AUSTERITY PROGRAMME: THE GOVERNMENT’S four-year plan
to dramatically reduce the State’s borrowing requirement will include
substantial reductions in public service numbers, a provisional property
tax, deep cuts in the minimum wage and across-the-board reductions in
the non-pension areas of social welfare.
The document, which is
expected to be published tomorrow, will propose that public sector
numbers be reduced by 28,000 between 2011 and 2014.
includes 5,000 voluntary redundancies already sought by the HSE, it is
also well in excess of the 14,000 identified in the Croke Park
The report was approved by Ministers at yesterday
evening’s Cabinet meeting. It is believed the key elements of the
four-year austerity programme have also been viewed by the European
Commission and that IMF was also briefed on its contents.
the HSE redundancies, the Government wants the remainder of reductions
in the public sector to be cost neutral. In effect, a source said, this
would mean that employees retiring from or leaving the public sector
would not be replaced.
Minister for Finance Brian Lenihan
confirmed that the minimum wage, €8.65 an hour, would be examined on the
basis that it had increased well ahead of the rate of inflation.
It is understood that the rate will be reduced by €1, or about 12 per cent, to €7.65.
in social welfare will not be announced until the budget on December
7th. However, the document will give overall targets for reducing the
welfare budget over four years, with reductions of about €2.6 billion,
or a little over 10 per cent of the overall social welfare spending over
A number of sources have confirmed there will be reductions of 5 per cent or more across most non-pension welfare payments.
old-age pension is expected to remain intact, although there may be
changes in additional allowances. A new levy is expected to be
introduced, however, for those on public sector pensions, of a similar
percentage to the levy imposed on public sector employees in the
emergency budget in April 2009.
Public-sector pensioners were not made subject to that levy, despite their pensions being index-linked to public service pay.
new property tax will also be introduced, but the measures will be
provisional and are designed as a stopgap tax until a full property tax,
based on site valuations, is introduced at a later stage.
overall yield of the temporary property tax is expected to be €570
million, which one source described as comparatively small, given that
the tax of €200 on second homes has resulted in €66 million being
The plan will also include a commitment to corporation
tax remaining at 12.5 per cent. Mr Lenihan reaffirmed yesterday that the
tax would remain unaffected by the rescue plan.
A provision for a
stimulus programme also exists, utilising resources from the National
Pension Reserve Fund. This will be directed at capital projects as well
as sectors of the economy with potential for growth.
The bulk of
the €6 billion savings target in the forthcoming budget are expected to
be achieved through cuts, with about a quarter coming from taxes.
new universal levy – replacing PRSI, the health levy, and the income
levy – will produce most of the revenue, as the rate will be higher than
those of the separate levies combined.
Other proposals, which
will be introduced in the second and subsequent years of the plan,
include the introduction of water charges.
The substance of the plan was agreed after an eight-hour Cabinet meeting on Thursday.
Government has insisted that what is contained in the austerity plan
has not been not influenced by either the European Commission or the