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EDITORIAL: Budget with no great expectations

October 8th, 2016 10:00 PM

By Southern Star Team

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OUR legislators are hardly back a fortnight from their summer holidays and already Budget 2017 looms large with details due to be announced on Tuesday next, October 11th. One thing for sure is that it won’t be of the great giveaway variety that we saw last year when the previous government managed to come up with an extra €1.5bn out of greater-than-anticipated corporation tax receipts to try to buy votes ahead of this year’s general election, which ultimately backfired on them.

For 2017, ironically, in spite of the continued improvement in the economy, the current government finds itself with less money at its disposal in the so-called fiscal space. The Summer Economic Statement estimated that they will have only about €1bn to play with for tax cuts and capital spending in 2017 and they are tied by the deal done in the programme for government, tacitly backed by main opposition party Fianna Fáil, so they won’t be able to dispense largesse on the scale we saw last year.

Also, the government is committed to providing two euros of extra public expenditure for every one used for tax cuts, so Budget 2017 will not be putting a lot of extra money into people’s pockets, apart from those who will benefit from an expected modest reduction in the Universal Social Charge – however it manifests itself – and any changes in the income tax bands. Not before time, self-employed people are set to benefit through better credits to help reduced their income tax and farmers need to get some help in taxation terms too.

Home carers are also likely to get some form of tax relief in belated recognition of the valuable role they provide, which has been taken for granted for far too long. It is expected that the entitlement to a medical card will be extended to all children in receipt of the Domiciliary Care Allowance. 

The threatened sugar tax – an attempt to start tackling our huge childhood obesity problem – is not now expected be imposed in this budget, but no doubt there will be another increase in the excise duty on cigarettes. However, a lot more money will need to be provided to make inroads on the major shortfalls we face in areas such as public healthcare and social housing. More gardai and nurses are promised.

As part of his Rebuilding Ireland Action Plan for Housing & Homelessness published at the end of July, Minister Simon Coveney flagged a scheme to help first-time new house buyers for Budget 2017. The 41% DIRT rate on interest earned from savings is punitive and a disincentive to people to save money and needs to be reviewed.

Education is another key area that the government is having difficulty adequately financing and an increase in third-level registration fees may now be a possibility, while it may be too soon to introduce the controversial student loan scheme that has been floating around for some time as it could provoke a political backlash against a government that is in a fragile state. 

There is likely to be an increase of 10c an hour in the minimum wage to €9.25 and perhaps also progressive State pension and social welfare increases with the restoration of most if not all of the Christmas bonus payment that was abolished during the economic downturn. The so-called grey vote has become increasingly important and State pensioners won’t be happy if they are not looked after with a promised increase.

An ever-increasing older population will need to be provided for, especially in the area of health care and more needs to be allocated for this with every passing year. The public health sector is stretched to meet existing demands and these are going to continue to increase with provision for more home care packages needed.

The amounts needed to tackle all the legacy issues of the economic downturn are frightening and the extra money available for public expenditure in 2017 will barely scratch at the surface. Then we have the uncertainty of how badly and when Brexit will affect the Irish economy, especially our export trade which has been driving our recovery in recent years and needs to remain strong in order to maintain our progress.

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