Donohoe announces €1.5bn in extra spending and tax cuts
Minister for Finance Paschal Donohoe has announced €1.5bn in extra spending and tax cuts in Budget 2022.
He said the measures would tackle the rising cost of living, while putting the public finances on a sustainable path as we emerge from the pandemic.
But the Opposition accused the Government of being “out of touch” and failing to tackle the major crises of housing, hospital waiting lists and childcare costs.
Mr Donohoe said the Covid-19 pandemic highlighted the role of the Government in supporting both the economy and society.
Minister Donohoe began his Budget speech by saying the Covid-19 pandemic had “brought out the very best in Irish society” and praised frontline workers and those in community and care sectors.
“Our efforts have worked. Our solidarity and common purpose saved lives. Our country now reaches for a better, a brighter future,” he told the Dáil.
Mr Donohoe said that through the Pandemic Unemployment Payment, the Employment Wage Subsidy Scheme (EWSS) and the Covid Restrictions Support Scheme (CRSS), around €17.5bn has been directed to individuals, families and businesses.
In framing the Budget, the minister said the Government had been conscious of the cost of living pressures that are currently confronting people and businesses.
“Budget 2022 meets the twin goals of investing in our future, of meeting the needs of today, while putting the public finances on a sustainable path,” he added.
Mr Donohoe announced a total Budget package of €4.7bn, €1.5bn of which is new spending commitments or tax changes.
He said the €4.7bn will be split between expenditure measures worth €4.2bn and tax measures worth €500m, including revenue-raising measures of approximately €230m, and that a contingency fund amounting to €4bn will be created.
Sinn Féin said that Budget 2022, like the Government, “is out of touch, out of ideas and out of time”, while Labour said it was “anaemic and directionless”.
The Taoiseach said Ireland’s economic recovery has been faster and more extensive than the Government had anticipated.
Speaking on RTÉ’s Nine News, Michéal Martin said the European Central Bank advised Ireland “not to pull the rug” too quickly from under the pandemic supports that were in place to protect jobs and incomes.
Mr Martin described Budget 2022 as measured and balanced, saying it “doesn’t overdo it”.
He said the Government is conscious it could overheat the economy and is conscious of the inflationary cycle.
Mr Martin said that while some people say more could have been done in this Budget, he said to do more would have been the wrong approach because to do more could have damaged people’s purchasing power because of inflation.
Pandemic support payments
Mr Donohoe said the EWSS will remain in place in a graduated form until 30 April 2022 and that businesses availing of the EWSS on 31 December this year will continue to be supported until 30 April next year.
He said that across December, January and February, a two-rate structure of €151.50 and €203 will apply, and for March and April next year a flat rate subsidy of €100 will be in place and the scheme will close to new employers from 1 January 2022.
For remote workers, Mr Donohoe announced an income tax deduction amounting to 30% of the cost of vouched expenses for heat, electricity and broadband.
He also announced an income tax package valued at €520m, which will increase the standard rate band by €1,500 and increase each of the personal tax credit, employee tax credit and earned income credit by €50.
Mr Donohoe said the minimum wage will be increased by 30c to €10.50 per hour.
The ceiling of the second USC rate band will be increased from €20,687 to €21,295 and the exemption from the top rate of USC for all medical card holders and those over 70 earning less than €60,000 has been retained.
The Help-to-Buy scheme for first-time buyers of new homes is being continued at the current rates for 2022, with a full review of the scheme to be carried out next year.
On climate change, Mr Donohoe said future generations “will not tolerate inaction from the leaders of today”.
He confirmed that the carbon tax will increase by €7.50, as expected. The Finance Act 2020 provided for annual increments in the carbon tax of that amount every year out to 2030.
In his speech, Mr Donohoe referenced the challenge around energy supply and prices across the globe in recent months.
“New monies raised in this change will be invested in targeted social welfare initiatives to prevent fuel poverty and ensure a just transition.
“It is why the additional revenue from carbon tax will be used to invest in a socially progressive national retrofitting programme,” he said.
He also announced that there would be a modest level of tax relief on personal income for households who sell surplus electricity that they generate back to the grid.
He said that from January 2022, a revised VRT table is being introduced. To continue to incentivise the uptake of electric vehicles, the €5,000 relief for Battery Electric Vehicles to end 2023.
There was welcome news in the Budget for the hospitality sector with confirmation that the reduced VAT rate of 9% will remain in place to the end of August 2022.
Minister Donohoe also acknowledged that the aviation sector had paid a particularly heavy price during the pandemic and said he is amending the taxation arrangements, which apply to international air crews under Section 127B of the income tax code.
A 50c increase in the price of a packet of 20 cigarettes has been announced, meaning the price of a pack of cigarettes in the most popular price category is now €15.
‘We have walked a long road together – McGrath
The Minister for Public Expenditure and Reform told the Dáil that overnight “the things we took for granted, the things we valued the most were taken from us”.
He said “for the past year-and-a-half, we have walked a long road together” and there were times “when it all seemed hopeless”, adding “we kept going, we dug deep, and we have stayed the course”.
The minister said that “we owe it to our children and to future generations, to be careful how we manage the public finances”.
He said €87.6bn will be provided next year for public expenditure – €80.1bn of which will be available for core expenditure, an increase of over €4.2bn (5.5%) on this year.
There will be up to €7bn in Covid funding for next year, for public health measures, particularly the continuation of test and trace and the vaccine booster campaign.
Minister McGrath confirmed the free GP care is being extended for children aged six and seven and the Drug Payment Scheme threshold is being cut to €100 per month.
He also announced a €31m women’s health package, which will include free access to contraception for women aged 17-25 from next August.
A record €6bn in Exchequer funding to the Department of Housing, Local Government and Heritage has been announced, an increase of 15.6% on the 2021 allocation and a 48% increase over the last three years.
Addressing the Dáil, Mr McGrath said a total of €2.5bn in direct Exchequer capital funding will be made available for housing alone, which will support the delivery of 9,000 new-build social housing units in 2022.
A New Youth Travel Card will offer a 50% discount to those aged between 19 and 23 across the transport network.
On education, Mr McGrath said the maintenance grant for third-level students will be increased by €200 and the €200 contribution for post-Leaving Certificate courses is to be abolished.
He also confirmed that the Jobseekers’ Allowance will be increased by €5, while the State pension will increase by €5 a week, with the Living Alone Allowance to rise by €3 a week, and the fuel allowance will go up by €5 a week.
He said the double Christmas bonus payment will be paid this year.
The minister announced that €34m is to be made available for apprenticeships and the package would include off-the-job training places for 7,000 apprentices impacted by the pandemic and a new Employer Grant for apprentices to be introduced from January.
He told the Dáil that 115,000 people who came off the Pandemic Unemployment Payment to return to work, moved to a different sector from their previous employment.
Mr McGrath said the evidence of the climate crisis is clear for all to see and that next year there will be a €700m capital investment by the Department of the Environment, Climate and Communications.
He said this will be the start of a “ramp up” in capital spending that will see €12.9bn of direct capital investment by that department over the lifetime of the NDP.
Mr McGrath said €202m of this funding will be spent in 2022 on supporting people to improve the energy efficiency of their homes.
He said this will support over 22,000 home energy upgrades.