No gain, just hidden pain

MIDDLE and lower income families have been crippled with a barrage of stealth taxes by Finance Minister Charlie McCreevy’s Budget.

Increases in VAT, bank charges and persistently strong inflation will wipe out any of the meagre gains for working people in yesterday’s Budget, union leaders and opposition politicians said.

The taxes include:

* a 1% increase in VAT which will affect consumers in their pocket when they purchase goods or services in restaurants, cafes, takeaways; and when they buy home-heating fuel, clothes, cinema tickets, newspapers, telephone services, and houses.

* 50c on 20 packs of cigarettes.

* 20c on a shot of alcohol.

* increased costs on cheques, credit and laser cards.

Workers earning as little as €250 a week will still be taxed.

Inflation is expected to rise to 4.8% next year, so failure to widen the tax bands will see many middle income earners losing because of rising prices.

Mr McCreevy hit the banks with a €100m levy a year for three years. But the indications are banks will simply pass this cost on to consumers.

The rich got tax breaks on company loans, yet Mr McCreevy failed to tax the bloodstock industry.

Unions and the Opposition said only lip-service was paid to the idea of employers and banks taking their share of pain in the current economic slowdown. As a result, the upcoming national wage talks are under serious threat, union leaders warned last night.

They also questioned how Government promises on improving public services such as health could be delivered amid plans for a public sector recruitment embargo and a cutback of 5,000 jobs.

While tax relief was provided to first-time housebuyers, tax experts said the 1% VAT increase would lead to increased house prices and wipe out any benefit in the long run. Builders predicted the 1% increase could add €2,000 to the cost of a new house.

But Mr McCreevy strongly defended his economic blueprint for 2003 arguing that his sixth budget contained the required prudence to stimulate growth in a difficult time and was also fair to all sectors of society.

“This is a Budget which will protect our long-term future and secure the welfare of all sections of our society,” Mr McCreevy said.

Despite lower 2003 economic growth projections, the minister announced a 5.7% public spending increase with larger borrowing and said he was providing an extra €1.3bn for public sector pay and road building.

Fine Gael’s Richard Bruton, however, said the Budget was a transparent formula which would fool nobody in the longer term.

“In the coming days the ordinary people will realise how they are being hit at every hand’s turn with higher prices mainly driven by the increased indirect taxes,” the finance spokesman said.

“The Budget is characterised by smoke and mirrors. The minister did not tell us every house in the country will face a hike in things like repair bills, heating and general maintenance costs,” Mr Bruton added.

Jack O’Connor, vice-president of the country’s largest union SIPTU, said the failure to take all workers earning as little as €250 per week on the minimum wage was a disgrace.

He said the VAT increase would fuel inflation and hit the weekly spending of lower and middle income families.

“This Budget has done nothing to address our concerns and help us find a formula for a national new wage agreement,” Mr O’Connor said.

Irish Congress of Trade Unions president Senator Joe O’Toole said employers had got much from the Budget with taxes cut to a general low rate of 12.5%. He said a levy on banks risked being passed on to customers.

“There is an onus on employers in national pay talks to be generous,” Mr O’Toole said.