by Aiken PR
Taoiseach Leo Varadkar has been working to build an image of Fine Gael as a progressive party that is determined to reward those who “get up early” in a “republic of opportunity”. He promised “no fireworks” but Budget 2018 was his first chance to paint a picture for voters of what that means for the country.
Under pressure to satisfy the party’s narrative and with limited room for manoeuvre, Minster for Finance Paschal Donohoe presented his first Budget to the Dail. He delivered a series of tax and spending measures with the primary aim of “balancing the books” while “giving back to hard working families.”
Headline Economic Figures
· The economy continues to grow with 4.3 per cent in 2017 and 3.5 per cent next year.
· Unemployment is at 6.1 per cent, its lowest since 2008 forecast to fall to 5.7 per cent next year, close to the level considered to be full employment.
· GDP growth forecast up from 4.2 per cent to 4.3 per cent for 2017 and forecast for 2018 of 3.5 per cent unchanged.
· Total expenditure next year will be €60.9 billion. The forecast deficit for 2018 is 0.2% of GDP
· Stamp duty on commercial property sales will increase from 2pc to 6pc which will raise €400m.
· There will be €1.83 billion for housing in 2018. 3,800 new social homes will be built next year.
· There will be an additional €115 million to deliver 4,000 extra social homes next year. The Minister will also further accelerate this delivery from 2019.
· €750 million from the strategic investment fund will be used for commercial investment in housing. The new initiative will be called Home Building Finance Ireland.
· Government will invest a further €149m for the Housing Assistance Payment scheme and provide cheaper loans to developers to encourage them to build homes and apartments.
· Mortgage interest relief will be cut by 25pc every year for the next three years, The relief allows homeowners who bought during the boom years to claim back tax on their mortgage interest payments.
· Creation of a new national homes agency which will be given wide–ranging powers to take over Nama lands and building projects – helping to kickstart property development.
· €9 million extra is to be allocated for public transport and roads up to €414 million to 2018.
· Brexit loan scheme will see up to €300 million available to SMEs including food businesses “given their unique exposure” to Brexit, to help with their short–term investment needs.
· Capital expenditure will be used to deal with the effects of Brexit, and there will also be some increased staffing across the public sector to deal with the UK’s withdrawal from the European Union.
· To “further protect the economy”, there will be “a rainy–day fund” established of 1.5 billion euro from Ireland’s Strategic Investment Fund. It will receive an annual contribution of €50 million.
· Capital budget between now and 2021 will be €7.8 billion, making it one of the highest in Europe.
· The 2.5 per cent Universal Social Charge (USC) rate to be reduced to 2 per cent and to ensure that full–time workers on the increased national minimum wage of €9.55 per hour do not pay the upper rates of USC. (more information below)
· The minimum wage is set to rise by 30c per hour to €9.55.
· By 2018 – the minimum wage for an experienced adult worker will have increased by 10.5% since 2015 – when the minimum wage was €8.65 per hour.
· The rates of Minimum Wage that will apply from January 2018 are:
o Experienced adult worker €9.55 per hour
o Over 19 and less than 2 years since first job €8.60 per hour.
o Over 18 and less than 1 years since began first job €7.64 per hour.
o Aged under 18 €6.69 per hour
· New telephone support of €2.50 per week for those on the living alone and fuel allowance.
· All welfare payments will increase by €5.
· €4–5 increases can be expected for pensioners from mid–spring alongside an increase to the Christmas bonus
· Welfare claimants and lone parents are also due to be given €2.50 more in the qualified child payment – bringing the rate to €32.30 per week for a child.
· A new Key Employee Engagement Programme, or KEEP for short, to support small and medium enterprises in their efforts to attract and retain key employees in a competitive International labour market will be introduced, by providing for an advantageous tax treatment on share options
· Spending on education next year will reach over €10 billion, a new peak for the sector. That represents 16.6 per cent of total spending. The Government will create 1,300 more posts in schools in 2018.
· Due to additional funding the pupil–teacher ratio will drop to 26 pupils for every one teacher in primary schools.
· An additional €310 million is to be made available until 2021 to address the infrastructure needs of higher and further education.
· The Minister for Education is set to announce details of an additional €200 million investment in public private partnership in the sector to support regional development.
· Levy paid by employers toward National Training Fund is to be raised by 0.1pc next year and again in 2019 and 2020
· Improved access to the Early Childhood and Education (ECCE) scheme will be implemented, which provides early childhood care, for three and four–year olds.
· A tax on sugary drinks is being introduced, it’ll stand at 30c per litre consistent with UK levels.
· An estimated €40 million will be raised from the new sugar tax. This will take effect from April 2018 on the same day the UK levy is being introduced subject to State Aid approval.
· Given the highly integrated production and supply chains which exist in the soft drinks industry between Ireland and the United Kingdom, The Government has sought to align the Irish sugar–sweetened drinks tax with the UK’s tax proposal, in terms of time–frame and structure.
Energy and Climate Change
· In order to incentivise the take up in non–fossil fuelled cars, the Government is introducing a 0% rate of Benefit in Kind (BIK) for such vehicles, for a period of one year to allow for a ‘comprehensive review’ of the sector before next year’s budget.
· There will be €36 million more for the expansion of energy efficiency programmes across public and residential sectors.
· The ESRI have been asked to carry out a review of carbon tax
· Increase in funding for the department of €685million. There is to be 1,800 more staff across the health sector. €90 million is allocated for new access plan to ensure patients can avail of medical care in the “most appropriate setting to them”, particularly aimed at vulnerable patients.
· A packet of 20 cigarettes will increase by 50 cents but duties on alcohol will remain untouched.
· No changes in the price of diesel or petrol.
Tourism and Sport
· VAT has not been changed on tourism and services sector. €2bn investment within the Department of Transport, Tourism and Sport is planned to help with the tourism sector.
· Total allocation of €111 million for sport.
· An increase of €64 million for the Department of Agriculture, Food and Marine bringing total investment to over €1.5 billion next year. There will be a further 25 million euro loan scheme for the agri–food sector dealing with Brexit.