Taxpayers hit by stealth charges as they pay price for public wage hike

TAXPAYERS will be hit by new stealth taxes to fund benchmarking awards to public sector employees.

People on low incomes will also be hit, with up to 16 social welfare cuts planned for the December budget.

Yesterday's Book of Estimates revealed that the bulk of next year's Government expenditure increases will be consumed by pay awards to public sector employees.

While spending will increase by 1.9 billion (or 5%) to 40bn, a total of 1.1bn of this will go in pay rises to 280,000 employees in the public sector.

With the rate of inflation running at 2.5% and at 6.9% in key areas like health and education it means that the increases will only be enough to maintain existing services in many departments and will lead to cuts in the Office of Public Works; the Prisons Service, as well as the Department of Defence and the Department of Community and Gaeltacht. Enterprise Ireland, the IDA and FÁS will also have their budgets cuts.

Outside pay, there are no additional resources for the gardaí, and the Department of Health is unlikely to be in a position to increase the number of hospital beds or go beyond very limited implementation of its radical health reform programmes.

To offset this, a number of ministers yesterday announced new below-the-counter charges, or so-called stealth taxes, amounting to 91 million.

Among the new charges is an increase of 5% in motor taxation. In health, there will be a 5 increase in accident and emergency charges and a similar 5 increase in the public in-patient bed charge, bringing it to 45 a night.

In addition, there will be a 15% increase in private bed charges in public hospitals. Health Minister Mícheál Martin said that the State subsidy (currently 50%) for private beds will be gradually eliminated, which may lead to increased medical insurance charges in the long term.

The payment threshold for the drugs payments scheme will also increase from 70 to 78 per month and the price of a passport increases from 57 to 75.

However, the Estimates do not include pay rises due to local authority employees. While Environment Minister Martin Cullen said yesterday that his department would provide 38m, local authorities will need to come up with at least another 44m to honour the awards. Opposition parties claimed last night this gap could be nearer 100m. The shortfall will mean an increase in local charges, they said.

Announcing the Estimates, Finance Minister Charlie McCreevy said public spending increases needed to be kept at or below last year's post-budget level of 7%. His refusal to increase expenditure for key departments signalled that next month's budget will be a tough one.

"It is clear that our economy will not return to the very high growth rates we saw in the period of up until 2001. Lower economic growth means lower revenue growth. Lower revenue acts as a constraint on what the Government can spend," he said.

Defending the introduction of new charges, he said that 91m comprised only 5% of the overall increase for 2004 and would add only 0.1% to the consumer price index.

Fine Gael deputy leader Richard Bruton said the Estimates heralded a further deterioration in public services.

"The omens are clear. The Minister is squaring up to raise tax levels. No doubt most of these will come in the form of stealth taxes. Many of the new stealth taxes will come through the local authorities," he said.

Labour finance spokesperson Joan Burton said the Estimates showed the Government's lack of vision and it was clear that real spending would fall once inflation was taken into account. She also claimed that there were 16 new cuts in social welfare allowances.

"What evidence is there in today's figures that hospital waiting lists will be reduced? Instead, health charges will be hiked," she said.

Dan Boyle of the Green Party said that, in real terms, there was only a 2% increase in expenditure. He said it would lead to a marked disimprovement in public services.