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News : Irish Economy Last Updated: Dec 8, 2010 - 7:26:14 AM


Budget Ireland 2011: Highlights from Brian Lenihan's Budget Speech from 3:45pm
By Finfacts Team
Dec 7, 2010 - 1:26:38 PM

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Snow blankets the courtyard of Government Buildings, Dublin, Ireland.

Budget Ireland 2011: The presentation of Budget 2011 to Dáil Éireann begins at 3:45pm (Dublin and London time) and we will present here the highlights of the speech being made by the Minister for Finance Brian Lenihan TD, as it proceeds.

The live broadcast of the speech is available from  here.

We will begin updating this page about 15 minutes after the minister begins speaking.

We said in an article earlier that the Minister for Finance, Brian Lenihan, will today present a harsh budget to Dáil Éireann but unlike the Domesday Book of William the Conqueror, not everybody will have to don a hair-shirt. That of course is not to say that the old victim's cross will not get a lick of varnish, whether merited or not.

Irish Budget 2011: Harsh Budget inevitable today but not a 'Domesday' verdict for everybody

We have got ample warning that €6bn will be extracted from the economy in spending cuts and taxes in 2011.

Finfacts Budget 2011 Page

Up to 45% of the workforce is outside the income tax net as workers do not begin to pay tax on income of €18,300 or less. It's expected that the Budget will seek to bring more than 60% of the workforce into the tax net through a reduction in tax credits.

Some people may regard that as a reasonable goal but as income and capital taxes were cut during the bubble, 'stealth taxes' were used to partially offset income.

For example, the cost of a new car in Ireland is about 30% higher than the Eurozone average.

The costs of basic items were also excessive.

The Budget is expected to be passed by Dáil Éireann with the support of non-party members who are bizarrely termed 'independents.'

They barter their support for local spending to benefit their constituents but in 1997, they also ensured payments for themselves.

Bertie Ahern who was then seeking the support of these representatives, provided them with a special tax-free cash allowance of €205,000 over a Dáil Éireann term, without requiring proof as to where the money was spent. 

Non-party TD Michael Lowry said last night that he agreed after 'extensive consultation' with the Government over the past week to support the Budget. Another TD, Jackie Healy-Rae, was also involved in talks with the Taoiseach and is expected to back the Budget as well.

“Failure to pass a budget would lead to further economic failure,” Lowry said Monday night. “If our Government and political leaders renege on a vital condition of our agreement with the EU/IMF we will suffer irreparable reputational damage. Such an abdication of governance would attract ridicule and scorn throughout Europe and the international financial markets.”

Touching patriotism but there was no information on the price for his support.

Highlights - - latest first:

  • The Minister said banks' loan losses are "unforgivable." He said that from 2008 to 2012, the total loan losses of the Irish banks are expected to reach €70-80bn, equivalent to about half of this year's GDP.
  • Maximum personal rate of payment for all weekly social welfare schemes to be cut by €8 from January
  • Carer's Allowance for people under 66 to be cut by €8 to €212 a week; Disability Allowance to be cut by €8 to €186 a week
  • Cuts in VTOS and FAS Training Allowances from €31.60 to €20 per week
  • Maximum personal rate of payment for all weekly social welfare schemes to be cut by €8 from January
  • Introduction of passport fees for over 65s
  • Funding for sporting bodies and agencies will be cut
  • Student Services Charge replaced with a flat higher education student contribution of €2,000
  • €10 cut in the personal weekly rate of Supplementary Welfare Allowance
  • €6 cut in the rate of Jobseekers Allowance and Supplementary Welfare Allowances for those aged 22-24
  • The Business Expansion Scheme, which helps companies raise finance is to be revamped and renamed as the Employment and Investment Incentive. The new scheme needs approval from the European Commission, and the existing scheme will continue until this has been received. Under the new scheme, the Minister said that the limit that can be raised by companies will be increased from €2m to €10m. The amount that can be raised in any 12-month period will be increased from €1.5m to €2.5m. Certification requirements will also be simplified.
  • The State car fleet will be cut by a third over the next two years.
    Former Taoisigh and Presidents and 'other users' will pool their use of the cars.
  • The engine sizes of the cars used will also be reduced to two litres or less as the cars in the fleet are replaced.
  • One of the two Government aircraft will not be replaced when it reaches the end of its operational lifespan.
  • Long service increments and Ministerial pensions will not be paid to TDs after the next election.
  • A number of Secretaries General, whose pay would have been higher than the Taoiseach's as a result of his pay reduction, have volunteered to adjust their salaries to bring them in line with the Taoiseach.
  • New tax incentive to support employment and improve energy efficiency in homes.
  • Average income loss for families of the combined tax/social welfare package estimated at 7% or €43 per week
  • Extension of 3-year corporation tax exemption for start-up firms
  • From 2011, Section 23 relief will be restricted to income from Section 23 property
  • Up to 25 tax reliefs to be abolished or restricted
  • PRSI rate for self-employed, higher earning public servants and office holders to be increased
  • Income levy, health levy abolished and will be replaced with single universal social charge
  • Employees PRSI contribution ceiling removed
  • Litre of petrol to rise by 4 cent; litre of diesel by 2 cent
  • Car scrappage scheme extended for a further six months
  • Air travel tax cut from €10 to €3 from March 2011
  • All stamp duty exemptions abolished
  • Flat rate of 1% stamp duty on all residential property transactions up to €1m. Increase of 2% duty on transaction over that amount
  • All property-based tax reliefs to be effectively terminated by 2014
  • DIRT interest tax is to be raised by 2% to 27% on ordinary deposit accounts and by 2% to 30% on longer-term deposit accounts
  • Income tax band and credits to be cut by 10%
  • People on the planned new reduced minimum wage of €7.65 per hour will not be brought into tax net
  • The top marginal tax rate to be unchanged at 52%
  • Public service pensions in excess of €12,000 will be cut by average of 4%
  • The President's salary to be capped at €250,000 and a salary cap of €250,000 will apply to civil servants
  • 10% cut in pay of new entrants to public service
  • PRSI incentive scheme to be extended until the end of 2011
  • Today's Budget will begin a reform process by abolishing the income levy and health levy and to replace both with a single universal social charge which will have one set of rules on a broad base. The employee PRSI contribution ceiling will also be scrapped while the PRSI rate for the self-employed, higher earning public servants and office holders will be increased.
  • Taoiseach's salary to be cut by €14,000; ministers by €10,000
  • In response to the cold weather, €14m has been allocated to the fuel allowance scheme, which amounts to about €40 for each recipient.
  • There will be 15,000 placements provided for to support unemployed at a cost of €200m
  • There will be a €10 reduction in lower and higher child benefit rates
  • No reduction in State pension this year
  • The Minister for Finance said the balance of payments is expected to record a small surplus next year, meaning the economy as a whole will be paying its way in the world.

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