Budget 2017: No giveaway but something for everyone in the audience
Double-income household with both adults earning €50,000 will be better off by €500
In the immediate aftermath of a budget speech it is traditional to look for winners and losers, but it might be more appropriate to declare Budget 2017 a draw.
Can someone on the minimum wage who will get an additional 10 cent for each hour they work really be called a winner? Will people on €40,000 be celebrating wildly when they realise that the cuts to the Universal Social Charge (USC) will give them an additional 57 cent per day to splash out on whatever takes their fancy?
Even older people who watched as the old age pension became the budget battleground in recent days are unlikely to be getting out the celebratory bunting. The Government’s decision to delay payment of the €5 per week increase until next March, instead of following the usual timetable and rolling it out in January, has taken the gloss off the announcement.
And what about the saver who has managed to squirrel a few bob into a deposit account somewhere? Will the 2 per cent cut in Dirt tax cause them to punch the air with delight when they look at the negligible rate of interest they are getting from their bank?
It is still the case, however, that many people will be better off next year as a result of Michael Noonan’s sixth budget.
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The half -point cut in the 1 per cent rate of USC will be worth €60 a year to those liable to pay the charge at the lowest rate, while the cut on the 3 per cent rate will be worth just over €33 each year. The reduction in the 5.5 per cent rate will be worth €156 to someone earning €50,000 per annum.
A double-income household in which both adults earn €50,000 a year will have about €500 more to spend next year , thanks to the cuts in the USC. A person who earns €70,000 will gain even more, with USC cuts worth €349.
So if there are winners, they are likely to come from the double-income households where both earners are getting €70,000-plus. They will win even more if they have two children under the age of three who spend 40 hours a week in State-recognised childcare.
If that is that case, they will have the benefits accruing from the tax changes plus an additional €80 per month per child which will go directly to their child care provider as part of the “radical overhaul” of childcare announced yesterday. While this may sound generous – and while it will be welcomed by most parents of children of a certain age – an allowance of €80 will not make much of a dent in the monthly cost of childcare which can easily run to more than €1,000 per child.
Relative to crash
It is also worth pointing out that middle-income taxpayers will still be substantially worse off in 2017 than they were before the economic crash.
From 2008, a series of austerity-driven tax changes saw net income fall by about €2,000 for someone earning €40,000 a year, and €3,500 for someone with an income of €70,000. So even when the benefits accruing from this budget are added to those announced by Noonan 12 months ago, most taxpayers are worse off than they were almost a decade ago. And that, of course, does not factor in the wage cuts experienced by many people since 2008.
The “old reliables” have become the “old reliable” this year with only cigarettes affected by a tax rise. Promoted by fear of a rise in the numbers of shoppers crossing the border to take advantage of the collapse in the value of sterling post-Brexit, there was no increase in the price of alcohol or petrol.
Noonan imposed a 50 cent increase in duty on a packet of 20 cigarettes. It takes the price of an average packet to more than €11. The tobacco lobby fumed about a slap in the face and called it a smugglers’ charter. People working in the health service said it was a great move.
When the numbers are totted up, it is clear this was by no means a giveaway budget, even if it was bigger and more costly than had been anticipated. There is a little something for everyone in the audience but it remains to be seen if it will be enough and whether the audience will go home happy or grumbling.