Tuesday 20 August 2019

We all suffer from this poisonous Budget

Finance Minister Brian Lenihan delivered his savage 2011 Budget last Tuesday. Over the following seven pages, we look at the cuts imposed, how they will affect people in Wexford, and what you think about the new Budget


AS THE COUNTRY grumbled about the snow and ice that saw us confined to our homes, the Government must have been secretly lapping it up.

After all, if we were giving out about the bad weather we were not thinking about the Budget, which was delivered last Tuesday.

With the country focused on the meteorological conditions (surely Jean Byrne, Gerard Fleming and co. never had such rapt audiences), the Budget was like a snake in the long grass, and when it pounced it spewed forth poison with abundance leaving the majority of people in a world of pain.

But Finance Minister Brian Lenihan reckons it's all OK because the savage cost-cutting Budget is 'a substantial down payment' on the country's road to economic recovery.

During his Budget speech, Minister Lenihan said tax revenues were ahead of target and exports are growing strongly. ' These data taken together paint a picture of an economy that is returning to growth after a deep and prolonged recession.'

His Budget speech, although more than 7,000 words, was relatively vague, with certain savage cuts glossed over. He mentioned there would be cuts to most social welfare payments but said the State pension was to remain unchanged. However, cuts to maternity benefits, blind person's allowance, disability allowance and carer's allowance didn't warrant a mention.

Jobseeker's allowance and benefit, disability allowance, one-parent family and farm assist will be cut by €8 from €196 to €188. However, younger claimants who already receive far less than this will see smaller, if any, changes to their payments.

The carer's allowance will be cut from €212 to €204 for those aged under 66, and will remain unchanged for older recipients. Supplementary welfare allowance paid to those who are awaiting a decision on other payment entitlements will be cut by €10 a week. Both child benefit rates will also be cut by €10 and there will be an additional €10 cut for the third child only.

There will also be an €8 cut per week to those receiving maternity benefit payments and blind pension allowance.

Minister Lenihan said the Government was leading by example, saying the salary of Taoiseach Brian Cowen would be reduced by €14,000 bringing it to €214,000, while the salaries of Ministers would be cut by €10,000 to €181,000.

But when you consider that a person in receipt of jobseeker's allowance will now receive €196 per week, a total of €10,192 per year, their cuts seem miniscule.

While old age pensions remain unchanged, pensions for all retired public sector workers, including judges and former ministers, will be cut by 4 per cent. Public sector salaries will now be capped €250,000 and this cap will also apply to the future President.

As expected, PAYE workers will see tax changes, and Minister Lenihan said there was a 10 per cent reduction in tax credits and tax bands, and there will be a new universal social charge replacing the income levy and health levy. Minister Lenihan insisted that low-income earners who are affected by the €1 cut to the minimum wage will not enter the tax net.

While there was no change to the current tax rates of 20 per cent and 41 per cent, workers will still be paying more tax. At the moment, a PAYE worker gets €1,830 as an employee tax credit. During the Budget, Minister Lenihan slashed this to €1,650, which is effectively a tax hike of €180. There is the same reduction in personal tax credits, meaning changes to the tax credits will cost workers €360.

And it didn't stop there. Changes to the tax bands (the amount of money you can earn before you move from paying 20 per cent to 41 per cent) were also announced. A single earner will now start paying tax at 41 per cent when he earns in excess of €32,800; previously it had been €36,400.

A married couple with a single income will now start paying tax at the higher rate of 41 per cent on income in excess of €41,800 instead of the current limit of €45,400.

A double-income married couple will pay the higher rate on income in excess of €65,600 instead of the current rate of €72,800.

The new universal social charge (USC) will apply to much lower levels of income, a paltry €4,000, which will impact heavily on the lower paid. With such a low level, almost every income earning in the country will be contributing to the Exchequer. Previously the health levy was applicable to incomes over €26,000. From January the USC will be 2 per cent on income over €4,000 and up to €10,036, four per cent on income between €10,037 and €16,016 and seven per cent on income over €16,016. PRSI is to remain a separate charge for the moment but there are plans to eventually merge it with the USC. There are charges to the PRSI system as well and from now on people earning in excess of €75,036 will have to pay PRSI on this income, which will affect higher earners.

Self-employed people were also hit, with the PRSI rate for them increasing from three per cent to four per cent.

Employee contributions to pension schemes will now be subject to employee PRSI and the USC, which will cost those paying into a pension significantly more.

DIRT tax on standard savings accounts will increase from 25 per cent to 27 per cent, affecting people's savings.

First time buyers were hit hard too, with the surprise introduction of a flat rate of 1 per cent on all house purchases up to €1 million, and two per cent on homes in excess of €1 million.

Previously, stamp duty rates of up to 9 per cent applied to home purchases, but firsttime buyers had been exempt. It is hoped that the massive cut in stamp duty will attract investors and help shift the glut of unsold houses languishing in ghost estates around the country.

Excise duty on cigarettes and drink remains unchanged but duty on petrol and diesel was increased by 4 cent and 2 cent respectively.

However, it was good news for car dealers with the news that the car scrappage scheme was extended by a further six months to June 30, 2011.

Education didn't escape either, with the increased registration fee of €2,000 and a 4 per cent cut to higher education grants. A €200 fee will be introduced for those on a Post Leaving Cert course. Primary school children will be charged €50 a year if they use school transport, while second-level students will have to pay €350 a year.

Children with special needs and children whose families have medical cards will be exempt from these charges.

It was bad news, though, for children with special needs, as from next September a minimum of 10 eligible children will be needed to establish or retain additional services. Currently seven eligible children secure extra resources.

Private health insurance is likely to increase as the cost of a private bed in a public hospital goes up 21 per cent.

The controversial air travel tax was cut by €7 to €3 and the change will take effect in March, and bets placed online will now be hit with a 1 per cent betting tax from next year.

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