Nation braces for impact of Lenihan’s savage budget...
FINANCE Minister Brian Lenihan last night warned he was “taking the knife” to billions of euro worth of spending in an emergency budget that may also inflict “painful” tax hikes.
Signalling the grimmest government financial statement for a generation, Mr Lenihan revealed only the social welfare department would escape deep cuts.
He insisted his key priority was to try and stabilise the State’s finances in the most difficult circumstances “in living memory”.
Mr Lenihan’s blunt talking came as cabinet colleague Noel Dempsey indicated “painful” tax cuts would feature in the crunch economic statement.
Preparing the nation for what is likely to be the most savage budget in a quarter century, Mr Lenihan said he faced immense challenges.
“We want to stabilise the public finances in the most difficult circumstances in living memory,” he told RTÉ.
Transport Minister Noel Dempsey also braced taxpayers for increases.
“You can either borrow, cut expenditure to the very bone or you can raise taxes. The budget has to contain a little bit of everything. We are conscious some people can afford to take more pain than others,” he said.
A 1% to 1.5% levy which would be taken on the entire wage, rather than an income tax band increase, remained the most likely option with the Cabinet set to finally sign off on the budget package at a special 9am meeting today, at which ministers will decide whether or not to take a pay cut in solidarity with public sector workers.
Mr Lenihan agreed he had “taken the knife” to spending and said around €2 billion in cuts had already been found, bringing the deficit down to 7% of GDP. This was still well above acceptable levels, however, and needed to be trimmed further by savings or tax hikes.
He warned that “every facet of Government expenditure” had been examined in the pre-budget process.
It appeared a huge rise in health insurance, perhaps as much as 20%, could be triggered by charging patients on VHI and other schemes for use of hospital beds.
However, it seemed ministers were shying away from attempts to means test child allowance, but medical cards for the over 70s could be subject to such a move.
While the Department of Social Welfare would escape cuts, benefits may not rise in line with inflation.
A travel tax on all air passengers was set to suck some €400 million a year into the exchequer, while changing tax breaks for pensions could raise another €200m.
Health was facing swingeing cuts as the HSE budget would barely grow at all with a €120m reduction already announced for hospital building and repairs.
Big increases were expected on beer, wines and cigarettes, while the €1,000 a year childcare supplement for children under the age of six set to be cut.
Major transport initiatives such as the western rail corridor and Metro expansions faced uncertainty.
Report by Shaun Connolly, Political Correspondent, Irish Examiner.