Firms escape as wages are cut and taxes rise in Ireland's budget

Taoiseach Brian Cowen warned last night that no-one could be sheltered from the Government's last gasp 15bn euro (12.6bn) economic recovery plan as he clings to power.

The minimum wage will be cut by one euro to 7.65 (6.48) and, in a double-whammy, income tax bands and rates will dramatically widen and increase to raise 1.9bn euro (1.6bn).

In the public service, newly-hired workers such as teachers and nurses will be pitted colleague-against-colleague as they start off on 10 per cent lower wages than current state employees.

The Opposition, unions and rights campaigners branded the cuts a savage attack on the most vulnerable and the working poor but the Taoiseach rejected claims the draconian blueprint targeted those on the breadline and insisted those who have the most, pay the most.

"We're not in a position to say we can shelter people from decisions," he said.

"Those who have least will be protected to the greatest extent we possibly can."

Jack O'Connor, one of the country's top trade unionists with the Siptu group, condemned the Government's National Recovery Plan.

"It has all the hallmarks of a roadmap back to the stone age," he said.

"As well as that a declaration of war on lower income people in the country who contributed least to the cause of the problems,"

The 2014 plan includes a cut in day-to-day spending by 7bn euro (5.9bn); a rise in VAT by 1 per cent to 22 per cent in 2013 and to 23 per cent in 2014 to raise 620m euro (524m); an increase in student fees to 2,000 euro (1,691) and the introduction of water metering.

Other measures include property and re-zoned land to be levied under a Site value Tax to raise 530m euro (448m) and a doubling of carbon tax charges to 30 euro (25) a tonne, raising 330m euro (279m), and changes to tax expenditures raising 755m euro (638m).

Several areas avoided the swingeing reforms – with the country's controversially low 12.5 per cent corporation tax not being touched. The old age state pension also appears to have avoided the axe.

The economy is predicted to grow by 2.75 per cent on average over the period of the 2014 plan.

David Begg, head of umbrella union group Congress, said: "Quite simply, they are penalising the poorest and the lowest paid and making them pay for the reckless behaviour of others."