Budget 2009 is a "belt-tightening" budget that will take spending power out of the high street, Galway Chamber of Commerce has warned.

Chamber CEO Michael Coyle said the new income levy of one per cent would be taken from total income and not taxable income, and would effectively take spending power out of the system and out of the high street.

The one per cent levy (which rises to two per cent for those earning over €200,000), combined with a new €200 charge on employees whose employer provides them with a parking space (in urban centres), higher car tax and petrol prices, would put pressure on employers by fuelling demands for higher salaries, he warned.

He also criticised the lack of provision for small businesses, saying the VAT increase was inflationary. However, he welcomed the decrease in stamp duty on commercial property and the measures targeted at increasing research and development.

"We would have hoped for something which would have stimulated economic activity, which this unfortunately doesn't," he added.

With recent months seeing a rapid crash in the construction industry, unemployment rising at record rates, and a global financial crisis that continued unabated until the concerted EU actions taken on Sunday, the Minister's first budget was announced in a climate of financial uncertainty.

Most of the measures announced in yesterday's Budget were small increases or decreases, with key measures including: a cost-cutting package in the public service involving voluntary early retirement; an income levy of one per cent on all incomes up to €100,000, rising to two per cent for those earning over this figure; a four per cent increase in motor tax for cars under 2.5 litres, with further increases for larger engines; small increases in pensions and some other state payments; a €2 levy on air travel within Ireland and the UK and a €10 levy for other flights; measures to help new start up companies; an increase in mortgage interest relief for first time buyers; and a decrease in stamp duty for commercial property.

Brian Lenihan's first budget was widely anticipated to contain huge cuts to quangos and public service staffing, as well as revenue raising measures, such as higher PRSI ceilings and travel taxes. Pay cuts for Ministers and tax increases on cigarettes and alcohol were also widely touted.

There were widespread fears for many projects in the West, including the Western Rail Corridor, road projects and the Western Development Commission.

The Ennis to Athenry line is secure in this year's Budget, but no mention has been made of further works. Funding for the road linking Galway with Limerick and Cork is also safe, according to yesterday's Budget.

Minister Eamon O Cuív has defended the decision to merge the WDC with Enterprise Ireland, saying: