December 7, 2010 / 4:06 PM / 9 years ago

Irish finance minister's 2011 budget speech to parliament

DUBLIN (Reuters) - Following are highlights of Irish Finance Minister Brian Lenihan’s address to parliament on the 2011 budget, which will strip six billion euros out of the economy as part of a four-year austerity package.

2011 BUDGET CUTS

“As outlined in the plan, 6 billion euros of the overall adjustment is being made in today’s Budget. The scale of this adjustment is demanding but it demonstrates the seriousness of our intent.

“In simple terms, the gap between Government receipts and spending is almost 19 billion euros this year. This gap must be closed.”

“The budgetary adjustments we plan for the coming four years are large. But if we postpone them, even bigger and more wrenching adjustments will be needed at a later date. Our proposed budgetary measures have been laid out in considerable detail to give certainty to households and firms so that they can plan for the future.”

TAX CHANGES

“In this Budget, we will:

- abolish the Income Levy and the Health Levy;

- replace both with a single Universal Social Charge, governed by one set of rules on a broad base;

- remove the employee PRSI contribution ceiling;

- increase the PRSI rate for the self-employed, higher earning public servants and office holders;

- reduce the value of bands and credits by 10% in line with overall reductions in incomes;

- tackle excessive reliefs associated with private pension provision;

- abolish or restrict many tax reliefs that higher earners use to shelter income unfairly, and

- target the remaining reliefs more clearly on employment growth.”

“In the measures I am presenting today, those on the new reduced minimum wage will not be brought into the tax net. The top marginal tax rate will be kept at 52 percent for all taxpayers.”

LOW CORPORATION TAX RATE RETAINED

“Two weeks ago, all political parties in this House supported a motion calling for the maintenance of the 12-1.2 percent corporation tax rate. Our commitment to the 12-1/2 percent rate was restated in the National Recovery Plan. I welcome recent comments by European finance ministers who understand the importance of this issue to Ireland. There will be no change to Ireland’s corporation tax rate.”

LEGISLATION ON SUBORDINATED BONDHOLDERS

“Neither has there been a bailout for holders of banks’ subordinated bonds. These bonds have absorbed losses of about 7 euros billion to date, and legislation to facilitate further burden-s0haring by subordinated bondholders will be submitted to the Oireachtas next week.”

STAMP DUTY ON HOUSE PURCHASES

“There will be a flat rate of 1 percent on all residential property transactions up to a value of 1 million euros with 2 percent applying to amounts above 1 million euros.”

“I am abolishing all existing reliefs and exemptions for Stamp Duty on residential property. This means that 1 percent will be paid on all residential property sales, new or old.”

CUT AIR TRAVEL TAX

“I have decided to introduce a single revised rate of air travel tax of 3 euros to come into effect on 1 March 2011. But let me be clear: this reduced rate is being applied on a temporary basis until the end of 2011.”

FUEL DUTY INCREASE

“Excise will be increased by 4 cent per liter on petrol and 2 cent per liter on auto-diesel, both increases inclusive of VAT, from midnight tonight.”

PENSION PAYMENTS

“First, I want to confirm that the government has decided there will be no reduction in the State Pension this year. We have significantly increased the State Pension over the last ten years and it is the government’s view that the security this has brought to older people should be preserved.

“In the case of working-age rates of payment, there will be a reduction of about 4%.”

CHILD BENEFIT CUTS

“There will be a 10 euro reduction on both lower and higher child benefit rates with an additional 10 euros reduction for a third child only.”

ELIMINATE PROPERTY-BASED RELIEFS

“The National Recovery Plan contains a commitment to the abolition or the curtailment of tax expenditures and to the phased abolition of property-based legacy reliefs. The 16 measures identified in the Plan will be given full legislative effect. Today, I will abolish or restrict a further nine reliefs bringing the total to 25.”

“This ... will effectively terminate all property-based reliefs in 2014.”

GAMBLING TAXES

“I am making the necessary arrangements to ensure that bets placed on the internet by domestic punters are subject to the same level of betting duty as applies in high street betting shops.”

PUBLIC SERVICE PENSIONS CUT

“Public service pensions above 12,000 euros a year will be reduced by an average of 4 percent. Those on a pension below 12,000 euros a year, roughly equivalent to the value of the social welfare pension, will be exempted.”

“This will bring future public service pensions more in line with private sector provision. Pensions will be based on career average earnings rather than final salary; the pension age will be increased; and post-retirement increases will be linked to retail price inflation rather than to pay.”

PAY CUT FOR MINISTERS’ AND PUBLIC SERVANTS

“The salary of the Taoiseach will be reduced by over 14,000 euros per annum and the salary of Ministers will be reduced by over 10,000 euros per annum.”

“The government believes there should be a maximum salary rate of 250,000 euros in the public sector.”

“The 10 percent reduction in the pay of new entrants to the public service contained in the National Recovery Plan will be applied to the salary rate of those appointed to hold office in the Judiciary in 2011. The 250,000 euros maximum will be applied to all such offices.”

PENSION FUND TO INVEST IN IRISH COMMERCIAL ASSETS

“The National Pensions Reserve Fund has confirmed it is willing to invest in Irish infrastructure assets on a commercial basis in partnership with third party institutional investors. The government will help identify opportunities for the NPRF and other private investors.”

RETURN TO GROWTH

“From a drop of 7.6 percent in 2009, GDP will record a small increase this year. Recovery in the real economy is beginning to take shape.

“As anticipated, this recovery is being led by exports ... Yes, domestic demand remains weak, as households and businesses continue to work off the excesses of the boom. But continued export growth will protect and expand high-value employment and stimulate domestically trading sectors of the economy.”

JOBS MARKET

“There are signs too that conditions in the labor market are beginning to stabilize. The Live Register has fallen for the third month in a row, the first time since early 2007. Redundancies in the last three months were over 30 percent lower than in the same period last year.”

UNDERLYING DEFICIT

“Our underlying budget deficit has stabilized at 11.6 percent of GDP. Our tax revenues are ahead of target despite a weak start to the year and our spending has been brought under control. So our actions to stabilize the public finances are making progress.”

WHY DOES IRELAND NEED A BAILOUT?

“We need their support to break the vicious cycle that has threatened our national finances and our banking system.”

“We need their support to break the vicious cycle that has threatened our national finances and our banking system.”

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