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The Briefing

Budget 2023 – Analysis & Reaction

Budget 2023 – Analysis & Reaction Banner

by Aiken PR

27/09/2022

The financial package was introduced to the Oireachtas today as the ‘cost–of–living Budget’.

Minister for Finance Paschal Donohoe and Michael McGrath, Minister for Public Expenditure, unveiled their 2023 Budget to the Oireachtas today, which they positioned as a ‘cost–of–living budget’ aimed at addressing mounting inflationary pressures and the impact of the energy crisis on households and businesses.

A financial package with a particular focus on tax breaks, energy, social welfare, housing, and hospitality, Budget 2023 also aims to ease the burdens of living costs on families, individuals and businesses.

A €10 billion boon in tax receipts over 2021 has led to a government surplus this year of €1 billion, and a projected surplus of €6.2bn in 2023, with Mr. Donohoe noting Ireland’s economy is on “strong foundations” with unemployment remaining low.

In light of this, Minister Donohoe says he has revised the forecast for inflation this year to 8.5 percent and 7 percent next year.

Donohoe confirmed the budget package will amount to approximately €11 billion, made up of €4.9 billion once–off measures with the remaining €6.9bn allocated to Budgetary measures for 2023 and onwards.

Energy
• €600 energy credits will be issued to every household in three instalments of €200 – one before Christmas, and two in 2023 – at a cost of €1.2 billion.
• A €400 lump sum payment allocated to Fuel Allowance recipients, with a once–off payment of €500 for pensioners, carers, people on disability payments and jobseekers.
• Temporary reduction in the rate of VAT on the supply of gas and electricity (from 13.5% to 9%) will remain until end of February 2023

SMEs
• Creation of Temporary Energy Support Scheme. Worth €1.4bn, it will cover 40% of the increase in electricity or gas bills for SMEs, with a monthly cap of €10,000.

Taxation
• Standard rate cut–off point raised by €3,200 to €40,000
• Main tax credits – personal, employee and earned income – raised by €75 each
• Newspapers zero–rated for VAT from beginning of 2023
• Cigarettes to be increased by 50c per pack of 20, with pro rata increase on other tobacco products

Climate
• Carbon tax rate per tonne of CO2 will increase from €41 to €48.50 as planned on October 12th
• Government is reducing the National Oil Reserves Agency levy to 0% in a bid to offset the cost
• Climate Action Fund will provide solar panels for every school roof in 2023

Housing
• Government has committed to a record €4.5 billion next year in public funding for providing social and affordable housing, with a €21 million increase in funding for homelessness services
• €87m allocated to the retrofitting of Social Housing in 2023.
• Introduction of Vacant Homes Tax at three times the local property tax rate, which will apply to residential properties occupied for less than 30 days in a 12–month period
• Rent tax credit of €500 per year will be applied for rent paid in 2022 and for every year thereafter
• Help to Buy scheme will continue at current rates until end of 2024

Hospitality
• 9% VAT rate for hospitality and tourism sector will expire at the end of February 2023.
• Special exemption fee required to host late night events to be halved, from €110 to €55.
• A 50c excise relief for independent cider producers

Welfare and Pensions
• Weekly social welfare payments are to increase by €12 per week in 2023
• Pensioners will receive one–off payments of up to €1,100 before the end of the year
• A double payment of the €253 per week state pension will be paid twice in the coming months – the first arriving soon after the Budget, and the second in December

Health
• Budget 2023 will provide €23 billion in health spending allowing for ‘continued health system capacity expansion’ and the recruitment of 600 staff in line with Slaintecare
• Free GP care extended to more than 400,000 people by end of 2022, with €225m in extra money to help tackle waiting lists
• VAT on health products, including defibrillators and “limited” number of contraceptive and hormone therapies, to be reduced to 0pc from beginning of 2023

Transport
• A package of €3.5bn to support the delivery of BusConnects, MetroLink, DART+ and a range of projects in 2023.
• The 20% discount on public transport fares will remain until 2023
• A Youth Leap Card, extending 50% discount to 16,17,18 year olds, is to be introduced
• Extension of current excise reduction of 21c per litre and 16c per litre for petrol and diesel, respectively.
• The reduction of Marked Gas Oil (MGO) will remain at 5.4pc per litre.

Education
• €9.6bn allocated to the Department of Education in 2023, involving 150 school building projects and provision for 686 additional teachers
• A one–off reduction in third–level student fees of €1,000 under cost–of–living measures
• Student fees to be reduced by €500 permanently to €2,500, applicable to household incomes up to €100,000
• An extra €3 million through Skillnet to support businesses to provide an extra 2,050 places, for upskilling in emerging technologies and programmes like sustainable finance and climate change.
• Free school books for primary pupils to be made available from September 2023 for all schools in Free Education Scheme

Childcare
• A reduction of 25% in the weekly fee of those availing of the national childcare scheme
• The double child benefit payment will be paid to all qualifying parents on November 1st

Construction
• A 10% levy on concrete blocks and pouring concrete in a bid to raise €80m a year, which will come into effect on April 3rd 2023

Justice
• 1,000 more Gardaí to be recruited in 2023 As part of €150m funding for the justice sector

Brexit
• €238 million allocated to alleviate the impact of Brexit on the agriculture sector

Contingency
• A €4bn+ contingency fund for potential Brexit and Ukraine war repercussions
• €2 billion set aside for rainy day fund this year and €4 billion in 2023

Analysis & Reaction

• Sinn Féin

The party’s finance spokesperson Pearse Doherty deemed the 2023 financial package as a “catch–up budget to counter government inaction” which will leave households “exposed to further price hikes.”

He said that the Government could have given ‘certainty’ to those who are vulnerable, and to ‘plan for the future’, but they failed to do so

Mr. Doherty claimed today’s tax cuts don’t go far enough, and that the tax credits for renters and electricity bills will only serve to “line the pockets and boost the profit margins of companies and landlords.”

• Labour

Labour spokesperson on Finance, Public Expenditure & Reform Ged Nash says Budget 2023 ‘will do little to nothing to transform this country’ and says a greater response is needed to the cost–of–living crisis.
He added, “What we have today, is a budget packages for next year that will in truth do little or nothing to transform this country”.

• Social Democrats

Róisín Shortall says the Budget 2023 has been billed a ‘giveaway budget’. She added, “Look behind the €4.1bn of one– off measures and that becomes clear. It’s those on high incomes who will be most rewarded by the Government.”

• Hospitality & Tourism

The Restaurants Association of Ireland have said that today’s Budget 2023 announcement has fallen short and does not go far enough to protect small Irish Hospitality employers as input costs rise significantly.

Meanwhile, the Irish Tourism Industry Confederation (ITIC) welcomed the focus on energy support, however noted its disappointment in the VAT hospitality discount being discontinued in February 2023. ITIC warns the tourism sector won’t fully recover until 2027.

• Business

NERI Research commented that the budgetary intervention will ‘reduce the likelihood of Ireland falling into recession next year’. It did, however, warn of a worrying economic outlook due to the fall and real incomes and continuing rise in interest rates.

Local Ireland, the association representing 32 weekly paid–for newspapers around the country, welcomed introduction of 0% VAT on newspapers with President Declan McGuire stating the new rate will encourage investment in journalism during the transition to new digital business models.