Cuts for all...except for politicians and top public servants
The lowest paid and vulnerable will be hit hardest as the minimum wage and social welfare payments are slashed, while politicians and higher-paid public servants escape any cuts under the €15 billion savings plan.
Wages of TDs and ministers could yet be targeted in the December 7 Budget, which will contain a detailed breakdown of cuts, but there are no plans to do so in the National Recovery Plan published yesterday.
Social welfare spending will be cut by €3bn over the next four years, with the retirement age to qualify for the state pension rising to 66 by 2014, 67 by 2021 and 68 by 2028.
At least €5bn of new taxes will be introduced between now and 2014, including €2bn next year.
Income taxes, which will be outlined in the budget, will rise by just over €1,000 a year for middle-income workers, Finance Minister Brian Lenihan indicated last night.
A married person on an income of €55,000 will pay €2,310 more in annual income taxes by 2014.
And workers on as little as €15,300 will have to start paying income tax in a major shake-up of the revenue system.
Households will be hit with a range of added expenses, including a water charge, property tax and carbon levy on home heating and fuel.
“The size of the crisis means that no one can be sheltered from the contribution that has to be made,” Taoiseach Brian Cowen said, while refusing to say sorry for the situation the country finds itself in.
* Student grants will be cut and third-level fees will rise from €1,500 to €2,000.
* The minimum wage will fall by €1 to €7.65 an hour.
* A flat rate household tax of €100 will be charged in 2012, to be replaced in 2013 by a value-based property tax averaging €200.
* Tax relief on rent will be abolished next year.
* VAT will increase from 21% to 22% in 2013 to 23% in 2014.
* The zero-rated VAT items will be re-examined, including basic food items like bread, butter, milk, sugar and tea as well as children’s clothing and shoes.
* Capital spending will be cut by €2bn next year and €400m a year after that.
* State assets will be sold to meet the cost of servicing the interest on our national debt, which will cost 20 cent of every euro paid in tax by 2014.
Unveiling the plan in front of the world media in Government Buildings yesterday, the Taoiseach said Irish people would “come through this challenge because we love our country and want to make sure our children have a future here”.
He said it was time to “pull together” to ensure “those who have most will make the most contribution, while those who have least will be protected to the greatest extent they possibly can”.
But opposition parties said the plan was an attack on the poorest and lowest paid while failing to cut the salaries of politicians and public servants earning more than €100,000 a year.
The plan aims to reduce the national deficit to below 3% and the national debt to below 100% of GDP by 2014.
But a footnote says the debt estimates “do not take account of any additional support to the banking system”.
This means “the entire plan may be out of date by next week when a new plan to fix the banks is expected”, according to Fine Gael’s Finance spokesman Michael Noonan.
The Taoiseach believes the plan “will be acceptable” to the IMF and the EU with whom the Government is negotiating a rescue package, believed to be around €85bn.
The plan was welcomed by the EU Commissioner for Economic and Monetary Affairs, Olli Rehn, who said it “will form the basis of the EU/IMF programme”, suggesting it is not necessarily set in stone.
Both Fine Gael and Labour said the plan could be changed in the likely event that they are in power in the new year.
But Mr Lenihan said the Fianna Fáil Government has presented the most realistic options for the country’s recovery.
“This document has to be the basis for any sensible proposals in the next general election. Anything else put forward is nonsense,” he said.
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