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PAYE and dole likely to escape Noonan Budget

THE Budget will not touch income tax, public sector pay or basic social welfare rates.

But stealth taxes and savings will have to bring in an extra €4bn.

The Government has convinced the European Union/ International Monetary Fund that it can reach next year's bailout targets without cutbacks in any of the three key areas -- which the Coalition has vowed to protect against cuts.

The news came as the 'Troika' of representatives of the EU, the IMF and the European Central Bank arrived in Dublin to present the findings of their latest 'report card' on Irish progress in meeting bailout targets.

The latest review is expected to be a relatively low-key affair with big ticket items, such as bank recapitalisation and restructuring, running slightly ahead of targets set out in the bail-out plan.



Progress

All eyes will be on the eurozone debt talks this weekend with EU governments struggling to come up with a new bailout strategy.

The Troika will have been keen to influence the preparation of the next Budget in Ireland, with detailed talks on the €4bn of savings expected to continue on the run up to Budget Day on December 6.

Sources said the Troika had identified no major issues during their 10-day mission, though the international authorities would like to see more progress on the reform of Ireland's labour markets, including labour market activation measures and reform of wage-setting mechanisms such as registered employment agreements.

Legislation has been published on reforms in the medical and legal professions aimed at cutting costs and a bill on public service reform is currently going through the Oireachtas.

The bulk of the Troika's mission has been focussed on the public finances, and authorities have been extensively briefed on the Government's plans for a three-year budget strategy and upcoming Budget.

Many analysts believed the Government would struggle to reach 2012's Budget targets without touching public sector pay, basic social welfare rates and income tax.

But it is understood that the Troika teams have accepted "in principle" that the targets can be achieved through other cuts and charges.

mlavery@herald.ie