Minister for Finance Brian Cowen has delievered his third Budget speech lowering the top rate of tax, increasing mortgage relief for first-time buyers and increasing the price of cigarettes.
Brian Cowen
Vowing to build a "fairer and stronger Ireland" Mr Cowen said his Budget would reward the taxpayer, target social welfare, health, the elderly and those with disabilities, while running a surplus next year.
He told the Dáil it would be "irresponsible and shortsighted" to spend all available funds immediately even though it has been and "exceptional year" for the economy.
A surplus in 2007 of 1.2 per cent is planned, overall spending will grow by 11.5 per cent and capital spending will grow by 13 per cent next year.
Tax bands have been widened and credits increased. The top rate of tax will fall from 42 to 41 per cent. Mr Cowen said it was hoped to reduced this to 40 per cent in next year's Budget.
The lower (20 per cent) tax band is to be widened by €2,000 and the income tax entry point rises to €17,600. Income tax credits increase by €130 for a single person. The total cost of tax changes is €1,250 million and they will take effect from January 1st next.
As expected, Mr Cowen decided not to change stamp duty on property and instead opted to double mortgage interest relief for first time buyers from €4,000 for single people to €8,000 and to €16,000 for a married couple.
This will cost €60 million in a full year. Smaller mortgage interest relief increases for non-first-time buyers were also announced.
The contributory old age pension will rise by €16 a week to €209.30 a week while the non-contributory pension will rsie €18 to €200. Social welfare payments will rise by €20 a week.
Mr Cowen said VRT on new vehicles would be adjusted to reward those who drive cars with lower emmissions. He said any changes would take effect from January 2008 following a consultation process.
He added that the Department of Environment would also work towards "rebalancing" motor taxation from January 2008 and that an environmental labelling system would be introduced for vehicles.
A packet of 20 cigarettes will rise by 50c per packet from midnight, Mr Cowen said. This measure will raise an extra €112 million a year in what the Minister described as a "health promotion measure".
Spending at the Department of Health will increase to €15 billion next year and Mr Cowen said the Government would be demanding "full value for money" and co-operation to implement reform in this sector.
Child benefit will increase by €10 per month for all children.
Mr Cowen told the Dail that "while tax revenues are well ahead, some of the buoyancy is due to one-off, windfall gains".
"I am not proposing that because we have extra resources we should spend it all now. That would be irresponsible and short-sighted. Responsible government involves finding the balance between meeting immediate priorities and making provision for future uncertainties.
"Of the additional resources at my disposal this year, I am returning some to the taxpayer, I am committing some to additional support in the social welfare and in the health areas, in care of the elderly and in improving services for the disabled.
"I am also using some of the additional revenue to run a very substantial budget surplus. In the event of a global slowdown, we will be able to use some of this flexibility generated during the good times to protect jobs and public services at home."
Concluding, Mr Cowen said the Budget "positions our country for the future. It is a major step forward in the building of a fairer and stronger Ireland."
The Tánaiste and Minister for Justice Michael McDowell described the Budget as "historic", claiming the Government had allocated substantial resources to meet the country's priorities, without planned recourse to borrowing.
Mr McDowell said allow for significant increases in social welfare and in other services for society, especially for the elderly.
"It will allow for taxation rates to be reduced, providing tax relief for citizens whose energy has produced the resources in the first place," he added.