- NEWS
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- BUSINESS
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Breaking stories
IMF: Cut old age pension and social welfare
The IMF has told the Government to cut the old age pension, the minimum wage, social welfare payments, and child benefit as part of a range of measures to reduce the deficit.
By Ann Cahill and Shaun Connolly
In its sixth review of the bailout, the IMF also suggested the means testing of medical cards and other state supports and a radical reform of third-level education by linking college fees to the costs and earnings potential of particular courses. It also recommends the Government raise €1bn by introducing a property tax levied at a rate of 0.5% on the value of a house. That rate would see homeowners with houses worth €200,000 facing annual bills in the region of €1,000.
Finance Minister Michael Noonan rejected this suggestion outright, saying 0.5% was too high.
“It is not mandatory to accept the advice, it is simply advice. I wouldn’t intend making a proposal to Government at that level, I think it is too high.”
Mr Noonan said the new tax would come in from July and would be for the half year, not for the full year.
“I don’t think if you divide €1bn by 1.6m houses in the country, I think that’s too much at present for ordinary families to bear. It is simply advice from the IMF and we are not taking that piece of advice. Taxes are announced on budget day, but you will get the full and final version on budget day.”
Despite assurances from the Coalition that the Croke Park Agreement would run its course, the IMF again said the public pay bill “remains high” and net pay and pensions should continue to be monitored.
Speaking in Westport, Enda Kenny said people would know “in good time” what kind of financial imposition the property tax would impose on them
“It will be considered arising from the Thornhill Report when it comes before Government in the not too distant future and at that stage, the Government will decide collectively the nature of the property tax, the characteristics of that, and spell that out for people so they will know in good time and in advance what it actually means.”
While recommending deeper reforms in health, the IMF said it was up to the Government to manage what cuts were to be introduced. However, they recommended public sector pay cuts rather than further cuts to frontline services.
In a stark warning that the economic future of the country still hangs in the balance, it says the Government should not rule out any spending cuts or tax increases in the budget.
However, the statement also bolsters the Government’s bid to convince the EU to refinance the €62bn bank debt, warning the crippling cost of this must be reduced if the country was to avoid spiralling into ever-increasing debt.
Cutting the growth forecast for this year and next, it issued a warning also to the EU, saying if Ireland fails to recover, it would be a setback not just for the country, but would exacerbate the broader European crisis.
Economist Tom McDonnell of the independent think-tank Tasc said cutting pensions was “growth destructive” as pensioners were among those who spend all their income, helping to keep the depressed domestic market going.
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For a summary of the IMF’s view on what Ireland needs to do next click HERE
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