By an interesting coincidence Ireland held a real budget on the day That Alistair Darling held a pretend one.
Whereas Mr Darling sees growth everywhere he looks, and believes there will be enough of it to solve the budget deficit next year, the Irish Finance Minister, Brian Lenihan delivered a scary 7% cut in public expenditure to match the 7.5% fall in GDP in 2009.
To match that Mr Darling would need to have announced £40 billion in public expenditure cuts in his pre-budget report. That would have been one for the headline writers ! It may currently be seen as a basket-case but the Irish budget means that there is a possibility that Ireland will bounce back faster than the UK, and here's why:
- Corporate and capital tax breaks for start-ups have been extended - real encouragment for start-up's.
- The Corporation tax rate of 12.5% is ‘here to stay’ - a few more UK firms to base in Dublin ?
- VAT has been reduced by ½% - at the same time as the UK increases it.
- Welfare benefits reduced to 2006 levels, with the social welfare bill cut by the equivalent of 1.5% of public expenditure.
- Dole allowance to be reduced to €150 a week - previously a pretty generous 200 a week.
- Social welfare to be cut 4.1%.
- Politicians’ pay will be reduced in line with public sector grades.
- Public sector pay cut of 5% on first €30,000 salary, 7.5% on the folllowing €40,000 of salary and 10% on next €55,000.
- The Taoiseach (Prime Minister) to have pay cut by further 20% on top of previous 10%.
- Permanent pay reduction of 12% for those on over €200,000 in the public sector.
- Savings of over €1bn on public sector pay bill Mr Darling has gone the other way, introducing penal tax rates at the top, and hiking NI payroll taxes for workers on only £20,000.
He put up VAT which as any left-winger will tell you, is regressive and hits the poorest hardest. You don't want to take political sides here but this is an odd class war political budget, where Labour's own core voters are being hit hardest.
Have we missed something ? Low paid, public sector workers on £20,000 get a pay freeze, a tax hike and whacked by VAT increases – a triple whammy. No mention of MP's sharing in the pain as in Ireland. That doesn't compare well when UK MP's are claiming for duck houses and bell-towers.
Ireland welcomes UK corporations with a tax rate nearly half the UK rate. Mr Lenihan also announced that alcohol and cigarette taxes are to be reduced. The UK get a reduction in Bingo Tax. Who would you bet on to have worst budget deficit problems by, say, the end of 2011 ?
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