'Uncertainty and anxiety' - The five main talking points from Budget 2021
Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath have delivered Budget 2021 in the National Convention Centre in Dublin.
"We will prevail" were the words of Paschal Donohoe as he introduced the document seeking to address a €24 billion hole in public finances brought about by the Covid-19 pandemic in Ireland.
The financial backdrop
"The budgetary landscape has transformed dramatically in the last few months," Minister Donohue said in his budget speech. He said Budget 2021 was underpinned by the assumption that Covid-19 would be with us in 2021 and in the absence of a widely available vaccine. He told the Dáil that 320,000 would be lost by the end of 2020 but that he expected 155,000 jobs to be recovered next year. The unemployment rate at the end of the year will be 10.25%.
The Budget was prepared on the assumption of a deficit for the country of €21.5 billion this year and €20.5 billion next year. The Budget will use the entirety of the nation's 'rainy day fund' of €1.5 billion. A resolution must come before the Dáil to allow that usage. The budgetary package amounts to €17.75 billion, including €270 million in tax measures. The total national debt level now stands at €219 billion.
The Covid-19 Recovery Fund
One of the biggest single expenditures announced was this Covid-19 specific but, as yet, unallocated fund of €3.4 billion. The government will use this fund next year to respond to the pandemic situation as it evolves, possibly in further business and employment supports as required. Minister Donohoe said the "government will use this resource for measures next year based on generating employment."
"The fund will be flexible to allow the government to react swiftly" in areas of infrastructure, reskilling and retraining and the maintenance of jobs.
Leo Varadkar tweeted during the budget speech: "The unallocated €3.4bn Recovery Fund will give us the firepower we need to do more in 2021 to protect jobs if the pandemic continues. We are also increasing spending on infrastructure to over €10bn in 2021, which will ensure there is work for the construction sector."
The jobs and business outlook
The PUP payments and Employment Wage Subsidy will continue is 2021. The government has expanded its tax warehousing scheme to help people offset tax bills for receiving supports from both schemes during the pandemic. This scheme will also extend to the self-employed. People who availed of the payments will be able to defer payment of resultant tax liabilities for a year with no interest. The subsidy scheme is also likely to receive EU funding so Ireland can access over €2 billion to help with the delivery of the scheme. The EWSS will be extended in some form until the end of 2021 - a similar scheme to that in place now and until March 2021 will be put in place to the end of 2021. "There will be no cliff-edge," Paschal Donohoe insisted. The government will decide on the form of this extension when economic conditions are clearer.
Targeted supports for the hospitality industry and the arts were also announced in Budget 2021. The Covid Restrictions Support Scheme will generally operate when Level 3 or higher restrictions are in place under the Living With Covid-19 Plan. Currently, the accommodation, food, arts, recreation and entertainment industries are eligible with those sectors closed under Level 3. Other sectors will qualify at higher levels of the plan if and when they come into force. People will apply to the Revenue Commissioners for advance credit for the period of restrictions. The scheme is available today until next March. The first payments under the scheme will be made in mid-November.
The headline VAT rate has been reduced for the hospitality and tourism sector. It will move to 9% from 13.5% with the change to stay in place from November 1 to the end of December 2021. A commercial rates waiver brought in during the July Stimulus plan is being extended to the end of the year. A €55 million fund has also been announced for the Tourism Business Support Scheme.
The budget also mentioned the new normal of working from home. The government is to develop a strategy for remote working with interdepartmental work already ongoing on this. Workers are entitled to claim €3.20 in tax rebates per day if their employer makes a contribution towards remote working. Those whose employer does not make a contribution towards remote working can also make a claim for a tax deduction for associated costs. These costs include lighting, heat and now broadband costs.
Minister Michael McGrath said the government was "investing a record amount in our health service," with changes and improvements he said would be there long after the virus has gone. 16,000 additional employment posts will be provided for in the health budget for 2021.
€4 billion will be spent on the health service in 2021. Investment will allow for 100,000 Covid-19 tests per week and will increase bed capacity.
"We must build up permanent capacity and resilience in health service," Minister McGrath said.
The measures announced include an additional 1,146 acute beds; an increase in critical care beds to 321 from 255 pre-Covid-19; 1,250 community beds in 2021 including 600 new rehabilitation beds; five million additional home care hours; €20 million for voluntary disability service providers and €5 million for community-based dementia services; €100 million on disability supports with a particular focus on 'Progressing Disability Services for Children and Young People'; €38 million for a new mental health strategy.
"One of the most important priorities for this government is undoubtedly climate change," Paschal Donohoe said on Tuesday.
Carbon tax will increase by €7.50 every year from now until 2029 and then by €6.50 in 2030 to achieve €100 per tonne. This year's increase will take effect on motor fuels tonight. This is likely to add €1.20 to a fill of petrol and €1.50 to a fill of diesel.
Changes have also been announced to VRT charges based on emissions. This measure is aimed at incentivising people to buy low-emission cars. In line with this, a third motor tax band will be introduced from January cover ultra-energy-efficient vehicles.
€65 million has been announced for the deep retrofitting of social housing stock. This came alongside a new apprenticeship scheme which will invest in the training of workers to carry out such work throughout the country.
BUDGET 2021 - AT A GLANCE:
- The pension age increase to 67 will not proceed. It will remain at 66
- Headline social welfare rates unchanged
- €4 billion to be spent on the health service
- No increase to income tax
- €3.4 billion unallocated Covid-19 Recovery Fund to be used as needed by the government next year
- €5 billion to be put into the Department of Housing - focus on social and affordable housing supply
- The price of a packet of cigarettes will increase by €0.50, bringing average pack price over €14.
- Wage subsidy scheme will be extended to end of 2021
- People can earn just over €400 in casual work without losing Pandemic Unemployment Payment
- ICU beds to increase from 255 to 321
- Price of petrol and diesel to increase by €1.20 and €1.50 per tank fill respectively
- Carbon tax will increase by €7.50 per year until 2029 and €6.50 in 2030 to achieve €100 per tonne
- Help To Buy Scheme extended through 2021. Max rebate for deposit of €30,000.
You can read all the details of the Budget HERE.