THE BUDGET IS five months away but already speculation has begun as to just what kind of budget measures we are facing in December.
The government has maintained the official line that budget matters will not be discussed in public and that nothing has been decided yet anyway.
But that hasn’t stopped various ministers ‘kite flying’ and suggesting the kind of measures that will be announced in the last week or so.
In some cases Ministers will make public statements or brief journalists about possible measures in order to gauge public reaction to these measures.
This is a well-worn tactic which the government freely admits backfired last year when measures were speculated on that weren’t actually announced in the budget.
What we do know is that the budget for this year requires an adjustment of €3.5 billion which will involve €2.25 billion of spending cuts and €1.25 billion of tax increases as outlined in the latest EU-IMF memorandum of understanding.
That memorandum also sets out measures that we are likely to see announced in December among them the replacement of the household charge with a graduated property tax - the details of which are not yet known – as well as reforms to motor tax and a “broadening of the personal income tax base”.
Beyond that we had various government ministers talking about budget measures last week with Communications Minister Pat Rabbitte suggesting to RTÉ that he wanted no “red lines” in discussions.
His view was backed up by that of Public Expenditure and Reform Minister Brendan Howlin who told the Sunday Business Post that he did not want to be “prescriptive” when it came to discussions with the cabinet.
That set off a firestorm of speculation about the changes afoot in income tax rates and social welfare rates given the government had committed to protecting both when it formed a coalition last year.
On income tax, the stated position in the programme for government is that the coalition will “maintain the current rates of income tax together with bands and credits. We will not increase the top marginal rates of taxes on income”.
On social welfare, the programme says simply: “We will maintain social welfare rates”
As if to underline this and go against the hopes of no “red lines” from the two Labour ministers, party colleague and Minister for Social Protection, Joan Burton indicated at the weekend that she will resist any attempts to cut social welfare benefits.
But when it comes to taxation, the minister appeared to indicate a hope to target the more wealthy citizens of the country as she noted the “wide variety of tax reliefs which continue to exist to enable the wealthy to sustain an effective level of taxation far lower than the headline top rates.”
Could this conceivably lead to the introduction of a third band of income tax? It is something which would please the Labour grassroots and of course those on the far left but it would be something hard to see coming from a Fine Gael finance minister in Michael Noonan.
All that said, in answers to parliamentary questions Noonan has not been equivocal on the issue, answering a question about a possible 80 per cent tax on earnings above €80,000 per year with a stock answer that it was not practice to comment on “tax matters that might be the subject of Budget decisions”.
On PRSI contributions, Burton was doing her own kite flying at the weekend, in the same speech referenced above she suggested that contributions from employers and workers could be increased.
The programme for government’s view on this is that there will “be no increase in the standard 10.75 per cent rate of employers PRSI”.
Finally – for now – the various social supports for the elderly such as electricity and gas allowances, free TV licence, free travel on public transport and telephone allowances could be targeted in Budget 2013.
The Irish Examiner reported last week that a European Commission document stated that the increasing number of over-65s in Irleand was putting pressure on these sorts of allowances which account for 0.3 per cent of GDP annually.
While it is unlikely that all of these would be targeted in one budget it gives an indication of the type of measures that government will be looking at implementing given how much needs to be cut and how much already has been in the last few budgets.
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