Budget to increase pension, welfare payments

A substantial increase in pension and welfare payments, a cut of 1 percentage point in the top rate of tax and the provision …

A substantial increase in pension and welfare payments, a cut of 1 percentage point in the top rate of tax and the provision of extra mortgage interest relief for first-time home buyers are expected to be key features of the Budget, due to be unveiled today by Minister for Finance Brian Cowen, write Stephen Collins, Political Correspondent and Marc Coleman, Economics Editor

The health service will get a significant injection of cash, while a targeted effort to deal with child poverty will also feature in what is certain to be a massive giveaway Budget, given the amount of money Mr Cowen has at his disposal.

A significant change in stamp duty rates is regarded as unlikely, but a cut in the top rate of tax to 41 per cent as well as an increase in tax credits and a widening of the bands is on the cards.

Among the key features expected in the Budget are:

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• An increase in the contributory pension from €193 to €208-€210 a week;

• An increase in the non-contributory pension from €182 to €198- €200 a week;

• Welfare payments to rise by close to €20 a week;

• The top rate of tax to come down to 41 per cent;

• A big increase in family income supplement.

The Cabinet is to meet at 8am to formally agree the Budget and will then be briefed by officials from the Department of Finance on the details of the package.

The provision of extra resources for the health service will be a key element of the Budget. Minster for Health Mary Harney has been pressing for more resources for the care of the elderly in nursing homes and a significant funding package will be announced today.

Substantial increases in State pensions have been a priority of Minister for Social Welfare Séamus Brennan, who was negotiating up to last night with Mr Cowen on the exact figures to be announced today. Tackling child poverty is another priority for Mr Brennan and an effort is to be made to target the available resources at the 25 per cent or so of children who are living in poverty, rather than spreading the available cash over the entire child population.

Child benefit has risen dramatically over the past few budgets, but this year the increase will be more modest, going up from €150 for the first and second child to around €158.

Family income supplement will be increased through a raising of the income thresholds, while there will also be a large increase in the back to school allowances to help hard-pressed families.

Government sources indicated yesterday that Mr Cowen would announce a Government surplus of just under €2 billion for next year.

The target is significantly better than the €720 million surplus targeted by the Government in last October's pre-budgetary outlook and reflects a strong surge in tax revenues during November.

Last month's White Paper on revenue and expenditure revealed that - before taking budgetary measures into account - the Government expected to run a surplus of €4.4 billion.

Compared to a rate of 8 per cent contained in last month's abridged estimates of expenditure, total Government spending will rise by 11-12 per cent next year, lower than the 13 per cent rate targeted for this year.

While the Government's strategy to date has been to keep one-third of income tax payers out of the tax net, the recent 12 per cent increase in the minimum wage will require this to rise to 40 per cent, or some 700,000 workers, Government sources said yesterday.

As a result, standard tax bands will not rise by the same extent as last year.

Compared with an increase of 9 per cent last year, the standard bands for a single earner is expected to rise from €32,000 to around €34,000.