Senator Bacik's Commentary on the Supplementary Budget

Commentary on the Budget by Senator Ivana Bacik.

(This article appeared in the Daily Mail on the 7th of April, 2009).

Now that the economy has gone pear-shaped, the Government has introduced a budget as bitter as a lemon. Minister Lenihan has announced a whole range of new taxes to be imposed upon income, so that ordinary wage-earners will be squeezed until the pips squeak. A doubling of the income levy, an increase in the PRSI ceiling, a doubling of the health levy; restrictions on mortgage interest relief. All of these measures will impact severely on low and middle-income earners, particularly those who have heavy outgoings in terms of mortgage commitments and childcare payments. In Dublin, crèche costs are at least €1,000 per month per child –so a couple with two pre-school children are paying €24,000 per year for childcare costs out of net income, before any other bills are met. For parents in this situation, the warning that child benefit will be taxed next year is a double whammy, coming on top of the abolition of the early childcare supplement. The introduction of a free pre-school place for young children is long overdue – although difficult to see how it can be done by January next; it seems like a mere concession to parents who have seen a significant drop in their incomes already.

The cost to us all of the swingeing reductions on income announced yesterday will be particularly bittersweet when compared with the ongoing bank bailout revealed in other parts of the budget. Minister Lenihan remarked in passing that the bad assets of the banks could now amount to €80-90 billion. This whopping figure is way above any previous official predictions – and could be enough to sink us financially, given that taxpayers are now going to take on the vast bulk of the risk through the National Assets Management Agency. This is a gamble of monumental proportions.

The Government's Budget was described as a ‘six-step five-year plan', but most of the detailed steps relate to tax increases and public spending cuts. Of those cuts, perhaps the most mean-minded are those in overseas development aid (an additional €100 million cut, only mentioned in the small print) and in social welfare. The Minister said he would not reduce welfare payments, but then proceeded to abolish the December bonus; cut rent supplement rates; and halve jobseekers' allowance for the under-20s.

In short, the Minister may have made a good start in his budget speech by announcing necessary reductions in payments to politicians; but his financial statement quickly descended into a crude plan to make ends meet by cutting public services and hiking taxes on the income of ordinary families. He attempted to sweeten the pill with a few token comments on the need to ensure greater competitiveness and to create more jobs. But there were no real ideas, no real proposals to stimulate the ailing economy. A real lemon of a budget, indeed.