Tough budget tempered by €500m jobs stimulus plan

Another tough budget designed to save €2.5 billion next year contained an unexpected sweetener of a €500 million jobs stimulus package.

The measures unveiled in the Dáil yesterday by Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin are intended by the Government to pave the way for the end of austerity.

The budget included a wide range of spending cuts and revenue-raising measures rather than any major change in the tax or welfare system.

Those most likely to cause political difficulty for the Government involve a tightening of eligibility limits for medical card holders, a €1 increase in prescription charges and a cut in maternity benefit.

A reduction in the income threshold for medical cards for the over-70s, the ending of the telephone allowance and the abolition of the bereavement grant are also likely to prove controversial.

The continuation of a levy on private sector pension funds, most of which are already in serious financial difficulty, and restrictions in the tax allowance for medical insurance could also be problematic.

The “old reliables” were hit, with beer, spirits and cigarettes going up by 10 cent from midnight last night, while the price of a bottle of wine will increase by 50 cent.

On the stimulus side, the budget saw the retention of the reduced 9 per cent VAT rate for tourism-related services.

A tax incentive for home improvements worth between €5,000 and €30,000 was introduced, the air travel tax was scrapped and a range of incentives for business and innovation were outlined.

“The purpose of this budget is to continue the progress we have made; to reinforce policies that grow the economy; to establish the conditions which will create jobs, and to prepare for exiting the bailout programme,” Mr Noonan said.

He said there would be no increases in income tax or the universal social charge in 2014, nor would there be increases in excise duty on petrol, diesel or on home heating oil and gas.

As widely anticipated, free GP care for all children aged five and under will be introduced at cost of €37 million.

While tax rates, pensions and child benefit have not been cut, payments for 22- to 24- year-old jobseekers will fall from €144 to €100 a week while 25-year-olds will get €144 instead of €188.

Mr Howlin announced a range of public investments that would be made from the €400 million obtained through the awarding of the National Lottery Licence.

While €200 million has already been committed to the construction of the national children’s hospital, the rest will be used next year to fund road maintenance and repairs, sports capital grants, housing for older people and those with a disability and a number of 1916 commemoration projects.

Fianna Fáil finance spokesman Michael McGrath said it was the third budget in succession that had placed a disproportionate share of the burden on those least able to carry it.

Sinn Féin finance spokesman Pearse Doherty said the Government was “pitting grandparent against grandchild” by ending the telephone allowance for pensioners and introducing free GP care for the under-fives.