Senior officials are understood to be preparing a scheme of mortgage interest relief to assist homeowners hit by interest rate hikes for possible inclusion in next week’s budget.
But there is strong resistance in some quarters to the reintroduction of any form of mortgage interest relief, and any scheme is likely to be limited and “very targeted”, according to one person familiar with discussions on the issue. Ministers will make final decisions on the content of next week’s budget package over the weekend.
The mortgage relief proposal is focused only on those affected by the recent sharp rise in rates, and a return of the previously available interest relief on mortgages, administered via the banks, is not anticipated. Instead, mortgage holders would have to apply to the Revenue Commissioners to get a special credit, in the same way as those applying for the rent credit tax relief have had to do. Another possibility being discussed is operating the scheme through the welfare system.
The scale of the package in this area is not yet clear, but it is likely to be restricted to those whose mortgage bills have gone up, and so those on fixed rates are unlikely to qualify. A time limit may also be put on the scheme.
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Separately, Minister for Finance Michael McGrath is expected to outline his plans to establish new funds into which excess corporation tax receipts will be paid. While the precise structure is still to be signed off, part of the money is expected to be put in a countercyclical fund. This would be available for use to support capital investment if the economy slows, while some of it will be put into a longer-term investment fund, with the interest used to contribute to spending bills in the years ahead.
There will also be a part of the fund which will be dedicated to climate action projects, it is expected.
The total fund could be as much as €14 billion.
Following intense negotiations in recent days, 12 Government departments have now agreed their budgets for next year, with only a small number – including the big spenders in health and social protection – yet to be settled. Negotiating sessions are scheduled for Saturday and Sunday, with the final package due to be agreed by the Coalition leaders and the two budget Ministers on Sunday.
Sources say the extent of the one-off giveaways – likely to be under €3 billion – should be agreed on Saturday evening, paving the way for the final social protection package to be signed off on Sunday.
Increases of weekly welfare payments of €10 is still seen within Government as the minimum but €12 is viewed as likely. Housing measures are expected to include an increase in the rental credit to €1,000 and there will also be a measure for small landlords, with tax relief aimed at encouraging them to stay in the market.
Meanwhile, the pre-budget White Paper, which outlines expectations for the public finances before the budget, has seen the Government revise down its forecasts for tax revenue this year by €500 million. While the amounts involved are not significant in terms of the overall budget, Minister for Finance Michael McGrath said that it is “a reminder of the external risks in particular facing the Irish economy”.
The downward revision in the White Paper, published on Saturday, is due to the forecast for corporation tax being cut by almost €750 million to just over €23.5 billion. The Department of Finance expects corporation tax to rise to €24.5 billion next year, again a small reduction on its earlier expectation.
The general Government balance this year – the key measure of the exchequer finances – is forecast to be in surplus to the tune of €9.6 billion, a slight reduction on the previous estimate.
