Irish Budget Targets Cross Border Shopping

The Irish Finance Minister Brian Lenihan (pictured) has begun to detail a series of radical spending cuts and tax increases.

Looking north, he said that excise duties on petrol and alcohol would remain unchanged, as he claimed that to do any other would only lead to increased cross-border shopping.

However, the price of 20 cigarettes is to increase by 25c tonight and the price of diesel is also set to change, increasing by five cents per litre. Both increases are VAT inclusive.

Already announced is news that the income levy is to be doubled, with those earning more than €15,028 hit by a 2% levy.

Those being paid €75,036 will pay 4% and workers on €174,980 or more will pay 6%.

Finance Minister Brian Lenihan had already announced cuts in the pay of TDs.

There will be a 10% reduction in their expenses, except for mileage rates and long service payments, and ministerial pensions and teacher's pensions for serving TDs have been abolished.

The salary of Oireachtas Committee chairs will be halved, and a review of TDs' salaries will be completed by July, using a benchmarking system compared to their European colleagues.

Meanwhile, the Finance Minister also announced that Ireland's corporation tax is to remain at 12.5 %.

He also set a new national borrowing target of 10.25% and pledged to cut gross public expenditure by €1.5bn.

Although most social welfare payments will remain at current levels, some changes have been announced. The jobseekers' allowance has been halved, and the traditional Christmas bonus will not be paid. Rent supplement will be reduced, and child allowance will be means-tested.

The early childcare supplement will be halved from May 1, and will be abolished at the beginning next year, to be replaced by a different scheme.

Finance Minister Brian Lenihan also said that welfare fraud investigation will intensify, promising extra staff for the role.

Brian Cowen's government is delivering a tough emergency budget to help the country through the recession.

Officially a 'supplementary budget' it is already understood to be one of the toughest in decades with the government forced into a delicate balancing act to save the state €3.5bn (£3.2bn).

This is the country's second such budget in six months as the economy contracts sharply.

The Cabinet Minister's speech to the Dáil is being closely watched by big business and international investors.

Unemployment is already at a record high and government forecasts suggest the deficit could reach four times the level allowed by the EU.

(BMcC/JM)