The first budget of the government of “new politics” was unveiled last week at Leinster House. The budget, containing a €1.3 billion package, weighted at about 3-to-1 between spending increases and taxation cuts, was laid out by Minister for Finance Michael Noonan and Minister for Public Expenditure Paschal Donohoe. It was generally received as a generous budget, with only one tax increase, numerous tax cuts and various increases in benefits. However, with the effects of Brexit on Ireland yet unknown, the success of the budget remains unclear.
Some of the major implementations of Budget 2017 include:
The Old Reliables
As expected, an extra 50 cent was added to the price of a packet of 20 cigarettes, bringing the average cost to €11. This was the only tax increase in the entire budget, with the excise on alcohol and fuel being unchanged.
The retention of the special VAT rate at 9% is a welcome measure for the tourism and hospitality sector, a major source of employment for thousands of students nationwide.
There were increases to social welfare payments across the board in the 2017 budget. Minister Donohue made numerous references in his speech to the creation of a ‘just society’. To this end, social welfare benefits were increased by 5 euro, and the Christmas Bonus was increased to 85% of your weekly payment.
The USC has been an unpopular tax (to put it mildly) with workers since its introduction in 2011. In Budget 2017, the three lowest USC rates are being reduced by 0.5%, a move that will please many voters, but a move that will cost the exchequer €335 million in a full year. Minister Noonan says the Government is committed to eventually removing the USC, resources permitting.
The announcement of an increase in early years funding from €345 to €465 million in 2017 was welcomed by many young families. A new childcare scheme will be set up from September which will provide subsidies for children going to a Tusla-registered childcare provider.
Few issues have been as prominent in 2016 as the housing and homeless crisis in Ireland. In response, €1.2 billion is to be provided to the Department of Housing to help tackle the current crisis, building 47,000 new social housing units by 2021. The government aims to provide 20,000 private homes by 2019, with a capital allocation of €50 million for a local housing activation fund. There will be an extra €105 million for the Housing Assistance Payment Scheme and Rent Supplement.
A help-to-buy scheme for first-time buyers was also introduced to help people get on the housing market. The Home Renovation Incentive Scheme is being extended to the end of 2018. The funding available for emergency accommodation for homeless people will be increased by €28 million, to €100 million for 2017. The housing plan, Donohoe said, will see the needs of 21,000 social housing applicants met next year.
The Health Department is getting its highest level of government funding to-date in the coming year. Expenditure for the health service will rise by €497 million, to almost €14.6 billion total. In an attempt to alleviate the chronic overcrowding in Irish Hospitals, an additional €15 million is to be made available to the National Treatment Purchase Fund.
An increase in spending of €458 million will allow for an extra 2,400 teaching posts, 900 of which will be resource teachers. Crucially, an extra €36.5 million will be made available for the higher and further education sector next year.
Farming and Rural Development
There will be 500 new places on the Rural Social Scheme. The Rural Development Programme funding will rise by €107 million, including €25 million for a new animal welfare scheme. Major construction schemes for Cork and Enniscorthy are planned as part of a €44 million package for flood relief. Finally, €15 million will be put into the much discussed National Broadband Plan next year.
Justice and Defence
The Defence budget will be increased by €16 million to recruit 800 new Gardaí and 500 new civilian staff.
A much needed €319 million has been put aside to improve regional and local roads.
Despite the controversy over Apple earlier in the year, Minister Noonan said the corporation tax rate would remain at 12.5% and that “nobody is asking for it to be changed.” DIRT is to be reduced from 41 per cent to 33 per cent by 2020. Sugar tax, much lamented by the soft drinks industry, and much desired by health officials, was also announced. Minister Noonan remarked “It is of utmost importance to me that such a tax is as effective as possible, as fair as possible, and minimises the administrative burden on business… I intend to introduce this tax to coincide with the introduction of its UK counterpart, in April 2018.”
In his opening monologue, Noonan made references to the potential economic impact of Brexit and the requirement for a ‘rainy day’ fund; ”Whatever the final settlement, what we know with certainty is that Brexit has increased risk to the Irish economy, and as well as introducing specific measures to assist particular sectors of the economy, we must also put in place safety nets to protect us against future economic shocks.” €1 billion annually will be set aside by governments, starting in 2019.
The combination of spending increases and tax cuts, especially to families and the elderly, has led many to suspect this is an “election budget.”
Responding to the budget announcements relating to third level education, the Union of Students in Ireland (USI) welcomed the €36.5 million in third level education spending, but emphasised it was €100 million short, as they had recommended spending of €140million in their pre-budget submission. The Budget allocated €4 million to reinstate maintenance grants from September 2017 for disadvantaged postgraduate students. USI welcomed the reintroduction of postgraduate grants, but emphasised that it would only benefit 1,100 students. The Budget allocated an additional €160m in total current funding for third level education over three years, the first significant expansion in Government spending after a decade where such spending was cut by 33%, but USI said it was €200 million short of what the Cassell’s Report identified as necessary.