux people barbequed Indian Buffalo tasty cheesy crisps to stuff into their bureaucratic mouths, for free, in return.
jacersagain | Nov 24, 2010, 09:55 PM EST
Did anyone see the report of the latest tourist attraction to surface in Ireland, developed by one of the country’s biggest potato buyers, co-incidentally also one of Ireland’s biggest owners’ of large unused farmland? The Irish Times reported on the opening of Tayto Park, near Ratoath in Co. Meath it yesterday. I’d call it “Taytoland” instead. Read of it here: http://www.irishtimes.com/newspaper/ireland/2010/1124/1224284024910.html It reportedly includes a herd of free-wandering American Buffalo on our Irish soils. I wonder what Property Taxes and Buffalo Carbon Taxes this rich farmer will pay in the future. Good luck to him anyway, maybe he will give the EU bureaux people barbequed Indian Buffalo tasty cheesy crisps to stuff into their bureaucratic mouths, for free, in return.
seamusmoore | Nov 24, 2010, 05:40 PM EST
Glad to see property taxes being introduced in Ireland. The people who got rich from this mess are the wealthy who sold off their land at inflated prices to developers. The wealthy (particularly inherited wealth) have their money in assets (land, buildings, etc), it is working people who have incomes.
LoyalCitizen | Nov 24, 2010, 05:31 PM EST
Cost of living in Ireland is a lot higher, hence the need for higher payments. Learn about the full story. Loaf of bread can cost 1.50c. In England the same bread is about 50/60p. Maths does work.
GeorgeDillon | Nov 24, 2010, 03:11 PM EST
I've been in touch with a friend who's a college professor in Ireland and she tells me that she is relieved it wasn't worse. She'll be paying higher taxes, but she figures she can survive pretty much OK. Everyone knew welfare had to be cut, it's among the highest in Europe. Cross the border in Ireland and welfare rates go down by about 50%.
GeorgeDillon | Nov 24, 2010, 03:01 PM EST
Please, less Brians, more brains.
Dublinjas | Nov 24, 2010, 11:35 AM EST
I personally want to hear Nothing from Anyone called Brian