Budget 2010 - Key Features.

By Eoin Fahy , Thursday, 10th December 2009 | 0 comments

Today's Budget contained few surprises given the many leaks over the last few days.  Public sector pay was cut by €1bn, other current public spending including social welfare by €2bn, and capital spending by €1bn.  The deficit next year remains at a staggering €19bn. Key features of the Budget are listed below.  A comment on the Budget will follow shortly.

  • Cuts in public sector pay amounting to €1bn. The first €30,000 of salary be cut by 5%, the next €40,000 by 7.5%, and the excess will be cut by 10%.  For higher earners, salaries will be cut (permanently) by the amounts suggested in the recent benchmarking report, leadings to cuts of 8% to 20%
  • A €1bn cut in capital spending.
  • A €760m cut in social welfare spending, implemented via a €8 per week cut in most social welfare rates (apart from the state pension which was left unchanged). Child benefit cut by €16 per month (social welfare recipients can reclaim the cut).
  • A cut in excise duties on alcohol, designed to discourage cross-border shopping. The cut is equivalent to 12c off a pint of beer, or 60c off a bottle of wine. The intention here is explicitly to reduce the extent of cross-border shopping.
  • A cut of 0.5% in the standard rate of VAT from January 1st, bringing the rate back down to 21%.
  •  A car scrappage scheme which will give a grant of up to €1,500 where a new car is being bought and a car of more than 10 years is being scrapped as a result, provided the new car is in band A or B for emissions.
  • A merger of PRSI, the health levy and the income levy, at an unspecified rate, in 2011.
  • Water charges and a property tax, but not next year.
  • A minimum average tax rate of 30% (plus PRSI and levies), up from the current minimum rate of 20%, for higher earners who claim relief from various tax incentive schemes .  This will start to kick in at income levels of €125,000 and be fully effective at the €400,000 level.
  • A carbon levy on fuel, effective from today for home heating fuel, diesel and petrol, and at varying dates in 2010 for coal and peat. The levy is about 5 cents on petrol and diesel, 6% on natural gas, 10% on briquettes, and 11% on coal.
  • For new entrants to the public sector only, a new pension scheme which will be more in line with private sector pensions, and the normal retirement age rises to 66 from 65.
  • A review of public sector pensions.  It's likely that they will in future rise in line with inflation, not salary increases.  This could reduce the actuarial size of the public sector pension deficit from around €108bnb to around €87bn.
  • A National Solidarity Bond to attract small savings, run by the NTMA.
  • A presciption charge of fifty cents for every prescription made on the Medical Card scheme.
  • Mortgage interest relief being phased out, to be gone entirely by 2017. Full relief will still be available for first-time buyers until July 1 2011. 

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