ROLLING: Boost for social welfare in 'a budget for its time'

ROLLING: Boost for social welfare in 'a budget for its time'

Minister for Public Expenditure Michael McGrath TD & Minister for Finance Paschal Donohoe TD during Budget 2023 at Government Buildings, Dublin. Gareth Chaney/ Collins Photos

'PROGRESSIVE BUDGET'

A Fianna Fáil City councillor has welcomed Budget 2023 as “progressive and protective”.

Cllr Tony Fitzgerald, who represents the Cork North West Ward, said he welcomed the “progressive and protective measures” announced in the budget by Finance Minister Paschal Donohoe.

“This is a significant Budget of progressive and protective measures in order to safeguard people, families and businesses from cost-of-living shocks while strengthening public services,” Cllr Fitzgerald told The Echo.

“It will include a €4.1bn cost of living package among an €11bn budget.” He said Fianna Fáil in Government is in a position to respond aggressively to the current crisis because the economy is strong and the country has full employment.

“Today, there are more than 2.5 million people in employment, the most ever at work, and 410,000 jobs were added over the past two years, the fastest job growth in history.

“Fianna Fáil is acutely aware of the effect the energy crisis is having on families and businesses across the country,” Cllr Fitzgerald said.

“We have listened to people who are really worried about skyrocketing energy bills and believe these substantial measures will support those who need it most and help everyone face these challenges.

“Along with the emergency measures that have been included in this budget, providing strong Public Services is one of the core values of Fianna Fáil,” he said.

“This is done through ensuring the delivery of universal healthcare and fundamental public services - in health, housing, education - to the highest standard through investment, innovation and reform and we believe this budget does that also.” The Fianna Fáil councillor added that his party had always been committed to helping those that need it most and its representatives understood the financial pressures felt by many people now.

“As a party we will not be found wanting when it comes to helping to alleviate this burden, while constantly looking for further ways to improve the lives of the people of Ireland,” Cllr Fitzgerald said.

MAIN POINTS

  • Budget package of €11bn announced, including €4.1bn in one-off measures.
  • Higher income tax rate to start at €40,000
  • €500 annual renters tax credit to be introduced - backdated to 2022
  • Help-to-buy scheme for first-time buyers to continue until the end of 2024
  • Electricity credits of €600 to be paid in three installments of €200
  • Excise duty will also be increased on a pack of 20 cigarettes by 50 cents.
  • Five agriculture tax reliefs due to expire were extended
  • 9% VAT rate for the tourism and hospitality sector will continue until February next year.
  • The government will cut the VAT on newspapers from January 1.
  • Funding is to be provided for the recruitment of up to 6,000 healthcare additional staff.
  • €439 million has been allocated to fund the ongoing public health response to Covid-19.

Sinn Féin reacts to Budget 2023

Responding to the Government’s budget, Sinn Fein’s finance spokesman Pearse Doherty told the Dail that Ireland’s “squeezed middle” had been “pushed to the bottom of the pile”.

“The Government had the opportunity to give people certainty as they face into a winter of rising costs, certainty about energy costs, certainty on rents, certainty that those on fixed incomes would be shielded from the price rises that they have seen,” he said.

“They had an opportunity to plan for the future and deliver on housing, and on health, and on real climate action. But they haven’t done that today.

“Time and time again, we’ve seen ministers come into this Dail and deliver budgets that promise much, but ultimately deliver little. And ministers opposite have come today and thrown out large numbers and announced tweaks here and there on the edges of the crisis our people face, and for many workers and for many families on middle and low incomes they will see little change in this budget.” 

Mr Doherty added: “Those workers in the squeezed middle, those earning €35,000 or less who should have been a priority, have been pushed to the side. For many, the hopes that they had for this budget have been disappointed today.”

Sinn Fein finance spokesman Pearse Doherty said that the Government had shown it did not understand the scale of the cost-of-living crisis.

Responding to the Budget, he told the Dail: “Everything is going in the wrong direction, inflation going up, house prices going up, rents going up, interest rates going up.

“Workers and families face the worst cost-of-living crisis in a generation and the biggest fall in living standards since the financial crash.” He added: “It is clear that the Government doesn’t understand the scale of the cost-of-living crisis that households face this winter with the package announced today that fails to provide the certainty and adequate help to help workers and families.

“A Sinn Fein government would have acted differently, we would have stopped the excess profits that energy companies are making as a result of government inaction.

“We would have given household certainty, by some support by cutting electricity prices back to their pre-crisis levels.” Mr Doherty said the Government had handed workers a pay cut in real terms.

He said: “In times of of inflation, a pay increase that fails to rise with the rate of inflation is a real-terms pay cut.

“And that is precisely what the Government has handed out.”

Policing

Michael McGrath also announced funding is being pumped into the justice department to recruit a further 1,000 gardaí into the garda college next year.

Mr McGrath said that an additional 430 garda civilian staff will also free up more frontline gardaí for core policing duties.

“A new recruitment campaign next year will also help us guarantee that there are 200 new recruits entering Templemore every three months over the coming years,” Mr McGrath added.

Defence will also receive a funding boost of 67 million euro, taking its budget to 1.2 billion euro.

“This allocation will include pay and allowance enhancements for serving members of our Defence Forces, the establishment of new transformation posts to lead this change and the provision for the recruitment, training and support of a projected 400 additional members of the permanent Defence Force in 2023.”

Shared Island Fund

The Public Expenditure Minister announced funding of €100 million to progress the Shared Island Fund as part of its efforts to “deepen connection and co-operation across the island of Ireland”.

Mr McGrath said the Government had committed to allocating €500 million of National Development Plan funding to the fund until 2025.

“We are progressing major cross-border infrastructure projects such as the Ulster Canal and a new generation of investments to help address shared challenges and opportunities on an all-island basis,” he told the Dail.

He said he was also looking forward to the implementation of the forthcoming cross-border Peaceplus North South Co-operation Programme.

Disability, Mental Health and Covid - 19

The supports for older people and those with disabilities include funding of €138 million for disability services, some €150 million for older people and a €58 million increase for mental health.

Mr McGrath also said €439 million has been allocated to fund the ongoing public health response to Covid-19.

It will be used to fund public health measures such as PPE, testing and tracing and vaccinations.

€99bn in funding for existing housing schemes

Michael McGrath also announced a €99 million increase in funding for existing housing schemes.

“I am also providing €215 million for homeless services. This is a €21 million increase in the homelessness provision and will provide assistance to those who are most vulnerable in our society,” Mr McGrath added.

“There is an unprecedented 87 million euro being allocated to the retrofitting of social housing in 2023.” Meanwhile, Mr McGrath also confirmed the Government will reduce class sizes at primary level.

He also confirmed that all primary pupils will receive free schoolbooks as part of the budget. It is set to benefit over half a million pupils across the country.

Healthcare measures

Public Expenditure Minister Michael McGrath described the last number of years as an “extraordinarily challenging time” for the health service.

He said about 15,000 new staff and 2,000 new hospital and community beds have been added across the health service since the pandemic began.

“Budget 2023 continues this very high level of investment in our public health system by providing for a total allocation of €23.4 billion,” Mr McGrath said.

It comprises a €1.15 billion increase in core funding, a 2023 Covid allocation of €757 million and an additional €117 million as part of the agreed National Development Plan allocations for the delivery of additional health infrastructure.

He said the funding is also provided for the recruitment of up to 6,000 additional staff.

Mr McGrath said the Government has allocated an additional €225 million in Budget 2023 to provide for an overall package of €443 million to tackle waiting lists next year.

An additional five million euros has been provided for oral health services on a recurring basis as well as a one-off provision this year of nine million euros within the overall waiting list fund to address oral health backlogs.

Funding has also been allocated to address health charges and expand eligibility by removing hospital in-patient charges for all public patients and the extension of free GP care to more than 400,000 people, with the implementation of the commitment to extend to six and seven-year-olds in the last quarter of this year and the extension to those “on or below the median income”.

He also announced an expansion of free contraception, currently available to women aged 17 to 25, to those aged from 16 to 30.

Access to IVF treatment was also announced for the first time as well as expanding women’s health hubs and providing additional funding for screening and other women’s health services.

Social welfare increases

Michael McGrath told the Dail that social protection payment will increase by €12 per week.

From January, the qualifying income threshold for the fuel allowance will increase from €120 to €200.

“For over-70s specifically, I am increasing the weekly fuel allowance means limit to €500 for single people and €1,000 for couples,” Mr McGrath added.

Childcare costs will also be slashed by 25% for centres registered under the National Childcare Scheme.

The cost to the state will be some €121 million. The measure is set to save families up to €175 a month.

Mr McGrath also said a further €59 million will be made to the core funding of the childcare sector.

The Student Contribution Fee will also be reduced by €500 for families earning between €62,000 and €100,00.

'A Budget for its time'

Public Expenditure Minister Michael McGrath said the Government was delivering a budget against an “extraordinary backdrop of uncertainty and challenge”.

In his speech, he told the Dail that many people were “genuinely worried about what lies ahead in the months to come”.

“These are not normal times,” he said, adding the Government was responding.

“This is a budget for its time, a budget that seeks to respond with unprecedented resources, with a breadth of measures and a speed of execution we have not seen before,” he said.

  • Once off €1000 increase in grants for graduates
  • 20% public transport fare reduction to be extended 
  • Threshold for fuel allowance to increase €12 extra per week for social welfare payments 
  • Working family payments thresholds up by €40 per week.
  • Susi income limit raised to €62k 
  • All SUSI grants to rise by 10 – 14% in September 2023

Mr McGrath said the Government has introduced tax and expenditures worth three billion euro in the last 12 months “to alleviate pressure on households and exposed sectors of the economy”.

He said a further winter package totalling €4.4 billion was being announced. It comprises €1.7 billion to be administered through the tax system and €2.7 billion of spending measures, with €0.3 billion of this amount being funded from the contingency reserve. “This is in addition to a core Budget 2023 package of €6.9 billion – €5.8 billion in expenditure and 1.1 billion in tax,” he said.

Public Expenditure Minister Micheal McGrath

Public Expenditure Minister Micheal McGrath said the Government was delivering a budget against an “extraordinary backdrop of uncertainty and challenge”.

In his speech, he told the Dail that many people were “genuinely worried about what lies ahead in the months to come”.

“These are not normal times,” he said, adding the Government was responding.

“This is a budget for its time, a budget that seeks to respond with unprecedented resources, with a breadth of measures and a speed of execution we have not seen before,” he said.

Michael McGrath TD: “€400 lump sum for fuel allowance by Christmas” 

  • Once off double week payment to social welfare recipients 
  • Normal Christmas bonus to be paid in early December 
  • Extra €500 lump sum for those on Working Family Payment 
  • Double Child Benefit payment to be paid in November

Public Expenditure Minister Micheal McGrath
Public Expenditure Minister Micheal McGrath

'Support will continue'

The Finance Minister concluded his speech on an “optimistic note” saying that despite the challenges facing the country he was “confident” that individual, families and businesses will continue to be supported.

“We know we have many risks,” Paschal Donohoe said. “Recent years have shown how quickly they can develop.

“And I know we need to do more, build more homes, continue to improve public services, respond with courage and resolution to our defining challenge of climate change, but we can and we will.” As he commended Budget 2023 to the Dail, Mr Donohoe said many are looking at this budget today “for confidence, for help”.

“We can and we should be confident about our future. We know our citizens need help, we know our employers need help and this budget aims to give this help,” he added.

Being prepared for unforeseen risks and challenges

Mr Donohoe said he will direct two billion euros into the national reserve fund and four billion in 2023.

“Following so soon after Brexit and Covid, it is a major achievement for our country to be in a position to put additional resources aside in order to prepare for future challenges and to run a surplus,” TDs heard.

He said major challenges are coming in the form of an ageing population, the digital transition and climate change, so therefore it is “imperative” that the Government prepare public finances appropriately.

Mr Donohoe said the contributions to the fund will mean the Exchequer is supplied with the “additional firepower” to respond to challenges over the coming years.

Corporate tax

Paschal Donohoe said Ireland needs to be mindful of its reliance on corporation tax.

“My department has undertaken significant work on these vulnerabilities, showing that approximately one in every eight euro collected by the state in tax comes from the corporation tax payments of a very small number of firms,” Mr Donohoe said.

“At the same time, our income tax system is heavily reliant on a relatively small number of employees; just 500,000 workers and 10 multinational companies account for over one-third of our total revenue.

“My department estimates that excess corporation tax receipts – that is the amount which may be more vulnerable to a shock – could amount to 8-10 billion this year.

“While these receipts are extremely welcome, they cannot be depended upon to fund permanent expenditure. To do so would be to repeat the mistakes of the years leading up the global financial crisis.

“It is therefore imperative that we treat these excess receipts differently.” He said his department will now monitor public finances while excluding any of these “excess” receipts.

Mr Donohoe also said that his department will start to “replenish” the National Reserve Fund with some of the excess receipts to build up the country’s economic resilience.

Hospitality

The finance minister also confirmed that the 9% VAT rate for the tourism and hospitality sector will continue until February next year.

Paschal Donohoe also announced that the government will cut the VAT on newspapers from January 1.

“This is in line with the Government’s commitment to support an independent press and the Future of Media Commission’s recommendation on this matter,” Mr Donohoe added.

He also said that the VAT on defibrillators will be removed from January.

Mr Donohoe said that the government will bring in its own windfall tax on energy companies if Ireland cannot be part of the EU measures that are currently underway.

“It is not fair for companies to earn excess profits from the current volatility in the market,” he added.

Excise duty will also be increased on a pack of 20 cigarettes by 50 cents.

Agriculture

Mr Donohoe told the Dail a number of important agriculture reliefs due to expire at the end of this year provide “important” supports to young farmers.

He announced the extension of the five agriculture tax reliefs due to expiring: The Young Trained Farmer and Farm Consolidation Stamp Duty Reliefs, the Farm Restructuring CGT Relief and the Young Trained Farmer and Registered Farm Partnership Stock Reliefs.

He said the duration of these extensions are dependent on the outcome of negotiations at European level on the agricultural block exemption regulation.

He also announced a time-limited scheme of accelerated capital allowances for farmers for the construction of modern slurry storage facilities to assist the sector adopting “environmentally positive farming practices”.

Climate change

Mr Donohoe told the Dail the effects of climate change are “becoming more frequent and more destructive” and that the Government is acting to reduce emissions and support newer cleaner technologies.

He said the additional funding needed for measures such as retrofitting comes in part from a carbon tax which he described as “appropriate”.

The rate per tonne of carbon dioxide emitted for petrol and diesel will go up from 41 euro to 48.50 euro from October 12 as per the trajectory set out in the Finance Act 2020.

“This will mean that there will be an increase of just over two cent VAT inclusive per litre of petrol and diesel,” he said.

“I also recognise the sharp cost of living challenges currently being faced by society, so the government is therefore proposing to offset this carbon tax increase with a reduction to zero of the National Oil Reserves Agency (Nora) levy.” “The Nora levy which is collected at a rate of 2 cents per litre (VAT exclusive) will offset the carbon tax increase which means that the price at the pump will not go up as a result of taxes or levies.”

Cost of Living

Paschal Donohoe has announced a number of measures to help businesses through the cost-of-living crisis.

“I am introducing a Temporary Business Energy Support Scheme to assist businesses with their energy cost over the winter months,” Mr Donohoe said.

“The scheme will be open to businesses that carry on a Case 1 trade, are tax compliant and have experienced a significant increase in their natural gas and electricity costs.

“It is proposed that the scheme will operate by comparing the average unit price for the relevant bill period in 2022 with the average unit price in the corresponding reference period in 202.

“If the increase in average unit price is more than 50% then the threshold would be passed and the business would be eligible for support under the scheme. Once eligibility criteria are met the support will be calculated on the basis of 40% of the amount of the increase in the bill amount.

“A monthly cap of 10,000 euro per trade will apply and an overall cap will apply on the total amount a business can claim.”

Housing

Mr Donohoe proposed to extend the residential development stamp duty refund scheme to the end of 2025.

The scheme, which has been in place since 2017, allows a portion of the stamp duty paid on the acquisition of non-residential land to be refunded where that land is subsequently developed for residential purposes.

The net minimum stamp duty payable after a refund is 2% whereas the normal rate for non-residential property is 7.5%.

He said to the end of 2021 the scheme had been used in respect of projects that have delivered more than 15,000 residential units.

Paschal Donohoe also said the Help-To-Buy scheme will continue at the current rates until the end of 2024.

He told the Dail that he will keep the scheme under review and will consider a number of recommendations made in a report on the scheme.

He also said he will introduce a new rent tax credit of €500 per year for renters.

“This measure, aimed at those who do not get any other housing supports, will apply for 2023 and subsequent years but I am providing that it may also be claimed in respect of rent paid in 2022,” Mr Donohoe said.

“Approximately 400,000 people are expected to benefit.” Mr Donohoe said he will bring in a vacant homes tax to “increase the supply of homes for rent or purchase to meet demand”.

The tax will apply to residential properties which are occupied for less than 30 days in a 12-month period.

Paschal Donohoe also said the Help-To-Buy scheme will continue at the current rates until the end of 2024.
Paschal Donohoe also said the Help-To-Buy scheme will continue at the current rates until the end of 2024.

Tax

Paschal Donohoe announced an increase in the second USC rate band (2% rate) from €21,295 to €22,920 in line with the 80-cent-per-hour increase in the national minimum wage recently agreed by the Government.

He said this would ensure that full-time workers on the minimum wage will remain outside the top rates of Universal Social Charge (USC).

He also extended the concession for a further year that applies to those who have a medical card and earn less than €60,000 a year so that those individuals pay a reduced rate of USC.

Paschal Donohoe also said the Government will further assess introducing a third rate of income tax.

He said the Tax Strategy Group (TSG) had examined the impact of introducing a third rate and further analysis of its report will take place immediately and conclude before next year’s Summer Economic Statement is completed.

Mr Donohoe said: “This analysis will assist government in arriving at an informed decision in a timely manner.

“Were the government to opt for the introduction of a third rate of income tax, it would required considerable change to the system in both the Revenue Commissioners and payroll providers; changes that will need significant lead time to implement.

“We are advised this could be done for January 2024.

“As a result, my department will engage with the Revenue Commissioner on the necessary preparatory work, in advance of a policy decision being made by Government.”

Latest: 1.25pm:

An Income Tax package worth €1.1bn was also announced and the standard rate cut-off point is increasing by €3,200, to €40,000.

The main tax credits (personal, employee and earned income credit) will increase by €75.

The home carer tax credit will rise by €100 to support stay-at-home parents.

Mr Donohoe announced an extension to the current excise reduction of 21 cents per litre of petrol, 16 cents per litre of diesel and 5.4 cents per litre in respect of marked gas oil and the 9% VAT rate for electricity and gas until February 28.

He said he will introduce the necessary financial resolutions in the Dail on Tuesday evening to give effect to these extensions.

Latest: 1.20pm

A Budget package of €11bn has been announced, including €4.1bn in one-off measures.

Latest: 1.15pm

Minister for Finance Paschal Donoghue has outlined the 'strong foundations' of the Irish economy which will see €12bn in corporate tax receipts this year and €20bn in corporate tax receipts next year.

The Minister said this foundation which resulted in a Government surplus of €1bn this year and forecasts of €6.2bn next year, is how the Government was able to help during the pandemic and again, today.

 

Earlier

THE budget package is “comprehensive” and “sustainable” and will help the country get through the unprecedented energy crisis, the Taoiseach has said.

The budget will be officially outlined in the Dáil chamber at 1pm on Tuesday.

In what could be one of Ireland’s most significant budgets in years, the pressure is on the coalition government to get the balance right as bills for energy, fuel, groceries and housing soar.

A tax credit for renters and double welfare payments are among the measures expected in Budget 2023.

A new support scheme for employers who are facing rising energy costs will also be part of the package.

Taoiseach Micheál Martin said the budget will aim to deal with the cost-of-living crisis.

“We will do it in a way that is sustainable, not just this year but throughout 2023,” Mr Martin said before the final pre-budget Cabinet meeting.

“It will mean investment in public services, it will mean significant reduction in costs for people, childcare education, health and also then allocating funding to people through taxation reductions, social welfare payments and energy credits.

“It’s a comprehensive package, but what we do have a significant eye on, 2023, and we have to be sustainable from a public finances perspective.

“In other words, have to make sure that not only do we get people through this winter in the teeth of this unprecedented crisis, but also make sure we have the reserves to get through the entirety of 2023 as well.”

UK TURMOIL

Mr Martin said that while government is focusing on its budget, it is conscious of the economic turmoil in the UK following the tax-cutting mini-budget announced last week.

“Europe and the UK are key partners, not just in the context of general economics but in the terms of the energy crisis as well,” Mr Martin added.

“We will watch and monitor what is happening in the UK.

“But our main focus is on the Irish situation and how the crisis is impacting on people and households, on workers and in businesses and we want to protect jobs and that will be a significant part of the budget.” The Government had indicated during the summer that the Budget would be worth 6.7 billion euro, but on Sunday it published a white paper that indicated it had a surplus of 4.4 billion euro, mostly due to the overperformance of corporate tax.

Among the one-off measures to be announced are energy credits worth 600 euro in total, with one payment to be paid before Christmas to help with spiralling bills.

Tánaiste Leo Varadkar said the budget package is designed to put money back in people’s pockets.

The Fine Gael leader said there will be permanent changes to help businesses with rising energy bills.

“There will be reductions in the cost of childcare, putting a child through education and college and other things as well,” Mr Varadkar said on Tuesday.

“It will hopefully restore confidence in the economy. It is a very large package in contrast to what you are seeing across the water and in other countries.

“This is being financed because we have a strong economy as our businesses are doing very well, because so many people are employed, it’s not being funded through borrowing.

“We will be able to put aside some money in reserve that if we do need to intervene again in the new year we will do so, as no-one can predict how long this energy crisis or inflation crisis will go on for.” Carers and people with disabilities are due to get one-off payments of 500 euro, while renters are reportedly in line for a 500 euro tax credit.

A double payment of social welfare and child benefit is expected, as is a reported 12 euro increase in the core social welfare payments – the latter of which has already been called “a serious disappointment” by stakeholder groups.

The Government has pledged to help people with high childcare costs as a core part of Budget 2023, and is to announce that fees will decrease by 25% next year, with Children’s Minister Roderic O’Gorman to push for a further 25% reduction in 2024.

The forthcoming budget is also to reduce third-level fees, with the student contribution charge reported to drop by 1,000 euro for all students.

A widening of the highest tax band is expected so that the top rate of 40%, which currently applies to those earning over 36,800 euro, will kick in at a higher wage.

The fuel allowance, currently 33 euro a week, is expected to be expanded to include a larger cohort than the current 370,000 eligible.

Minister for Finance Paschal Donohoe said the budget will include a new support scheme for employers.

“The overall scale of our core spending will be broadly in line with the parameters of summer economic statement,” he added.

“Michael McGrath (Minister for Public Expenditure and Reform) has worked intensively with all government ministers to put together day-to-day spending plans that are in line with what we have already announced.

“We are going to be announcing a scale of one-off measures, it’s going to be significant.

“A key driver of this will be bringing forward a new support scheme for employers who are facing challenges regarding the rising cost of energy.

“That will be a significant intervention in our economy. We have to protect jobs and we have to put in place measures that will stop a surge in pricing turning into a threat to jobs.” Higher Education Minister Simon Harris said it is a “really important day”.

“This budget is all about the cost of living,” he said.

“It’s all about trying to make sure families can get through the winter and it’s about making sure work pays.

“All ministers have been working across departments to make sure any and all measures that can be considered to help people can be put in place.” The Fine Gael minister also said that he is “very confident that we have used an awful lot of levers at our disposal to try and help students, parents and families of workers”.

“My message to students to parents, to families in general, is that help is on it way,” he added.

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