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Budget 2022: Here’s everything we know so far about the upcoming Budget

THE Budget will be announced on Tuesday, October 12, and indications are it will include a tax and welfare package that will be targeted at easing the cost of living.

ut the cost of the pandemic and existing budgetary commitments mean there will be little room for manoeuvre for Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath when they make their announcement in the Dáil in seven days’ time.

Already it has been flagged that there will be new taxation measures costing around €500m, while plenty of ministers are bidding for a slice of new spending that will total around €1billion.

And Taoiseach Micheál Martin has warned it will not be a Budget where there will be increases for “everyone in the audience”.

So here’s what we know so far about what we can expect in Budget 2022.

Childcare and family:

  • The Taoiseach has identified tackling the cost of childcare as a key issue in this Budget but with limited money available it’s difficult to see if much can be done to ease the burden on parents. Children’s Minister Roderic O’Gorman is understood to have put forward a range of measures looking in particular at the sustainability of services and affordability for parents.

  • Options under consideration include changes to the National Childcare Scheme (NCS) as well as increased investment in childcare services to support staff retention.

  • Fine Gael is pushing for an increase in the universal subsidy which is just €22.50 per week. But senior Government sources have signalled it may be the next budget before costs for parents are cut in any meaningful way

Tax and personal finances:

  • A tax package of around €500m will also be announced by Finance Minister Paschal Donohoe on Budget day, with Tánaiste Leo Varadkar anxious to ensure the cost of living will be addressed by index-linking tax credits and bands to take account of inflation. This could involve increasing the standard cut-off point at which the higher rate of income tax applies and increasing the entry point for USC.
  • On a practical level, Tánaiste Leo Varadkar gave an example to his Fine Gael party last week of how this would work. If someone earning €40,000 gets a 2.5pc pay increase or an extra €1,000 next year and there is no adjustment to tax bands they would lose over half of that to income tax, universal social charge (USC) and PRSI, Mr Varadkar explained. But adjusting the bands would let them take home €750-€800 of that. Increasing the standard rate cut-off point for income tax and increasing the USC entry point ceilings are the options being examined.
  • A new voucher scheme similar to the Stay and Spend scheme from 2020 may be announced.
  • The Economic and Social Research Institute (ESRI) warned this week that hiking taxes on workers to cover new spending would be a Budget mistake that would strangle economic recovery. In a largely upbeat economic forecast, they said the Government had room to borrow and should avoid covering all new spending by higher taxes.

  • In their alternative Budget, Sinn Féin proposed increasing taxes on people earning over €100,000.

Working from home:

Tánaiste Leo Varadkar has indicated that the Budget will include tax incentives to help people working from home.

Climate:

  • In line with the Finance Act passed last year, the carbon tax will be increased by another €7.50 this year to €41 per tonne – and will rise by the same amount in every budget until the year 2029. This will push up the cost of petrol, diesel and home heating fuels. A 60-litre tank of diesel will increase by €1.48 from October 13 and a similar tank of petrol by €1.28.

  • All other fuels will go up from May 2022 with an estimated €19.40 on a 1,000-litre tank of home heating oil. Mr Donohoe is resisting pressure from some in Fine Gael to scrap the planned increase over fears about its impact on home heating costs. The funds raised from the increase will go towards funding an increase in the fuel allowance as well as programmes aimed at reducing the State’s overall carbon footprint.

  • In Labours alternative Budget, they propose to give households a refundable carbon tax credit worth €200 along with a €5 per week increase in the fuel allowance.

Housing:

  • There will be no tax breaks for downsizers designed to free up the supply of homes. Finance Minister Paschal Donohoe blocked efforts by Housing Minister Darragh O’Brien to introduce a number of incentives for people to downsize — also known as rightsizing — from larger three to four-bedroom homes to apartments in order to free up supply for young families.
  • Mr O’Brien also wanted to extend the Help to Buy scheme to first-time buyers who would bring derelict homes back into use. However, this was blocked by Mr Donohoe and the Department of Finance over fears it would dilute the overall impact of the tax relief of up to €30,000 for people buying their first home.
  • In their alternative Budget, Sinn Féin proposed also proposed the abolition of the Help to Buy Scheme to fund the phasing out of the local property tax.

Rainy Day fund/Pandemic Bonus:

  • Public Expenditure Minister Michael McGrath has said there is no plan to announce a pandemic bonus, in the form of a Bank Holiday or a voucher, on Budget Day.

Pensions and social welfare:

  • An increase in the weekly State pension, which is currently €248.30, has been all but confirmed after two budgets without any increase. But there is much debate among Fine Gael and Fianna Fáil TDs about how much it should go up by. An increase of at least €5 seems likely, but there are calls from some TDs in the two main coalition parties to increase it by €10. Fianna Fáil rebel John McGuinness has gone so far as to suggest it should be raised by €20 in this budget and subsequent ones in the coming years.

  • Mr McGrath and Social Protection Minister Heather Humphreys are examining possible increases in other social welfare rates. Green Party minister Joe O’Brien has suggested the core rate should rise from €203 to €245 on a gradual basis, starting in this budget.

  • At the very least, rising energy bills are expected to lead to an increase in the weekly fuel allowance which is currently paid at €28 per week for 28 weeks of the year. An increase of at least €5 has been mooted, but there has also been some discussion around widening eligibility.

  • In their alternative Budget, Sinn Féin proposed a €5 increase in the State pension. Labour are calling for a €7.50 increase. And in Labour’s alternative Budget, they propose an expansion of the means test to cover an extra 100,000 households on social welfare payments.

Old Reliables

  • No new impositions on drink, either off-sales or on.
  • Cigarettes likely to be lightly taxed, if at all, because of a perceived tipping point in revenues.

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