25 Nov 2010

Austerity plan announced for Ireland

6:01 am on 25 November 2010

The Irish government has announced a range of tough austerity measures designed to help solve the country's debt crisis.

Among the spending cuts and tax rises are a reduction in the minimum wage, a new property tax and thousands of public sector job cuts.

The four-year plan is designed to save the state 15 billion euros ($US20 billion, £13 billion).

The government is also negotiating a bail-out package with the EU and IMF, expected to be worth about 85 billion euros.

The plan outlines plans to cut 24,750 public sector jobs, achieve savings in social welfare spending of 2.8 billion euros, and raise an additional 1.9 billion euros from income tax.

The government will also reduce the minimum wage by 1 euro, to 7.65 euros per hour and raise VAT from 21% to 22% in 2013, with a further increase to 24% in 2014.

The government also said it wanted to protect health and education spending as far as it could.

It will maintain the country's low level of corporate tax at 12.5%.

Property tax

Finance minister Brian Lenihan said the government would also introduce a property tax, which will cost most homeowners up to 200 euros per year by 2014.

He added that the spending cuts would be concentrated in areas of highest spending - pay, pensions and social welfare.

He said the plan will cost Irish taxpayers 20 euros per week.

In total, the spending cuts will amount to 10 billion euros while tax rises will bring in a further 5 billion euros.

The BBC reports that these equate to about 9% of the country's total economic output, which is similar in percentage terms to the 8% budget cuts recently announced by the coalition government in Britain.

However, the Irish government has already implemented 15 billion euros of cuts since the onset of the global financial crisis.