As Noonan looks to bailout exit many fear his ‘good news’ about budget

People will be “astounded with all the good news” announced in tomorrow’s budget, Michael Noonan said at the weekend.

But with households already coping with the pressures from half a decade of cuts and tax increases, most will be dreading the moment when the finance minister rises to his feet to announce €2.5bn worth of more austerity.

Mr Noonan is trying to sell the positives of the budget on two grounds: Firstly, that it will not be as bad as it might have been, and secondly that it’s worth hanging on in there because we are about to exit the bailout and things are beginning to turn around.

The problem with the first message is that it’s always hard, politically, to sell a counter-fact; for example, to tell older people protesting outside the Dáil because of a cut to their fuel allowance that they are lucky that their State pension has stayed the same.

The second message will have more sway. The Taoiseach gave the date for the bailout exit — Dec 15 — because it gives people something positive to cling to; even if it won’t make much difference to their everyday lives, it points to a glimmer of light at the end of the dark austerity tunnel.

There will no doubt be sweeteners and some positives to spin. And this budget will be easier than what has gone before. But there will be areas likely to cause an angry backlash.

Here are some of the areas to look out for in Budget 2014:

nClass sizes: The numbers of pupils per teacher in public primary schools has not changed since it was increased by the previous administration in 2009.

Fine Gael has stated that any easing up on austerity should help mitigate cuts to education, so it had been hoped that class sizes would be spared as a result of reducing the budget adjustment from the planned €3.1bn to €2.5bn.

While Education Minister Ruairi Quinn told the Dáil last week that he could not rule out an increase to class sizes, it is now expected that they will remain the same.

For every extra one pupil per class, the Government can save €22m. If this increase includes secondary schools, and fee-paying private schools — it could raise €80m — a good chunk of the €100m Mr Quinn needs to find in education cutbacks.

nStudent grants: A confidential document drawn up by the Department of Education in the summer said including farm assets in the means test for college grants would save €6m.

But because of resistance to such a move from rural Fine Gael TDs, officials are understood to have examined a straight cut to the grant, which currently amounts to €3,025 a year for full applicants.

Students have already put up a strong campaign of protest against increases in fees and are likely to intensify their campaign if the grant is cut.

The Union of Students of Ireland said after a recent meeting with Mr Quinn that he appeared to be “sympathetic to the plight of students”. But its national council will meet on Wednesday to discuss its response to the budget and has pledged to “react appropriately”.

nChanges to the medical card: One of the key sweeteners of this budget is likely to be free GP care for under 5s — the first step in the Coalition’s ambitious promise of universal health care.

But Health Minister James Reilly, is under growing pressure over the removal of discretionary medical cards for people with serious illnesses or conditions requiring a lot of medication and care — as highlighted in this newspaper over recent days.

Now there are reports that thousands of normal medical card holders could lose the entitlement because of a major tightening of the eligibility criteria in tomorrow’s budget.

Medical cards have become something of a “third rail” issue in Irish politics — something that carries great political consequences for those who dare to touch them.

nWelfare payments: With the dole, child benefit, and pension free from cuts in 2014, a swathe of smaller, so-called secondary welfare allowances will be hit to make up the expected €300m adjustment in Department of Social Protection spending.

Gas, electricity, and telephone allowances all come under the household benefit package for pensioners and people with disabilities, and there has been speculation these entitlements could be slashed by up to €84m.

This is unlikely to be without some backlash, and accusations that the coalition is once again targeting the most vulnerable.

nPensions: The 0.6% pension levy, announced as part of a jobs initiative in 2011, is due to expire at the end of this year. But given that it has raised €500m per annum, it may be partially kept, or replaced in another form.

In last year’s budget speech, Mr Noonan said that from 2014, he would introduce arrangements to give effect to the programme for government commitment to effectively cap taxpayers’ subsidies for pension schemes that deliver income of more than €60,000 per year. So higher earners will most likely see restrictions on their pension contributions, something the Government will sell as a fair measure.

n9% Vat rate: A lowering of the 13.5% Vat rate for the hospitality and services sector was introduced as a temporary measure aimed at boosting the industry, and is due to expire at the end of this year.

But the bar and restaurant trade, as well as Government TDs representing areas reliant on tourism, have put up a strong lobby to retain it in the interest of jobs. In mid-September, Tourism Minister Leo Varadkar added his voice to the debate, telling the Irish Examiner: “I would not like to see it withdrawn too quickly or too soon.”

Mr Noonan had argued that keeping the lower rate would cost €350m which would have to be found in other taxes. But on Oct 4, he gave a strong hint in the Dáil, saying that stronger-than-expected revenue from the pension levy meant “we would recover the money by putting the Vat up to something less than 13.5%”.

The programme for government proposes a rate of 12% so it might end up there.