Thursday, December 10, 2009

Public sector workers bear brunt of spending cuts

Public sector workers bear brunt of spending cuts


The Dáil is debating cuts in social welfare rates today as it discusses legislation to enable measures outlined in yesterday's Budget.

Public servants and social welfare recipients took the brunt of the €4 billion in spending cuts announced in the Budget yesterday by Minister for Finance Brian Lenihan.

Reaction has been largely negative with the Opposition claiming the Budget was not 'fair' and public service unions threatening further unrest.

Speaking in the Dáil this morning, Taoiseach Brian Cowen insisted Budget 2010 was “fair” and would provide “a significant stimulus” for jobs, training and employment opportunities.

The Taoiseach said the measures introduced yesterday would provide training or supports for 180,000 people. He said 80,000 jobs will be supported through the Employment Subsidy Scheme and €900 will be invested in 2010 protecting jobs and providing training. A further €200 million will be invested in enterprise supports.

Mr Cowen said a “key goal” of the Budget is to aid recovery and build Ireland’s smart economy.

He said €40 billion will be invested in infrastructure over the next six years. He said this investment was expected to create at least 60,000 jobs.

The Taoiseach also said the introduction of an employer PRSI exemption for new employees will reduce the cost to business of creating new jobs, support employment and help to get the economy moving again. “This Budget is the start of a new phase – where we begin to create sustainable jobs as the global economy begins to pick-up,” he told the Dáil.

Mr Cowen described the reduction in social welfare as a “regrettable, but necessary” adjustment. “The reason we are reducing payment rates is to ensure that we have a sustainable welfare system which can continue to protect the most vulnerable.”

Key elements in the Budget unveiled by Mr Lenihan yesterday were cuts of more than €1 billion in public service pay, a reduction of €760 million in social welfare, just under €1 billion on day-to-day spending and the same amount on capital projects.

From January 1st public servants will suffer a cut of 5 per cent on the first €30,000 of salary, 7.5 per cent on the next €40,000 and 10 per cent on the next €55,000. Social welfare recipients face an average reduction of 4.1 per cent with those under 25 facing much more substantial cuts.

Child benefit will be cut by €16 a month with families on social welfare being compensated through an increase of €3.80 a week in the qualified child allowance.

Pensioners were exempt from the welfare cuts and public service pensioners decoupled from the cuts in pay. However, Mr Lenihan announced his intention of ending the link between public service pay and pensions in the future, making a link instead with the cost of living index. A cut of 20 per cent in the Taoiseach’s pay and 15 per cent in Ministers’ pay was also announced.

This morning, Minister for Social and Family Affairs Mary Hanafin said cuts in social welfare announced in Budget 2010 would not have a severe impact on people, as the value of the increases given in last year's budget still existed.

"The euro is going further. Prices have come down for all groups of people including those who are unemployed and including those who are on social welfare," she told RTÉ's Morning Ireland . "And, I know it is a difficult situation for them but the real value of the increases that we gave last year still exist. It won't make the situation any worse for them."

By contrast with April’s budget there were no significant tax changes this time around though Mr Lenihan announced a domicile levy of €200,000 a year on Irish nationals and domiciled individuals whose income is more than €1 million and whose Irish located capital is greater than €5 million.

Mortgage interest relief was also extended until 2017, when it will be abolished.

Full details of the cuts across Government Departments will emerge in coming days. They include measures such as a 50 cent charge per item on prescriptions and an increase in the monthly threshold for the drugs payment scheme from €100 to €120. Savings of €400 million are to be made in health.

In an effort to curb cross-Border shopping Mr Lenihan reduced excise duty on alcohol by 12 cent on a pint of beer, 14 cent on a glass of spirits and 60 cent on a bottle of wine. He also announced a reversal of the half per cent increase in VAT imposed in his first budget last year.

As expected there was a carbon tax of €15 a tonne. It will result in increases of 4.2 cent in the price of a litre of petrol and almost 5 cent in a litre of diesel from today. It will apply to home heating oil and gas from next May. Other measures include a car scrappage scheme and extra funding for Fás training programmes. Some €70 million was allocated to help the victims of flooding as well as flood protection measures.

The Government had a decisive majority of 13 in the first Dáil vote on the measure last night. The reduction in excise duty on alcohol was carried by 88 votes to 75 with Independents, Michael Lowry, Noel Grealish and Jackie Healy Rae voting with the Coalition.

Peter McLoone, leader of the State’s biggest public sector union Impact warned 350,000 workers would now prepare for industrial action. “All existing and former public servants must now mobilize to protect their incomes,” he said. But Mr Lenihan signalled last night he was prepared to face down unions and even raised the prospect of further cuts if reforms proposed in last week’s pay talks were not agreed.


It would appear as though the actual budget cuts have lived up to the opinions rendered in the past few weeks. As expected they affect most Irish people, especially workers and the needy. If these people are willing to accept these cuts in services, it is certainly time for some government officials who have recently retired with obscene “golden handshakes” to pay their fair share. Their retirement packages should be adjusted to reflect the cuts that are being borne by the people that they represented before they abandoned an obviously “sinking ship”.

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