AHEAD OF BUDGET 2015, the Minister for Finance was undoubtedly advised by some commentators that the best tactic was to make as little change as possible and he appears to have adopted that strategy.
Minister Noonan stated that his main objective was to reduce unemployment, and some of the measures that he proposed seem to be quite beneficial in that regard.
The Minister introduced a new back-to-work family dividend to allow parents to retain qualified benefits in relation to their children for a period of 12 months. This benefit reduces to 50% in year two. There is also a minimal increase to the child benefit which will be retained by parents returning to work. It is hoped that this provision will help avoid poverty traps and allow parents on social welfare to return to work without losing money and help to reduce the unemployment rate.
Creating opportunities for businesses and unemployed people?
The Minister has proposed to double the number of JobPlus places to 6,000 this year under the subsidy scheme. The danger with this scheme is that the subsidised positions displace real jobs and that candidates end up in positions where there is no real training taking place.
However, these schemes certainly provide opportunities for businesses to take on staff that they would not even consider taking on otherwise. Many of these jobs allow participants to continue on in work when the scheme ends and to gain skills and opportunities that would otherwise be unavailable to them. In general, I welcome the extension of the scheme.
The home renovation scheme has been extended to include rental properties where the landlord is paying income tax. This scheme, in relation to owner occupiers, has had a positive effect on employment in the building industry and has levelled the playing field for small contractors competing with those in the black economy. It’s hoped that this extension of the tax rebate will have a knock-on effect on jobs in the building industry because small builders will now be able to compete effectively when tendering for renovation work.
The knock on effect of a major capital investment in social housing
The Minister announced that €2.2 billion would be channelled towards social housing provision within the next three years. He indicated that a further 2,500 housing units would be provided by 2015 and 6,700 units in total by 2017.
It is hoped that this capital investment, which is the first major capital investment in social housing by the Government since 2009, will lead to a further reduction in unemployment particularly in the hard-hit building industry. One would like to think that many of those who emigrated to find work in the building industry abroad may now be in a position to return to productive employment in Ireland.
The announcement that the public service recruitment embargo will end next year is an extremely positive development, as the recruitment embargo has been a blunt instrument which has damaged the delivery of public services to a very significant extent. It is vital however that recruitment takes place for front-line and essential service staff and is effectively targeted to produce real improvements in the public service.
Minister Noonan has announced the removal of the 80% windfall tax in respect of zonings and planning decisions. He has effectively brought the position back to the old rules pre-2009 which is good news for business as the tax would have created a real disincentive for the sale of zoned lands.
There had been some speculation that tax relief measures were being introduced to encourage property development but no such measures were evident in the Budget speech.
Little respite for those on low wages
The Minister has clearly failed to live up to expectations with regard to a reduction in taxation for those in work. The changes proposed do little to ease the burden on middle income earners or on those on low wages.
The Department of Finance figures indicate the improvement in terms of take home pay resulting from the changes to the income tax and universal social charge rates are between 0.6% and 1.7% of net income. This equates to a net increase of €5 per week for a single person with no children in private sector employment earning €12,000 and a net increase of €14 per week for those in the same category earning between €70,000 and €175,000. It’s clear that when property taxes and water charges are taken into account these categories of workers will suffer a significant reduction in take-home pay.
The Minister announced that the levy on pension funds is to be reduced this year and next year and to be abolished by 2016 which is a welcome initiative as the pension levy ran completely counter to Government policies in respect of pension provision and discourage people from making an essential investment in their pensions. On the one hand, the Government was predicting a crisis in pension provision while simultaneously discouraging people from actively investing in their pensions.
Finally, as a non-smoker, I am delighted to see a further significant increase in tax on cigarettes and tobacco products. The statistics show that 50% of people who begin smoking as teenagers will die of tobacco related illnesses. The increased excise duty represents only a drop in the ocean in comparison to the costs which cigarette smoking causes in our health system.
Noel Doherty is managing partner with FitzGerald Solicitors at 6 Lapps Quay, Cork. He has a thriving practice in the areas of employment law, child law and family law. Noel also has a keen interest and works in IT & data protection law.
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