Young families hit hardest by tough budget

On 7th April 2009, Minister for Finance Brian Lenihan delivers one of the toughest budgets in decades. As taxpayers across the country tuned in to hear what decisions he made, it quickly became apparent that huge waste in the public sector and a bloated Government was maintained in favour of increased levies and taxes, with young families being hit hardest. In Ireland, there are 1.1 health professionals (doctors/nurses) for every healthcare administrator in the HSE. With the public sector pay bill running in excess of €20 billion per year, one can only wonder if the HSE would come to a shuddering halt if half of these administrators were made redundant or offered early retirement. Instead, last week"s budget has caused many more sleepless nights for lower and middle income families with young children. Already under major financial stress, the new costs associated with this budget means they have essentially walked themselves into a bank and taken out the equivalent to a five-year car loan. The main tax points from the budget are: • Income levy doubles to 2%, 4% & 6%. • Thresholds lowered to €15,028, €75,036 & €174,980. • Health levy doubles to 4% & 5%. • PRSI ceiling is raised to from €52,000 to €75,036. • Mortgage interest relief scrapped after seven years, an indication that it may be abolished entirely in the future. • Early Childcare Supplement (ECS) slashed by 50%. • ECS likely to be scrapped entirely next year. • 5 cent more on a litre of diesel. • Excise duty increase of 25% on 20 cigarettes. Example 1: Married couple, two children (under 5), single income of €50,000 Additional PRSI/Health Levy, €1,000 Additional Income Levy, €500 Early Childhood Supplement, €664 This family is €2,164 worse off per year - or the price of a 2006 Ford Focus Example 2: Married couple with one child under 5, one earning €60,000; the other earning €35,000 Additional PRSI/Health Levy, €2,191 Additional Income Levy, €950 Early Childhood Supplement, €332 This family is €3,473 worse off per year - or the price of a 2007 Toyota Avensis However, as unpalatable as this sounds right now, these tax hikes are just the beginning of a five-year plan. Other areas to come into focus in new budgets will be: • Child benefit to be means-tested or taxed. • College fees likely to be introduced. • Abolition of Early Childcare Supplement. • Property tax introduction. • Scrapping of mortgage interest relief. • Widening of tax base. All these measures will undoubtedly lower working families" propensity to spend. It is not sufficient for the minister to rise in the Dáil and speak of the monthly savings made on mortgages due to lowering interest rates - most families were pushed to the pin of their collar in making their repayments. What has happened since the ECB started reducing rates is widespread redundancies, pay cuts, income levy introductions, rise in motor tax, fuel…need I go on? This budget was aimed at fixing the Irish banking sector. While this is clearly very important, it held no mercy for families with young children. From my perspective as a personal finances consultant, can I offer you this advice? 1. Stay clear from credit card debt you can"t repay. 2. If you have a credit card balance, switch it across to the lowest credit card rate going or take out a credit union loan. 3. Speak to your children and partner about your personal finances. 4. It is not just Brian Lenihan that has to balance the books; keep track of your spend every month. 5. Set up an authorised overdraft to avoid unnecessary bank charges and referral fees. 6. If you run into financial difficulty, don"t be a stranger. Seek help. Bob Quinn is a personal finances consultant and qualified financial adviser. He can be emailed at personalfinancesireland@gmail.com or call him on (087) 952 7060.