Ghost of budgets past will come back to haunt taxpayers from next January

Cuts to benefits and entitlements announced in Tuesday’s budget may be frightening enough on their own. But more pain lies in store as the ghosts of budgets past come back to haunt taxpayers next year.

That’s because the full force of cuts in child benefit, property tax and hikes in PRSI announced in last year’s budget will only be felt from January.

Minister for Social Protection Joan Burton announced this week that child benefit rates will be protected over the coming year. But larger families will feel a significant hit in their income in a few months.

Child benefit is being cut by €20 per month to €130 for fourth and subsequent children from January 2014 onwards, as was announced in the 2013 budget.

Other cuts to child benefit announced in the 2013 budget – a €10 reduction for the first two children and €18 for the third child – came into effect earlier this year.

“We are devastated that child benefit is being hit again,” said Niamh Uí Cheallaigh, a member of the Protest Against Child Benefit Cuts group. “We have faced savage cuts over the last few years and feel angry and disappointed that we were lured in to thinking that there would be no cuts this year.”

In addition, many mothers are only beginning to feel the impact of last year's decision to tax maternity benefit which came into effect last July.
This, along with a decision to pay maternity benefits at the standard rate from January next, means many mothers will see their payments halved.

Almost 90 per cent of women in receipt of maternity benefit are receiving the higher rate and will see a €32 drop in benefit, or a loss of just over €800 over the six months of paid leave, from January onwards.

When combined with the taxation of maternity benefits, the upshot is that mothers who are taxed at the marginal rate will receive just over €3,500 in benefit from 2014, compared to a total of just over €6,800 a few months ago. That’s a cut of almost €3,300.

While the property tax was not mentioned in Tuesday’s budget, it will loom large in 2014. It came into effect mid-way through this year, so homeowners were eased into paying the new charge.

Next year, however, it is set to double as it will be the first time it is liable over a full 12-month period. Given the average value of a house is just over €190,000, according to latest estimates, this would see the tax jump from €157 in 2013 to €315 next year for most homeowners.

Another key claim of the Government is that income tax and PRSI rates remain unchanged in Budget 2014. However, some will still see reductions in their incomes on foot of PRSI changes announced last year which come into effect in January.

In 2013 an exemption on PRSI for certain members of the civil and public sector in respect of “unearned” income – such as from rent or a trade – was abolished. On foot of this, this income became liable to PRSI at a rate of 4 per cent.

From next year onwards, the exemption from PRSI is being abolished for all employees.

The measure is expected to yield about €30 million for the Government.