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News : Irish Last Updated: Apr 24, 2009 - 5:31:05 PM

Irish Budget 2009: Lots of taxes but no serious reform; The rainy day has arrived and the cupboard is bare
By Finfacts Team
Oct 14, 2008 - 6:15:16 PM

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Finance Minister Brian Lenihan
Irish Budget 2009:
The Minister for Finance Brain Lenihan, began his Budget Speech at 3:45 pm  and  as forecast, there is little cheer to dispense against a backdrop of an Irish economy in recession, a global financial crisis and a deeper contraction expected in 2009. In simple terms; after years of feasting on the "fatted calf" the rainy day has arrived for the politicians in power and the Irish people but the cupboard is bare.

Click for Finfacts Main Budget 2009 Page - - Oct 14, 2008 -  for summaries etc

The Minister said there would be a Budget deficit of 6.5 per cent of GDP next year, well above the EU limit of 3 per cent. He said this was the maximum reduction that could be achieved this year.

Current spending will rise by 1.8 per cent, with a current deficit of just over €4.7 billion and a capital deficit of 8.7 per cent.

Lenihan said the economic downturn had “taken even the most pessimistic of commentators by surprise”. 

The Minister said he expected the economy to shrink by 1.5% next year, as measured by GNP, with GDP contracting by 0.75 per cent. He said unemployment would rise to 7.3 per cent but inflation would ease to 2.5 per cent.

He said the Budget would "restore order and stability in the public finances" but would
"protect the most vulnerable".

The Budget includes a 1 per cent levy on incomes, a 10 per cent ministerial pay cut and the reduction of State agencies by 41.

Employees who earn up to €100,100 per annum (€1,925 per week) will pay the new 1 per cent tax, while a 2 per cent levy will be imposed on the balance of all income above that level. Lenihan said the levy would be “kept under review” and said it would help Ireland to return to a healthy economic situation.

Ministers and senior civil servants will take a 10% pay cut.

“Other public servants in leadership and senior positions may wish to consider whether it is appropriate for them to make a similar move in current circumstances,”Lenihan said

Cigarettes will rise by 50 cent per packet, while 50 cent will also be added to the price of a bottle of wine. Tax on petrol will rise by 8 cent per litre, but excise on diesel will not increase.

An airport exit tax of €10 per passenger will be introduced, raising €150 million per annum; Motor tax will rise by 4 per cent for cars with engines of up to 2.5 litres and in CO2 bands A to D. It will rise by 5 per cent for bigger vehicles.

The State pension will rise by €7 a week, while the automatic entitlement to a medical card for the over 70s will be eliminated. Those who do not qualify will receive a cash payment of €400 a year. Child benefit is to be halved for 18-year-olds from January 1st.

The standard rate tax band for a married couple will rise by €2,000, where both are working, while it will rise by €1,000 for a single person.

A €200 levy will be applied to owners of holiday homes and second houses.

Mortgage interest relief is to be increased from January 1st next for first-time buyers from 20 per cent to 25 per cent in year one and year two and to 22.5 per cent in years 3, 4 and 5. The additional relief will be available to new first-time buyers and first-time buyers who have bought a house in the last 4 years.

Mortgage interest relief for non-first-time buyers is to be cut from 20 per cent to 15 per cent from January 1st.

An early voluntary retirement programme will be launched by the Health Service Executive.

A “focused review of public sector numbers” is under way and a report is due in November. The number of State bodies and agencies will be cut by 41 and a number of Army barracks will be closed.

The National Consumer Agency will be amalgamated with the Competition Authority. Longford and Monaghan Barracks, Rockhill House in Letterkenny and Lifford Military Post in Co Donegal will be closed and consolidated into existing barracks at Finner, Athlone and Dundalk. St Bricins Hospital, Dublin will also be closed.

Lenihan said the timeframe for decentralisation of public sector staff had been revised. He said that 2,500 had already moved. However other parts of the programme are being deferred for budgetary reasons.

The Minister said that the State would help those seeking affordable housing by taking an equity share in houses.

Stamp duty on commercial property has been cut from 9 per cent to 6 per cent; the standard VAT rate is to rise to 21.5 per cent; the rate of capital gains tax has been increase by 2 per cent to 22 per cent;  Stamp duty on cheques is to rise from 30 cents to 50 cents per cent and the annual limit for maximum tax relief on pensions has been  lowered to €150,000, from €275,000.

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