FINAL DETAILS of the budget are due to be worked out at a meeting of the Cabinet tomorrow morning, where the issue of a further contribution to the public finances by those earning more than €150,000 is likely to be addressed.
Minister for Finance Brian Lenihan has pledged no new taxes will be introduced and Government sources last night categorically ruled out a third rate of income tax. However, to avoid the perception of unfairness, an extra imposition of another kind on single-income earners above €150,000 is under serious consideration.
This would be favoured by Green Party Ministers John Gormley and Eamon Ryan and some of their Fianna Fáil colleagues. The precise form of such an imposition is not agreed but it is thought to be an increase in the income levy rate of 1 or 2 per cent for that category.
Senior Fianna Fáil sources said that, in order to avoid charges of unfairness towards lower-income groups, “the Government has to show that those on high incomes will be asked to give a bit more”.
There were conflicting reports as to whether Green Party Ministers had initially sought a third tax rate for higher earners, without success. Fianna Fáil sources said they had done so but this was strongly denied by sources in the Greens.
Other political sources said a third rate of personal income tax for higher earners would act as a disincentive to international companies considering the establishment or enhancement of an Irish subsidiary.
The December 9th budget will feature significant cuts in social welfare payments, with child benefit a particular target. An across-the-board cut in the rates is inevitable but there is likely to be provision for those on social welfare or low wages to secure a compensatory “top-up” payment.
The jobseekers’ allowance for those under a specific age – either 23 or 25 years – is also expected to be cut, unless the recipient enrols in a course of training or retraining.
Another item of high expenditure that may be cut is the rent supplement scheme, which provides a subsidy for unemployed people living in rented accommodation. This was “costing a fortune”, said one well-placed observer.
Asked if the State pension would be cut, Government sources said there was “no final decision on that”.
Proposals for restricting the rate of tax relief on pension contributions to 30 per cent, and removal of the ceiling for pay-related social insurance (PRSI), are also said to be “on the table”.
The urgency of agreeing the budget terms tomorrow derives from the fact that Mr Lenihan will “need seven to 10 days to put the finishing touches”, sources said.
A Green Party spokesman said: “We are involved in Cabinet discussions to frame a budget which will meet the economic challenges. The Green Party is determined to protect the most vulnerable sectors of society. In all our discussions over 2½ years in Government we have never engaged in any kind of threats.”
Labour’s spokeswoman on social and family affairs, Róisín Shortall, is tabling a Private Members’ motion in the Dáil tomorrow evening against child benefit cuts.
“Families with young children have taken a hammering in the last two budgets and they simply cannot afford any further cuts in the family income,” she said.
