The budget pegs gross government current and capital spending at roughly euro 38 billion.
While the impact on direct taxation in the budget proposals will be relatively light, Irish consumers are to be hit with a range of indirect or so-called “stealth” tax hikes on everything from public transportation fares to the old reliables such as alcohol and tobacco.
The new tax levies will be coupled with cuts in various public services in what is the toughest budget in years.
And hardly was the ink dry on the budget package when another blow was delivered by McCreevy’s colleague, environment minister Martin Cullen, who announced a 12 percent increase in car tax.
People are being hit by a range of increases in areas like health insurance, stamps, education, drug programs, electricity charges, transportation fares, rents, parking fees and garbage collection.
McCreevy described his package as a “prudent and planned response” that avoided short-term solutions that would cause long-term problems.
Fine Gael leader Enda Kenny said it was a “vivid, livid example of how soulless, how characterless, how gutless, how bankrupt of decency and morality” the government is.
He said there were a thousand cuts that the government won’t acknowledge or admit.
Labor leader Pat Rabbitte said workers and welfare recipients will be punished for the government’s recklessness.
He said it was a “matchbox” budget because social welfare recipients will hardly be able to buy a box of matches as a result of the measures. Stealth taxes would have a savage adverse impact on living standards, he said.
Economists say the cumulative effects of budget increases will mean that the inflation rate — currently 4.6 percent and the highest in the EU — could surpass 6 percent next year. The minister has forecast it will be 4.8 percent for the whole year.
With the current national partnership deal on incomes due to expire for many workers on Jan. 1, union bosses have said the budget leaves workers worse off. Unless employers are prepared to offer higher wages to protect living standards, a new deal would be impossible, they said.
The main employers’ body, IBEC, is seeking a pay pause followed by modest wage increases.
A return to a free-for-all of industry-by-industry wage bargaining could lead to a winter of discontent with more industrial disputes.
Unemployment is also set to rise. Job creation in private business and industry has been hit by the economic downturn and public-sector hiring has boosted unemployment figures.
The government has frozen public sector employment levels. Having created about 50,000 jobs since 1997, it is now planning to cut numbers by 5,000 over the next three years.
McCreevy’s budget is part of a three-year plan. The prospects are for 2003 and ’04 to also be belt-tighteners as economic growth is predicted to continue at more modest levels until 2005.
The ’03 budget, meanwhile, is a give and take affair as all budgets are. The emphasis, however, is more on taking. Here are some of the main points: