Brian Lenihan (Image © Council of the European Union)

The budget was widely expected to be the harshest ever in the history of the Irish state, amid a deepening recession in the country.

Mr Lenihan unveiled large hikes in income tax, and major spending cuts in an effort to regain control of a spiralling national budget deficit.

Taxation
The emergency measures include doubling Income Levy rates and reducing the entry points for each rate. The new rates are 2%, 4% and 6%.

These new rates equate to €15,028, €75,036 and €174,980 per annum with the weekly equivalents as €289, €1,443 and €3,365.

The Minister has also announced a reduction in the level of tax relief that investors can claim on the interest for mortgages and loans on residential rental properties to 75% of the interest. This reduction comes into effect immediately.

Ireland’s low corporation tax rate of 12.5% remains unchanged.

The PRSI ceiling will also be raised to €1,443 per week or €75,036 per annum.

Price hikes
Cigarette prices will rise by 25 cent per pack of 20, while diesel rises by five cent a litre. All increases are VAT inclusive. Petrol and alcohol duties will not increase due to the threat of lost revenue if people opt to buy these items in Northern Ireland.

Government cuts
Mr Lenihan also outlined amendments to remuneration of upper and lower house members, which follows a previous decision to cut the number of government junior ministers from 20 to 15. There will be a 10% reduction in all expenses apart from mileage rates where a 25% reduction has already been announced.

Reductions in capital spending will amount to €1.3bn in 2010 and €2.4bn in 2011.

Speaking during his delivery, Mr Lenihan said: ‘Those with the most must pay the most.’

Finance spokesman for Irish opposition party Fine Gael, Richard Bruton, said the harsh economic measures put forward today are not the product of bad luck, but the product of bad government.