Despite talk of tax and spending, housing is the most important element of the budget

Budget 2018: Expect to hear the word ‘sustainable’ a lot today

Minister for Finance Paschal Donohoe at the Department of Finance   with TD Peter Burke. Photograph: Cyril Byrne.

Minister for Finance Paschal Donohoe at the Department of Finance with TD Peter Burke. Photograph: Cyril Byrne.

 

Expect to hear the word “sustainable” a lot today, as Paschal Donohoe and Leo Varadkar seek to make a virtue of the extremely tight budgetary spot in which they find themselves.

The Taoiseach has already cast the first budget of his administration as the first in a series that will bring modest, annual improvements in living standards.

Such words will suffice this year, because Budget 2018, between welfare increases and tax cuts, will only see most people better off by €4-€6 per week.

This time next year, Donohoe and Varadkar will have far more money to spend and it will only be then that their self-proclaimed, wholesome approach to budgeting can be truly assessed.

Yet this Budget, perhaps more than any other, will show voters that in order for baubles to be handed out in the form of tax cuts and increased spending, resources will have to be found elsewhere, with Donohoe deciding on a steep increase on commercial stamp duty.

Varadkar has also used his first Budget to follow through on a promise he made during the Fine Gael leadership election: to sharpen his party’s definition.

After talking about those who get up early in the morning, the Taoiseach sees the rise in the threshold at which people hit the higher, 40 per cent rate of income tax by €750 as actually doing something for his target audience.

Against that, Fianna Fáil, whose abstention is required to pass the Budget, will claim its insistence on €5 across the board welfare increases and USC cuts shows that it is the “progressive” party standing against Varadkar’s Fine Gael, with its emphasis on the middle classes.

“By our influence, this will be the second progressive budget in a row,” emphasised a senior Fianna Fáil source. “Fact.”

Raising the threshold at which people enter the higher rate of income tax will benefit 550,000 people, while 1.3 million will benefit from USC reductions: you don’t have to search too hard to see the differences between Varadkar and Micheál Martin, a divergence that will increase as we get closer to an election.

There is greater agreement between the two parties on housing, the most critical issue facing the political system at present.

If pre-budget speculation proves to be true, the Government should be given credit for adopting a pragmatic approach to housing policy. Minster for Housing Eoghan Murphy said ideology would not be a problem in attempts to increase house building and it seems he has followed through on that commitment.

The hefty increase in commercial stamp duty - allied with efforts to tackle land hoarding - will send a message that the Government is prepared to punish as well as reward developers.

The carrot is evident in the retention of the scheme of grants for first time buyers of new build homes. Keeping “help to buy” in place was the main goal of the Construction Industry Federation, and it has got its wish.

Also anticipated is a new agency, effectively an offshoot of Nama, to provide cheaper loans to developers.

Despite the talk of sustainable tax cuts and spending increases, housing is the most important element of this budget.

On that front, it will be some time before the welcome policy initiatives in Budget 2018 can be deemed a success.

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