Housing, health and Brexit protection main focus of budget

A raft of measures to address bottlenecks in housing and health were announced by Minister for Finance Paschal Donohoe in the budget, along with funding to help make the country "Brexit-ready".

Mr Donohoe unveiled a package worth about €700 million to protect the economy from Brexit, which he described as “the political challenge of a generation”.

Chief among these were “a human capital initiative” worth €300 million and a future growth loan scheme of €300 million for SMEs in the agri-food sector.

Mr Donohoe acknowledged that the prospect of a no-deal Brexit had played a significant part in the planning of Government expenditure for next year.

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In his speech to the Dáil, Mr Donohoe said he intended to balance the budget next year for the first time since 2007 and run budgetary surpluses after that “if the economy continues to perform well and to use them to reduce our national debt”.

“Historically, our economic performance has been less stable than that of other small, open economies in the EU,” he said. “Our ability to withstand economic shocks needs to be stronger.”

In a budget dominated by the twin themes of Brexit and housing, Mr Donohoe said he would allocate a total of €2.3 billion to the Government’s housing programme for 2019 with €1.25 billion earmarked for the delivery of 10,000 new social housing units through a combination of construction, acquisition and leasing.

An extra €121 million would also be provided for the housing assistance payment (HAP), the Government’s principal rent support scheme, aimed at delivering an additional 16,760 new tenancies next year. There was also an extra €60 million in capital funding for emergency accommodation.

‘Shelter and homes’

“This funding reflects our determination to do more to rise to the challenge of providing shelter and homes for our people,” he said, while acknowledging “where we find ourselves today [in terms of housing] is not where we want to be”.

Mr Donohoe announced an increase of €1.05 billion in health funding for next year, bringing the total health budget to €17 billion. This would help fund a €25 increase in the weekly income threshold for GP visit cards, making up to 100,000 more people eligible for free GP visits. The move comes as budgetary over-runs in health this year are expected to hit about €700 million.

The emphasis on spending allowed for only a moderate income tax package of just under €300 million, with the lion’s share funding an increased entry point to the higher rate of income tax for all earners by €750, raising it from €34,550 to €35,300 in the case of a single worker.

Mr Donohoe also announced a reduced third rate of the universal social charge (USC) of 4.5 per cent, “to give a further targeted benefit to low and middle-level incomes”.

The impact of the changes means that the top marginal rate of tax on incomes up to €70,000 will be reduced to 48.5 per cent, and fewer people on incomes around the national average will have any income subject to the 40 per cent rate, Mr Donohoe said.

His decision to abolish the 9 per cent VAT rate for the hospitality sector and increase it to 13.5 per cent, which had been well-flagged, drew strong criticism from the industry, which claimed it would cost jobs.

But Mr Donohoe said the measure would raise €466 million and allow him reduce the exchequer’s reliance on other tax heads, such as corporation tax.

Rainy day fund

The "historically high levels of corporation tax" would, from now on, be channelled into the Government's rainy day fund, which will commence next year with an initial capitalisation of €1.5 billion from the Ireland Strategic Investment Fund and an annual exchequer contribution of €500 million thereafter.

At a press conference on Tuesday night, Mr Donohoe defended his decision not to increase the current level of carbon tax amid concern over the Government’s commitment to tackling climate change.

He suggested it would precipitate price increases in several other areas, including transport, at a time when the State was facing a significant risk to its competitiveness from Brexit.

A 50 cent hike in excise duty on a pack of 20 cigarettes and a 1 per cent surcharge on diesel vehicles across all vehicle registration tax (VRT) bands were among the other measures announced.

These would help fund a €5 per week increase in all weekly social welfare payments from next March, and the restoration of the full Christmas bonus payment.

Opposition parties criticised the Government, however, for failing to do enough to address the housing crisis. Fianna Fáil's Michael McGrath said the Government should focus on delivering homes while Sinn Féin's Pearse Doherty said the budget fell well short of what was supposed to be a "housing budget".