Renters will feel benefits from budget, Ministers insist

Donohoe and McGrath defend scale of measures on home-building and childcare

Leading economic ministers have rejected the suggestion that the budget hasn’t delivered for renters or tackled high land costs, saying it will help home-building and assist tenants in other ways.

“We absolutely recognise high rents are a problem and are a huge challenge for many thousands of people across the country. The real solution for that is increasing supply where it is needed,” Minister for Public Expenditure Michael McGrath said.

“One of the top priorities of the Government is to tackle the housing crisis, and renters will benefit from that by increasing the supply of new homes,” he said.

Minister for Finance Paschal Donohoe defended the new zoned land tax, which is already attracting criticism as it will be charged at a lower rate - three per cent versus seven per cent - than the vacant site levy - and will not come on-stream for two years.

“The vacant land tax is going to apply to thousands of hectares of land over the country, the current existing tax applies to just over 200 properties,” Mr Donohoe said. “The tax we’re going to be bringing in is in scale completely different, far larger than the one that we have… and is a really comprehensive and significant new departure in tax policy.

“The reason it’s going to take two years is we have to assemble a map of every piece of land in the country that’s zoned for residential or mixed use, and it has to be valued,” he said.

Asked why he didn’t introduce a tax credit for renters, he said: “I just have a huge concern that we would bring in a credit and then we would find that credit quickly being absorbed by seeing the general rent levels go up as well.”

On childcare, Mr McGrath said the measures were a “start”. While the budget measures are intended to freeze fees for many next year, it does not guarantee rates will come down for many families. He said changes to the rules for accessing the National Childcare Scheme would be significant for those impacted, saying they were “modest but important”.

He argued improving conditions of workers in the sector by injecting funds for this purpose was a key measure - one that would also freeze fees.

‘Important start’

“This is a very important start, and I think parents really want the workers in the early years and childcare sector who carry the huge responsibility of caring for and educating their children to be really well looked after,” he said.

The Minister for Finance accepted the challenges around the increasing the cost of living could grow bigger over the year ahead.

“The rise in cost of living is a problem for many, and it’s a problem that could grow as we go through the rest of this year,” he said. Pointing to budget measures aimed at bringing down the cost of medical care, attending college, and reducing the tax wedge “tax wedge” (a measure of all tax on labour income, paid both by the employee and the employer).

“What we’ve tried to do in the way we’ve designed these policies is actually concentrate the use of money for those who may need the help the most,” he said.

He added that he was conscious that things “could change yet” with regard to Covid, despite recent progress in bringing the disease more under control. “While I’m very hopeful that we can put behind the really dark days of this year, what I learned from last year’s budget is that with Covid it is very unpredictable and continues to be a very dangerous disease,” he said.

Mr Donohoe said the Government was convinced the carbon tax increases were the right thing to do, despite increasing energy costs, which he said would likely prove transient while threats from climate change were permanent.

“Even though it is difficult, I do believe it is important to stand by the commitment that we have to increase the taxes on carbon year by year… and play our role in avoiding an even worse crisis.”