Govt must make right choices in looming budget

With just a week to go to budget day, the plight of struggling families has been further revealed this week with a survey showing that half of Irish families are being forced to spend their child benefit on everyday necessities such as food and household bills. The survey by the Irish Daily Mail and RTÉ's 'The Frontline' in advance of next week's budget shows just 15 per cent of recipients putting the monthly allowance into a savings account for their children's future, while 53 per cent are spending it on groceries and 33 per cent have used the money to pay bills. But while the research reveals the vital role child benefit plays in most families' budgets, a majority of people in receipt of the payment say it should be means-tested while a further 16 per cent feel the payment should be cut or taxed just like any other income. Just two per cent believed child benefit should not be cut. The children's allowance, of course, will be just one of the items on the table when Minister for Finance Michael Noonan stands before the Dail next week to deliver a budget which is being anticipated with dread the length and breadth of the land. And while the troika of international lenders to Ireland's bailout has been pressuring the government to axe universal benefits not based on income levels, there is some support among the population for moves to curb the payments to better-off families. The other big ticket item on the agenda for most will be the introduction of a property tax from next year, and there is a great deal of speculation around how much this will cost the average family and how it will be administered. Again, the pressure to collect revenue in this manner has been coming from the EU/ECB/IMF which has pointed out that Ireland remains one of the few European countries where some form of property tax is not the norm. With a gap of €3.5 billion gap to be bridged in 2013, the big spending departments of social welfare, health and education are likely to see the most spending reductions. The government has already pledged to keep imposing annual cuts and tax hikes through to at least 2015 as part of its austerity programme to combat a massive deficit and to fund the disastrously expensive bank rescue programme. The last of our €67.5 billion borrowed from our EU partners and the IMF is scheduled to be spent by the end of 2013, by which time the country should be back to normal borrowing on the international bond markets. There have been tentative forays already back into those markets since this summer. However, austerity is undoubtedly taking its toll on ordinary people. Spending cuts, salary reductions and tax increases already have reduced average net pay by around 15 per cent in the last five years and there is real concern among middle earners - which make up a large proportion of the workforce - about how they will be able to pay the new annual taxes on homes and water that they know are coming down the tracks. Consumer confidence remains at a low ebb as people brace themselves for the probable scale and range of painful adjustments that next week's budget may inflict on household spending power. But these concerns are not the only ones which are giving consumers sleepless nights as there are also imminent increases in electricity and gas bills while the Central Bank has argued that domestic salaries will also need to fall even further to assist the Irish economy in becoming fully competitive again. Against this backdrop, Minister Noonan will need to very carefully craft a budget that reduces spending and finds new sources of revenue but which also takes account of the hardships being endured in homes throughout the country. An increase in consumer confidence and a revival of the domestic economy is absolutely key to getting the country back on its feet. Not enough has been done in this regard and greater ambition is required from the minister. Harsh measures on their own will merely force consumers to keep what little money they have in their pockets, and so the focus needs to be on cutting expenditure rather than raising taxes, something to which the coalition already has already committed itself. There is no low hanging fruit left so the decisions he will have to make will be tough and will hit citizens in the pocket. However, the minister will have to counter-balance whatever cuts he is contemplating with a stimulus that will incentivise consumers to go out and spend their hard-earned cash rather than relying entirely on fiscal retrenchment.