Government Four Year Financial Plan Announed

Taoiseach Brian Cowen and Minister for Finance Brian Lenihan have unveiled the Government's four-year plan to reduce the national debt. 

 Ireland will cut welfare expenditure, slash the minimum wage, raise income tax and introduce a levy on land and property owners under a drastic austerity plan intended to stabilise the public finances by 2014.

• €15bn correction over four years
• Corporation tax will remain at 12.5%
• Public expenditure down €10bn, tax up €5bn
• VAT will increase 1% to 22% in 2013 and to 23% in 2014;
• Health spending to fall by €1.4bn over term of the plan
• Minimun wage to fall to €7.65 per hour
• Property tax in place by 2012
• Water meters to be installed next year
• Plan includes 'full implementation of the Croke Park deal

Importantly for business, the government has refused to yield to pressure from Germany, France and other eurozone states to raise corporation tax from its present level of 12.5 per cent

By 2014, income tax will be paid by people earning at least €15,300 a year instead of €18,300 at present.

A household charge of €100 a year will be imposed in 2012, to be replaced by a site value tax of up to €200 in 2013.

The plan confirms that 40%, or €6bn, of the required €15bn adjustment will be made in 2011, and that the adjustment will be made up of €10bn in spending reductions and €5bn in tax and revenue raising measures.

The measures represent an effort to persuade financial markets, deeply worried about the impact on the public finances of massive losses at Irish banks, that Ireland can combine strict fiscal discipline with economic growth rates sufficient to stabilise the public debt

For further information, please contact Tadhg O'Sullivan, Senior Partner OSK