What is in and what is out in Budget 2022?

Tuesday’s budget will be very different from the one announced in the teeth of the Covid-19 pandemic emergency last October

Last year, Paschal Donohoe and Michael McGrath produced an enormous €17.75 billion budget package, where hard decisions could be put to one side as money was splurged in the face of a crisis.

Barring a “rabbit out of a hat” on Tuesday, however, this year’s package is €4.7 billion. Of this, €1 billion is said to be available for new spending and €500 million is for tax measures.

Taoiseach Micheál Martin has warned that there will not be “something for everyone in the audience”. With families under pressure with inflation and rising energy costs, senior Government figures have been flagging for weeks that the budget will be focused on tackling the cost of living. So what is known? What is in and what is out in Budget 2022?

Income taxes and work

It is widely expected that tax relief will be provided in the form of indexing tax credits and bands to help offset the impact of inflation on people's take-home pay. Fine Gael has been promising such measures for months. Most of the €500 million for tax measures in the budget is set to be gobbled up by this measure. Tánaiste Leo Varadkar has also said there will be efforts to promote remote working. At present, employers can give €3.20 a day tax-free to their employees. Alternatively, workers can claim a proportion of home expenses back themselves. The proposal is to update this system with workers able to defray the cost of utilities against the tax they pay.

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Climate action

The latest Irish Times/Ipsos MRBI poll shows higher taxes on fuel are not popular – with 82 per cent opposed. But failing a major deviation from one of the key commitments in the Programme for Government, carbon tax will rise by €7.50 per tonne as part of efforts to reduce greenhouse gas emissions by 7 per cent per year. This means an estimated €1.28 extra on a 60 litre tank of petrol and €1.48 more for a full fill of diesel from midnight next Tuesday. Increases in the cost of other fuels like kerosene (900 litre tank up €19.40), natural gas (average annual usage up €16.95), coal (40kg bag up 89c) and peat briquettes (12.5kg bale up 20c) would not kick in until May. The proceeds will be spent to better insulate homes, but also to increase fuel allowances for those most at risk of fuel poverty.

Social welfare and pensions

Almost half of the €1 billion available for new spending could be taken up with welfare increases. As mentioned, the fuel allowance for vulnerable households – worth €28 per week between the end of September and April – should rise. It was increased by €3.50 in last year's budget. With high energy costs expected this winter, don't be surprised if the increase is greater this year. A key question is whether or not State pension payments will rise for the first time since 2019. Government backbenchers are calling for increases of €10 per week. When asked, Minister for Social Protection Heather Humphreys said: "We have said that if the cost of living has gone up, and the cost of fuel, that's something we're certainly taking into consideration." Some increases are a safe bet, therefore.

A full Christmas bonus for people on welfare payments was paid last year including to people in receipt of pandemic unemployment payments. The Government will want to announce this if at all possible, but arguments are still in play.

Childcare

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There were no measures to help with childcare costs last year . On Friday Varadkar issued the strongest signal yet that help with the costs could be on the way as he confirmed the issue is being examined as the Budget is being finalised.

Earlier this week Minister for Children Roderic O’Gorman said he hopes to make changes to the National Childcare Scheme (NCS) next year.The levels of subsidies for the universal and mean-tested scheme went untouched for 2021. Changes to the scheme are being examined ahead of the budget as is low pay for staff and the sustainability of the business of childcare providers. An extra two weeks of parental leave is set to be introduced from next August. That will bring the number of weeks a parent of a newborn can take off work – supported by €245 payments from the State – to seven.

Housing

The Coalition launched its landmark Housing for All plan just last month. It promised the "largest ever housing budget in the history of the State" with "in excess of €20 billion" to be provided – through exchequer funding, the Land Development Agency (LDA) and the Housing Finance Agency – over the next five years. Expect some of that to be stumped up on Tuesday. While applications for the new affordable housing scheme are not due to be open until early next year, the existing help-to-buy scheme for first-time buyers purchasing new builds will be extended beyond the end of this year.

Health

Varadkar promised earlier this year that the up to €4 billion in extra health spending for tackling the Covid-19 pandemic would be maintained next year. That must have been music to the ears of Minister for Health Stephen Donnelly as he entered budget talks and it would be surprising if the €22 billion allocated last year is not matched, at the very least. With warnings that 500,000 people will be added to healthcare waiting lists before the end of the year and the Sláintecare reforms hitting troubled water the Government will not want to be seen to be taking the foot off the throttle in its support for the health system.

Cigarettes and alcohol

It is expected there will be 50c on the cost of a pack of 20 cigarettes. The Government is reluctant to increase excise on drink given the pressure on pubs and restaurants during the pandemic.

Cormac McQuinn

Cormac McQuinn

Cormac McQuinn is a Political Correspondent at The Irish Times