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REPORT CARD - How did the government do on the big issues in its first budget?

Brought to you in association with Ormonde Tax Advisors

Justin Kelly

Reporter:

Justin Kelly

Email:

justin.kelly@iconicnews.ie

REPORT CARD - How did the government do on the big issues in its first budget?

REPORT CARD - How did the government do on the big issues in its first budget?

Jobs/unemployment - 8/10 

The measures: The PUP payments and Employment Wage Subsidy will continue is 2021 with people in receipt of PUP for more than four months entitled to a Christmas bonus. A tax warehousing scheme will help people offset tax bills for receiving supports from both schemes during the pandemic. 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. The government will decide on the form of this extension when economic conditions are clearer. One of the biggest single expenditures announced in Budget 2021 was the Covid-19 Recovery Fund which will be placed into infrastructure, reskilling and retraining and the maintenance of jobs throughout 2021.

The verdict: Despite the thousands of jobs to be lost in 2020, this Budget at least gave certainty on measures there to provide support. The choice to not increase staple social welfare payments will draw criticism but the Covid support commitment and rolling recovery fund will at least put some minds at ease.

Business supports - 8/10 

Targeted supports for the hospitality industry and the arts were 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. A €55 million fund has been targeted at supporting the tourism sector. The extension of the wage subsidy scheme has also been welcomed across the sector.

The verdict: This support is not insignificant and there is a certain appreciation of that from businesses. There is always room for more but the Covid-19 Recovery Fund of €3.4 billion will undoubtedly provide extra help as it is needed in 2021.

Tax/income - 7/10 

The measures: There will be no increase to income tax or USC. 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. 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 verdict: There may have been a mutiny from workers if their income tax increased, although it may have been justified given the fiscal situation post-Covid. The lack of further supports for workers in terms of childcare and dealing with reduced hours or salary will draw criticism. However, PUP recipients being allowed to earn just less than €500 without losing their payment will be welcomed. 

Transport/Environment - 7/10

The measures: 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. 

The verdict: In the broader scheme of things, these motoring measures will take us some way to addressing our climate change emissions targets. The apprenticeship scheme will result in jobs and warmer and more efficient houses too. However, with the added costs for motorists and consumers generally, these measures will not be popular.

Health - 6/10

The measures: €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, 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; as well five million additional home care hours.

The verdict: This is an unprecedented spend on health but will be judged on its implementation rather than its headline amount. The increase in ICU beds does not go far enough and the promise of 100,000 tests per week is still just that - a promise. 

Housing 5/10 

The measures: Over €5 billion will be spent on housing next year. The Help to buy scheme has been extended until the end of 2021 with a max rebate of €30,000. €500m has been allocated to capital expenditure on housing, supplying 9,500 new social housing units in 2021. An expansion has been announced for HAP tenancies as well as 800 more rental accommodation scheme tenancies. €22m will be spent on homelessness programmes including additional beds; €110m for affordable housing package for affordable and cost rental and €210m under Rebuilding Ireland Home Loan scheme.

The verdict: A huge budget but lacking ambition. The number of social houses to be provided, even when you include those the government will lease, is not enough. Neither is the rate of new builds for affordable housing schemes. A move to include second-hand homes in the Help To Buy scheme would have also been welcomed to reduce the reliance on that new supply. 

BUDGET 2021 - AT A GLANCE:

- Budget measures totalling €17.75 billion announced 

- The pension age increase to 67 will not proceed. 

- 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.