Noonan to add 20c to price of pack of cigarettes in budget

An increase by at least 20 cent on the price of a packet of 20 cigarettes is likely to be the only tax increase announced by Minister for Finance Michael Noonan in next week's budget.

While the Economic Management Council (EMC) was due to meet last night to discuss next Tuesday's budget, the meeting was postponed. The Cabinet will hold a meeting at 8am today to put the finishing touches to it.

The EMC – comprising Mr Noonan, Minister for Public Expenditure Brendan Howlin, Taoiseach Enda Kenny and Tánaiste Joan Burton – was expected to discuss primarily the tax package. It is understood final discussions were also focused on the size of various supplementary estimates to be introduced later in the year. While there has been speculation Mr Noonan may seek to increase tax on diesel and petrol, Coalition sources ruled this out.

The only new tax increase to be announced by Mr Noonan next week will be an increase in the price of tobacco, which sources said will be of the order of 20 cent at least. However, the exact rate of the increase has yet to be finalised.

Such a move would partly mirror the approach taken by Mr Noonan in last year’s budget, when the only tax increase announced was a 40 cent increase in the price of a packet of 20 cigarettes.

The vast majority of the €750 million available to Mr Noonan for tax cuts will be directed towards changes to the universal social charge, primarily at the 7 per cent rate, to benefit people earning between €17,000-€70,000. A rate cut between 1.5-1.7 per cent to the 7 per cent rate is anticipated, while cuts to the lower rates are also under consideration.

Lower-paid workers

Possible changes to income entry points at which USC also apply are still being worked on, it is understood. Of particular focus is ensuring lower-paid workers who are set to benefit from the 50 cent rise in the minimum wage do not lose their increase through higher taxes.

However, while discussions are ongoing, Government sources said both Mr Noonan’s taxation package and Mr Howlin’s spending measures were nearing conclusion.

On the spending side, the final size of the combined supplementary estimates being provided to the Departments of Health, Transport and Education, and possibly Social Protection and Justice, would be announced after the budget.

Sources said the combined size of the various supplementary estimates would come in substantially below the €1 billion mark. The Department of Health is expected to need at least an additional €600 million by the end of the year, while €100 million was already promised to the Department of Transport for increaser services. The Department of Health was also allocated €50 million for a summer works scheme.

Christmas bonus

Meanwhile, it is understood Ms Burton is examining if an even bigger increase in the Christmas social welfare bonus is possible. The bonus, abolished by the previous government, was partially restored by Ms Burton last year, with a promise to bring it up to 50 per cent of its previous level in this budget.

Ms Burton is understood to be weighing up if an increase that would push the bonus above 50 per cent of its previous level is possible. She is also expected to reverse previous cuts to the living alone allowance. Speaking yesterday , Ms Burton insisted nothing had been signed off on but confirmed an increase in child benefit had been agreed.

She confirmed a second free preschool year would not be included in the budget.

Discussions between the Departments of Health and Public Expenditure look set to go to the wire. Ms Burton said there was an agreement by the two parties that the health budget would be protected.