IT’S JUST DAYS away from this year’s Budget, and we pretty much know what to expect.
During the recession carefully considered kites were flown and leaks made to the media, which would be used to gauge public support for a certain measure.
However, this year there are no such kites. Why?
Well, because this is a paltry Budget.
It won’t be a giveaway budget, by any means. The government has at least €350 million available for new tax cuts and spending increases next year. The Irish Times has reported this figure could be as high as €1 billion.
So what can you expect?
One thing to be sure of – low and middle-income earners will receive a tax boost in Budget 2018. Taoiseach Leo Varadkar is targeting his demographic of those people “who get up early in the morning”, as he puts it, with both he and Finance Minister Paschal Donohoe showing their cards when it comes to taxation way back in the summer.
Donohoe says he will do this through tax band changes rather than rate cuts. It’s expected the band at which someone pays 40% tax rate (€33,800) will be pushed out by €1,000 to €34,800.
One thing you definitely shouldn’t count on is a big tax cut, however.
Fianna Fáil already gave this warning during the week and hinted at what’s to come.
Donohoe says: “We went through a period of shock and awe in relation to personal taxation here in Ireland. Awe about a tax cut in a particular year that led to massive increase in take home pay. Shock a few years later when that tax cut was undone. The approach that I will be taking, and this is particularly important for next year, is to adopt a steady approach to change in terms of personal taxation and every other area,” he told reporters recently.
“I want to make sure if I make a change in relation to personal taxation, if I make a reduction – which I am committed to doing – that it is affordable, not only in 2018 but beyond; that it also takes into account what is happening in our economy, and also takes into account what is happening in 2018; that I have to balance the books,” he adds.
I want to have a broadly-balanced budget for next year. Within that, the particular priorities I have called out are the self-employed and the contribution that they make to our country, over a number of budgets, amalgamating PRSI and USC and using that as a system to try and expand the benefits that are available to our citizens and in relation to personal taxation, I believe the issues relating to the standard cut-off point and levels of USC for those with low or middle incomes, are areas we have to make steady progress on.
Donohoe’s plans hit a speed bump when Fianna Fáil reminded them that it is the confidence and supply agreement (the document propping up this government) that a USC cut is promised.
Fine Gael have accepted this now and it looks like there will be a cut to the much-hated USC (most likely a reduction from the 5% to 4.5%) for the “squeezed middle” earning between €18,722 and €70,044.
While will be welcome news to some, it won’t mean a lot in your pocket.
Pensions
An increase in the State pension has been well flagged.
The Taoiseach previously said he favours an increase in the State pension, though he wouldn’t be specific about how much. The figure of €5 a week has been floated, which would bring the contributory pension up to €240 a week. Fianna Fáil’s Micheál Martin indicated in an interview this week that his party would be satisfied with an increase of €5.
It looks like politicians have learned from the past that there is one thing you don’t mess with, and that’s pensioners.
Housing and homelessness
If there is one thing that needs urgent attention, its housing – and those in government know that it is the one issue that the public won’t accept anymore. There should be some big announcements in this year’s Budget, if the government has learned anything from the last 12 months.
Housing Minister Eoghan Murphy made a number of announcements last week and this week in a bid to tackle the housing and renting crisis. It’s expected the minister will announce an increase in government spending in terms of ramping-up of social housing builds.
But, it’s understood that officials do not think that throwing money at the problem is going to fix it, with other measures due to be announced, such as a package on affordable housing. It is something the Taoiseach flagged back at the Fine Gael think-in and is also something Fianna Fáil are eager to roll out.
One to watch is what is to become of the Help-to-Buy Scheme and whether there will be any changes to it. The independent review of the scheme is complete and the report is due to be published on Budget day. It was originally flagged that the scheme would be scrapped, however, there appears to be a change of opinion on that front in recent weeks.
First-time buyers will be eagerly awaiting news on this front. A vacant site and property tax has also been well-mooted, as have possible incentives for landlords to utilise their properties and get them back on the market.
Childcare
Children’s Minister Katherine Zappone concluded her talks with the Finance Department on Thursday.
Since the summer, Zappone has been pushing for the budget to include more childcare supports. Writing for TheJournal.ie in May, Zappone said she wanted this year’s Budget to match last year’s.
However, this year it’s not expected that affordable childcare will be expanded – with this year’s budget focusing more on quality childcare provisions. We should expect some sort of announcement in relation to ensuring childcare workers are equipped with the training, skills and qualifications to care for children.
In addition, we should see a boost to resources for Tusla. There have long been calls from officials that the agency is not functioning as it should under its current budget, and the minister has sought to address that issue.
Health spending
The health budget has been rising in recent years after it was decimated during the recession. However, a €300 million deficit in the health service budget is projected for this year.
It’s understood that officials from the Department of Health were scrambling late this week to firm up the health budget. The Taoiseach and the Health Minister have both been at pains to state that last year’s health budget was the largest ever, but will it be bypassed this year.
Harris has indicated that he doesn’t think all the problems in the health service can be fixed with more money and Donohoe has had some stern words recently.
“My message to the HSE is very clear,” said Minister Donohoe yesterday.
He said the deficit had to be “managed and dealt with” from within existing resources, ruling out any supplementary budget for this year.
Donohoe said the annual health budget was now €14.1 billion, €1 billion more than when he became minister of public expenditure.
“I expect the HSE service action plan to be delivered,” he said.
“The health services in our country have never had more resources available to them as they do now,” he said, adding that the government expects a commensurate level of services coming out of that.
Social Protection
There are reports that there could be social welfare increases, but there is limited cash in the pot.
Disability provisions
During Leaders’ Questions this week, Taoiseach Leo Varadkar has indicated there will be increased funding for people with disabilities in next week’s budget.
Fianna Fáil’s Micheál Martin pointed out that it takes up to two years for some people ti even get an assessment. Varadkar acknowledged there were lots of shortcomings and said more needed to be done.
“Obviously, that is something that is going to have to form part of the budget and the estimates process,’’ he said.
“I am sure we will find additional funding for disability services next year as we did last year.’’
He then listed of what can be expected in this year’s budget, stating that from the €1.688 billion budget for social care, some 8,400 residential places will be provided, 182,000 respite overnight care nights, 1.4 million personal assistance hours for 2,400 people with disabilities and 24,800 day places.
In addition he said, 41,000 day respite sessions will be provided.
Education
Education Minister Richard Bruton is expected to announce measures to reduce class size and increase student to teacher ratios.
Fianna Fáil have said that education is one of their key demands this year, so it’s expected their demands on more guidance counsellors will be met. The government is likely to announce more special needs supports, while it’s unlikely there will be any definitive plans about how the demise in third level funding will be dealt with.
Corporation Tax
One you can bet on – there will be no change from the current 12.5%.
There has been a lot of talk in other countries about the phasing out of diesel vehicles.
It’s likely there could be an increase in excise, to bring the price a lot closer to petrol.
A gambling tax had been mooted but this has been pretty much sidelined.
This week the Minister of State David Staunton said he was hoping to publish the gambling control Bill this Dáil term but it won’t be possible. However, he did state he is considering setting up a regulator in shadow format to kick-start the work that needs to be done in this area.
A sugar tax (which Michael Noonan mentioned in last year’s budget) has been well flagged and Varadkar has said he is favour of it. We held off on it last year as the UK delayed its introduction of it until 2018, so some announcement on this is expected, either way.
TheJournal.ie will be liveblogging the Budget Day events on Tuesday and bringing you all the breaking news about how this year’s Budget is going to impact on your pocket. Join us then.
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