Cuts and Changes Ahead In Budget 2013 by Annette J Dunlea
Published In the Carrigdhoun Newspaper 8th Dec 2012 p.18
Ireland’s plan for the 2013 Budget to cut spending by a further €2.25 billion and to increase taxes and other income by €1.25 billion,will not be enough to meet the EU and IMF’s targets for cutting the deficit.The outline proposals for the 2013 Budget could include further cuts in social welfare spending, a broadening of the income tax base, and even more reductions in the number of people on the public payroll.The domestic banks were continuing to lose deposits as savers moved their cash elsewhere.Only a continuation of Ireland’s consistent implementation of the previously successful stabilisation program can continue to win back the confidence of the markets.”All the options there are on the table. You can’t rule anything out.”Finance Minister Michael Noonan is being hampered by a lower-than-predicted growth rate for the economy in 2013.The Government is planning on raising about €3.5 billion in the Budget, with the bulk coming from spending cuts and the remainder through tax hikes.It will take place over a single day this year.The government has been warned that families face a “tipping point” in the coming Budget unless the Government introduces specific measures to protect the vulnerable. Charity Focus Ireland says repeated cuts to funding have pushed families and single people to the brink of homelessness.
Families are facing a €10 cut in child benefit and medical card holders will see a doubling of the charges they pay for prescription drugs to €1 in next week’s Budget.Also suggested is a cut to the time for which non-means-tested dole is paid from twelve months to nine months. Seniors can pay the property tax from their estate after their death but there will be a cap on the number of years that can be deferred.Rents for social housing is to rise €1 or €2 a week to bring in €50-€100 a year per house.To compensate for local-authority housing tenants exemption from the property tax, the occupants rent will be raised.The property-tax rate will be at 0.2pc in a self-assessment system, with bands starting at €50,000 and going up by €50,000 each time. A person residing in a house worth €100,000 will pay up to €200, while someone living in a house worth €1 million will pay up to €2,000. A typical house worth €157,400 will cost €315 property tax per year.Changes to the medical-card system are still under discussuion.The seniors over-70s are being closely examined, especially the means-testing threshold of €72,000 for a married couple and €36,000 for a single person. Sources say that a GP-only card is being examined for those on good pensions. The free pension will not be cut and the free travel scheme is not expected to be touched. But a cut to the package of free TV licence, electricity and phone is still under discussion. Unemployment benefit of €188 a week should remain.Newly unemployed can stay on unmeans tested dole for nine months only to encourage people to get back to work.Michael Noonan said it will be a tough but fair budget hitting those who can afford it.Excise duty on alcohol is one target they will probably be looking at very closely.Duty on alcohol has not risen much in the past decade. It was decreased by around 20% in Budget 2010 and has not been touched since then.They will sell state assets up to the value of €5 million. Budget 2012 will held on December 5th 2012.
After the cuts and changes made in the 2012 Budget such as the Household Charge , Increased VAT and reduced Child Benefit,what else have the government and the IMF / EU got lined up for us in the 2013 Budget?About €1.25 Billion in extra taxes and charges are expected in 2013.We are expecting increases to the following :carbon tax, which will affect gas and petrol diesel .Excise duty on alcohol and tobacco .VRT which will increase the cost of new cars.Motor tax further restrucuring is expected and PRSI increases are expected. The Property Tax details are to be published. Child Benefit cuts of some form are expected with balancing increases on means tested benfiits so that poorer families are not affected.There is always be the possibility of cuts to public sector wages , public sector pensions and primary social welfare rates if required.Privatisation of state assests is also on the cards with the receipts being used to reduce debt. ESB have already been told to prepare to sell of €400 million of assests. More sell offs may be announced in the Budget.A key demand is to cap pension tax relief at €60,000. The cut would mean pension tax relief would no longer be given to those with pensions worth more than €60,000.The Commission now expects the economy to grow by just 1%, well below the 1.8% it had predicted. Economists at Davy stockbrokers reckon it could amount to an extra €400 million.
Tasc say the government could reach its target of €3.5 billion in December’s budget by introducing an equitable model of property tax – that is based on ability to pay.It also suggested reforming pension tax reliefs that benefit high earners, and increasing the Universal Social Charge and social insurance charged on salaries over €100,000.Tasc said its recommendations alone could help the Government make 80 percent of its targeted savings for 2013.Ireland must save €8.6 billion over the next three years if it is to plug its massive deficit.Anti-poverty campaigners Social Justice Ireland said a site valuation tax would be fairer for low to middle income families than the Government’s proposed property tax.It also suggested pension reforms, including a change to the current tax break system that sees 80 per cent going to the richest 20per cent. ANTI-smoking campaigners have called on Finance Minister Michael Noonan to put an extra 60c on the price of a pack of 20 cigarettes in the next Budget.ASH Ireland also said it wants to bring the taxation on “roll-your-own-tobacco” into line with other tobacco products when Mr Noonan delivers his Budget package for 2013.
The Government must achieve greater efficiencies in public spending to meet the €3.5 billion deficit target for Budget 2013 instead of making up the shortfall through increased taxation on businesses, according to the Institute of Directors in Ireland (IoD) which launched its pre-budget submission today. Some 59pc of directors surveyed said they do not think that money saved through budget cuts in the past year has been spent wisely by Government, with directors citing public service spending on salaries, allowances and benefits as a key concern. A further 57pc of directors surveyed indicated that the Government has not demonstrated transparency and accountability in its term in office to date.When asked to rate the performance of individual Government departments, 77pc of directors rated the Department of Health’s performance as poor or very poor. The Department of Finance was identified as the best performing department, with 49pc directors rating its performance as good or excellent.The IoD is calling for changes to the child benefit payment in Budget 2013. Almost three-quarters (74pc) of directors surveyed, half of them currently receiving child benefit payments, would support the introduction of a ‘two-tier’ system which would cut the universal payment to €100 with top-ups available to low income families, as has been proposed. Seventy percent of directors also support the introduction of a tax on child benefit payments for higher income families.Directors surveyed support changing residency terms to ensure that tax exiles make a fair contribution to the Exchequer, with 75pc supporting the re-introduction of a ‘place of abode’ test and 73pc supporting the introduction of a ‘centre of vital interests’ test as criteria for determining residency for tax exiles in Ireland.“The Government has a significant opportunity in Budget 2013 to address longstanding issues in our child benefit payment system, in residency terms for tax exiles and indeed its own operations, and to achieve greater efficiencies that will lead to a stronger, more competitive economy in Ireland in 2013.”It needs an outside agency to monitor Croke Park savings.
A dramatic cut in wages of the judiciary, senior pubic servants and lowering the number of TDs would result in dramatic savings alone.Abolish private secretaries, drivers, advisers and helpers attached to ministerial and constituency offices of Ministers and junior ministers.Cut salaries of semi-state bosses to €150,000.Cut bankers and legal salaries.Abolish the Seanad.Cut number of TDs to 100 and cap pay at €80,000, with no expenses.Abolish all bonuses to all state employees, people are paid to do a good job and have increments if they achieve targets.Stop paying public service increments.Means test childern’s allowance, household package and free medical card to over 70s.Abolish rent allowance and give houses on ghost estates to people on housing waiting lists.Make a law to make it a criminal act to take a pension from the state and go back into employment with them as a consultant, teacher, doctor, nurse and TD.No government expenses to be paid without a receipt with VAT number.Tax big savings in the banks.Reduce public service sick and holiday leave which is high for senior staff and standardise it with private practice.Redploy staff to the busiest departments and have lecturers or teachers retrain the public service and cut the need for paying external experts.Why don’t the politicians abolish their unvouched expenses, reform their generous pensions, take proper pay cuts and honestly evaluate every single euro of our taxpayers’ money they choose to spend.They seek €77 million cuts in education, that they have increased their own 2013 Oireachtas budget by €4 million up to €112 million, without any debate. The 2013 Oireachtas budget includes more than €30 million for their salaries and expenses.Where is our promised referendum on the future of our Seanad during 2012, that could easily have been added to the children’s referendum.
A recent report from the IMF entitled “Ireland: Selected Issues“ made some observations and comments on “ Medium-Term Fiscal Consolidation in Ireland”.There were a few suggestions in the report for possible cuts in spending – and it will be interesting to see if any of these cuts make an appearance in Budget 2013 which is due to be announced on December 5th this year.The IMF report points out that the average public pay/GNP per worker in Ireland is one of the highest among advanced European economies, which is suggestive of a public wage premium over private pay . The report says it may be possible to achieve paybill reductions within the framework of the Croke Park Agreement through allowances, sick pay and reduction in premium/overtime payments. However, if significant progress within the CPA framework proves elusive, pay rate adjustments may be necessary.The 4 percent average levy on public pensions in 2011 appears to have generated relatively small savings in the public pension bill. With a 53 percent increase in pensioner numbers between 2008 and 2011, the net public service pension bill has risen by 49 percent since 2008. This cancels out one-third of the savings in the net public pay bill.The report also points out that the public pension scheme reforms currently being introduced will apply only to new entrants and will not help to reduce the rising public service pension burden for almost 30 years. The report goes on to say that the average public service pension is roughly double the state pension and suggests that a review of the scope for further savings in the pension bill is warranted.State Pensions – The IMF report states that the rate for contributory pensions (paid to about 80 percent of state pensioners) is only 5% above the rate for non-contributory pensions. They suggest that these rates could be equalized as the link between PRSI contributions and pension entitlements appears weak; and contributory pensioners more likely have occupational pensions. Household benefits package – The increasing cost of providing universal free TV license, telephone, electricity and travel for the elderly was also mentioned in the IMF report. They make a suggestion of abolishing these benefits and instead introducing a corresponding increase to the means-tested pension. They point out that there would still be considerable savings, as only one-fifth of pensioners receive means tested pensions.Medical cards – The IMF report mentioned that the medical card means test for people over-70 is much more generous than that for the under-70s and over 95 percent of the over-70s population have medical cards.The IMF suggested that Ireland needs better targeting of child benefit, medical card spending, household benefits package and expenditure on non-means tested pensions. They said that these changes could generate significant savings whilst protecting the poor.
The IMF report also suggests that a standard means-test for all ages could be considered. They also suggest the use of more graduated medical card coverage as well as incentivizing greater generic drug usage.They suggested cutting or taxing child benefit A suggestion of reintroducing fees that would generate substantial progressive savings which could be deployed to supporting low income students.The IMF insist that in order to avoid new uncertainty on the markets, Ireland must further pursue its adopted austerity and reform measures.The IMF report published on Wednesday recommended that the Government needed to look at means-testing for child benefit payments, taking away the automatic right to medical cards over the age of 70, and lowering social welfare entitlements.
SJI argue that emigration remains high. The working poor issue is not being addressed, they say. 100,000 households are on waiting lists for social housing.Ireland has achieved all the benchmarks required by the Bailout agreement with the Troika.Yet the economic benefits that were supposed to flow from these adjustments have not emerged. In part this is due to the international economy being weak but in major part it is also due to the failure of the economic model on which the bailout is based.SJI say without jobs there will be no recovery. Without a recovery Ireland will be forced to continue its current austerity programme. This situation is being exacerbated by the Government’s protection of the rich at the expense of the rest of us.A new approach is needed. This new approach requires:a major investment programme that will create jobs.Protection of public services, the vulnerable and their communities.A fairer tax system collecting up to 35% of GDP in tax. A fairer distribution of the ‘hits’ in the budget.All of this can be done while reducing borrowing by €3.5 billion. Achieving the borrowing reduction target by tax increases and expenditure reductions on a ratio of 2:1.Introducing a new capital investment programme. Making no reductions in welfare rates or Child Benefit.Addressing the working poor issue by making tax credits refundable.Eliminating the household charge and introducing a site value tax.A programme to reduce long-term unemployment by 100,000.Protecting the social services infrastructure. Honouring our ODA commitments. Introducing a universal pension funded by standard rating the pension tax-break.This approach would be good for the economy, good for the vulnerable, good for Ireland. It would be fair and seen to be fair.
SJI say that revenue measures to raise at least €1.25 billion, including:a broadening of personal income tax base. A value-based property tax. A restructuring of motor taxation. A reduction in general tax expenditures. An increase in excise duty and other indirect taxes.Expenditure reductions necessary to achieve an upper limit on voted expenditure of €54 billion, which will involve consolidation measures of €2.25 billion on the basis of the MTFS, including: Social expenditure reductions. Reduction in the total pay and pensions bill.Other programme expenditure, and reductions in capital expenditure
.SJI key proposals:
1. Reduce borrowing by €3.5 billion.
2. Do this through tax increases and expenditure reductions on a ratio of 2:1
3. Introduce a Part-Time Job Opportunities Programme to create 100,000 part-time jobs for people who are long-term unem-ployed. This would cost €50 million in 2013 and would be a positive step towards addressing long-term unemployment in a meaningful way.
4. Make tax credits refundable in Budget 2013. At a cost of €140 million this proposal would directly benefit 113,000 low income individuals and begin to address the ‘working poor’ issue.
5. Extend the USC levy of 3% to all income in excess of €100,000 irrespective of its source. This would address the anomaly in the present system whereby only self-employed earners are subject to this additional 3% USC levy. This would increase income by an additional €50m in 2013.
6. Introduce a levy of 2.5% on all corporate profits in 2013. This would provide additional revenue of €750 million for the Exchequer. It would enable Corporate Ireland to play a meaningful part in aiding Ireland’s recovery. It would also be an acknowledgement of the many benefits Ireland offers, including natural resources and the various financial incentives made available to many com-panies based here.
7. Implement the Commission on Taxation recommendations on tax expenditures, with the exception of proposals on Child benefit. This would save €100 million in 2013.
8. Scrap the household charge and replace it with a Site Value Tax. The introduction of an SVT is a necessary part of a fairer taxation system. It would bring in an additional €340 million in 2013.
9. Introduce a universal basic pension payment for all people over the age of 65 from July 2013. This would be set at €230.30, the current level of the Contributory Old Age Pension. Standard rating the tax break for all pension contributions to 20% would increase the tax-take by €700 million in 2013 and would help fund the universal basic pension payment. This would be a fairer and more equitable way of organising the pension system in Ireland.
10. Remove the price differential between agricultural and road diesel, and replace this pricing arrangement with a rebate system for farmers whereby they can claim the price differential for agricultural diesel. This proposal is largely cost neutral and would have a significant impact on reducing fuel laundering and criminal activity.
11. Provide an investment package of €7 billion for the domestic economy to drive Ireland’s recovery. This focussed, off-balance sheet programme would have the dual impact of increasing domestic economic activity while also addressing some of the social and infrastructural deficits which remain in Ireland.
12. Introduce a tax of one third of one cent on each text sent by SMS through mobile phones or any other devices. This would provide an additional €40m in taxation revenue in 2013.
13. Introduce a ‘bad nutrition’ tax on the main components of junk food, fast food and soft drinks to yield €15m in 2013. P.10
14. Invest €65 million to enable 12-15 community nursing facilities with approximately 50 beds each to be replaced or refurbished in 2013.
15. Invest €50 million for the infrastructural development of Primary Care Teams in 2013.
16. Invest €50 million for the infrastructural development of Children and Family Services.
17. Invest €35 million to support the development of Community Mental Health teams.
18. Introduce an income contingent student loan facility to allow students to borrow to pay for third level fees and living costs. This would save the exchequer €445 million in 2013.
19. Invest €100 million in Early Childhood Education and Care from the ages 0-5.
20. Invest €20 million in Adult Literacy programmes.
21. Increase the provision for Social Housing by €20 million.
22. Increase the tax take on gambling as per Budget 2012.
23. Increase carbon tax by €2.50 per tonne in Budget 2013 to bring the overall carbon tax up to €22.50 per tonne.
24. Reduce public expenditure through measures identified in the Comprehensive Expenditure Report 2012-2014, National Procurement Service and Croke Park Implementation Body.