Lenihan reveals budget 2011

He says that there will be a €3billion adjustment in 2011. He has identified a €1billion in capital spending, €1billion in current spending and €1billion in tax increases via a social solidarity tax.

The social solidarity tax will roll up the income and health levies as well PRSI plus an extra €1billion, across all income. I think you are looking at maybe a three band social solidarity tax of something like 8, 10 and 12%. With the lower 8% maybe cutting off at €50k and 10% at €150k. Those are the kind of figures you are looking at. Its not one bit pretty.


I can’t see that 50k is a low base:
“a new social charge to be paid by all income earners at a low base.” (from the RTE piece).

25k is the median wage. It currently attracts PRSI.

My guess is everyone, dole recipients, pensioners included, will pay something. Only those whose sole income is means tested will be exempt I think.

Will he remove the pension exemption on PRSI for PAYE workers is one good question? Or will he extend it to the self-employed? (as the commission on taxation recommended). Or do nothing about it?

edit: blolocks, I should post less when I can’t read - you mean 8% up to 50k, not 8% from 50k, don’t you?

Will we happen to have another budget between now and then though?

The social solidarity tax is coming in sometime next month, I think. We may get the odd “and I am also taking the opportunity to …” in the money bill that introduces it.

It probably won’t be called a budget, but it is damn sure going to feel like one.

Ahh yes… the whole tell someone they are sobering up while sneaking a shot into their coffee trick.

Although in this scenario they’re just sticking a Nescafe label on a bottle of whiskey me thinks.

PS - it’s actually a very smart move to have deferred the PRSI/Health levy reform until some time during the year, as it allows for a mini-budget that is both flagged and can contain emergency measures.

I am assuming it will still be in March/April? :confused:

Anyway, lots of the stuff is taken from this speech:
finance.gov.ie/documents/spe … ishtax.pdf

Including this rather bizarre bit:

Eh, don’t we have 75,000 people entering the workforce each year? What are the other 30,000 going to do?

And this gem:

Jeepers, Islamic Finance is going to produce growth here?

The savings rate is being abused again:

That would be debt repayments. It is likely to continue for a long time. It is not parking capital available for other uses in the banks. The banks borrowed most of this money ‘short’ to lend to the consumer…

The decline in the “savings’ rate” isn’t going to happen…

Was there a ‘Dear Santa’ at the top of that list?

These measure are akin to attacking your childrens’ piggy bank to pay the mortgage.
You yourself know that they’ve only been getting 50cents a week for the past two years…
But for some reason you find yourself hoping there is 3 or 4 grand in there.

There is no quick fix to this…

Front load the pain… people will adjust to the new reality… then set target that may actually be achievable.

I’m not too up on Japan but I wonder the costs to societal moral of 5-10 years of continuous under performance?
In many respects people need to see a light at the end of the tunnel and at the moment I get the sense that as soon as people are just beginning to adjust to one cut or loss… another one comes along… and then another… etc.

Absolutely. That has been my view for some time. We really, really need to get to a point where people can both see the bottom and see the way out from it.

I mean up to €50k from maybe €5,200 at the 8% level; €50-150k at 10%; and, €150k+ at 12%

Yeah, I gotcha, see my edit. I think you’re right.

Be interesting to see if there’s any attempt to clamp down on the black economy.

Sounds like a platitude for Impact and Siptu after Scary Mary couldn’t say the public service won’t be hit again on the week in politics some weeks back.
Lenihan knows PS escalation is on the way next week and is hoping to push this problem down the line just like every other problem FF has ever faced.
The Public service called for fairness (in their eyes - I’m not looking to start a public/private argument again and I hope that people won’t) which would involve hitting all the adult population by a rise in tax instead of just the PS.

Taxes are going to have to be increased substantially regardless.
It isn’t a diversion tactic it is an absolute necessity.

For a start the report says 1 billion in capital spending cuts and 2 billion in current spending cuts and additional taxes together. So we don’t know yet how much of this is tax. Secondly we don’t know that the taxation money will all come from income taxes (although I’m not sure how much extra could be raised from other taxes - maybe a flat water tax or a site valuation tax, or an increase in nppr tax).

Next Lenihan says that he sees no room for increase in marginal income tax rates. So that means that the effect of the rejig of PRSI and levies will not lead to any kind of rich tax like 60% on income over 200K, instead it will mean squeezing more out of middle and low income bands. PRSI is ludicrously complex and outdated and the simple bands recommended above seem to me to make more sense.

One thing I don’t get is that the ps numbers were recommended to reduce by 5%/17,500 in the mccarthy report. Is this to be achieved by natural wastage and non-renewal of contracts? As I don’t think there have been any redundancies yet.

Not going to happen before the budget towards the end of this year.


You might see a discussion document next month, but that’s it.

Ah, I see, thanks. So much for the masterstroke…

Question would this be progressive, ie if you earn €125k is it 10% on total income? or would you be taxed 8% up to €50k and 10% on the remaining €75k?

It would have to be tiered with only the marginal income taxed at the higher rate or else you it acts as a discouragement to work.

And we’d never have that in this country!

health levy is just like that.
earn less than 26k a year and you pay nothing.
earn EUR26010 and you pay 4% or whatever on entire income.
A friend of mine makes EUR25k per year, and got a bonus of EUR130 this month. Effect was that she got just under EUR8 extra into her pocket. It’s not like shes overpaid as it is.

She would have been better of with a bonus of EUR80. Perverse.
Very very irish.

independent.ie/national-news … 76169.html