€5 welfare hike; €4 weekly rise for workers

Social Protection Minister Regina Doherty

Payments for children of welfare recipients will be increased to over €32 while pensioners, carers, the disabled and jobseekers are likely to get an extra €5 as part of the budget.

Social Protection Minister Regina Doherty was in last-minute talks with Finance Minister Paschal Donohoe but was expected to secure a package close to €400m, sources said.

Leo Varadkar’s first budget as Taoiseach will also include house building plans, Brexit supports, extra revenue increasing commercial stamp duty, and will be the first balanced budget since the crash.

Negotiations went down to the wire last night as competing ministers sought to secure as much funds as possible from Mr Donohoe, with an extra €900m to €1bn earmarked overall for services and tax cuts.

Qualified child payments for parents on welfare will increase from €29.80 to €32.30. There will also be a widening of criteria for lone parents on supports, where they will be able to earn more and still get benefits.

Ms Doherty is also keen to ensure all groups on welfare-related payments see increases and not just some recipients. Pensioners, the disabled, carers and jobseekers all look set to get increases in the budget. Weekly rises of up to €5 were being flagged, but some groups may not see increases until March or later if payments are staggered as there is not enough money to meet all demands from January.

Elsewhere, workers will see modest tax cuts with reductions to the USC and changes on income tax.

The 2.5% and 5% rates of USC may be reduced by less than a half per cent while the threshold for the introduction of the top rate of income tax for workers may rise by €700 or €800 from its current base of €33,800.

Both measures overall may see workers on average only get a €4 weekly rise in wages.

Fine Gael ministers were last night understood to be content with their negotiations, with social protection and housing talks still continuing with Mr Donohoe.

It is also thought there will be no increases in taxes on alcohol or diesel, but this could be subject to change if Mr Donohoe decides he needs to suddenly get extra spending power at the last minute to pay for any minister’s demands, Department of Finance sources said.

Housing will also feature strongly during today’s announcements. It is expected that the government will announce new Nama-linked measures to increase the construction of affordable homes. A new inter-agency, possibly using the expertise or financing from Nama, could be flagged to help builders.

But the Government will also hit the corporate sector by increasing commercial stamp duty. This may be increased by between 2% and 4%. Each 1% rise raises an extra €100m. This is likely to be the biggest standalone revenue raising measure in the budget.

The help-to-buy scheme for first-time buyers also looks set to be retained, but possibly tweaked.

A sugar tax will also be introduced next year, but is unlikely to come into effect until April or later. Cigarettes are also likely to be increased by 50c.

What sweeteners are likely to be offered?

By Juno McEnroe, Political Correspondent

  • Any increased tax on drink is unlikely but cigarettes could go up by 50c.
  • Diesel costs also look to remain the same despite talk of equalising levels with petrol.
  • A new housing agency will borrow expertise or even finances from Nama.
  • Capital gains tax and inheritance tax look unlikely to be increased.
  • Increases in pension, carers’ and disability payments plus welfare are likely, by €5, but will be staggered, possibly being introduced in spring rather than January.
  • Welfare claimants and lone parents will get a €2.50 rise in the qualified child payment, bringing it to €32.30 a week per child
  • The help-to-buy scheme for first-time buyers is likely to be tweaked but overall retained.
  • The free travel scheme may be extended for other routes.
  • New targets and promises are likely to end the use of hotels for the homeless and to reduce the numbers without homes.
  • A further drop in Dirt savings tax by 2%.
  • Relief for the self-employed to be increased, bringing them closer to the PAYE tax credit of €1,650.
  • Mortgage interest relief will be continued but phased out by 2020, by 25% a year.
  • Reductions in universal social charge in at least two rates and threshold of paying higher rate of income will be raised above current €33,800 level. This might give €4 or more a week back to workers.
  • Increase of commercial stamp duty by at least 2% to 4%. Each 1% rise raises an extra €100m
  • Reducing tax relief for intellectual property rights purchases to 80%, raising up to €150m.
  • Special Brexit package, including potential loans for small businesses and other reliefs, including for exporters.
  • A new sugar tax would raise €40m in a full year, but its delay until April or later will mean less.
  • Health is likely to get an increased budget again, after an overspend of €300m this year.
  • Prescription charges may also be reduced again by 50c to €2 per item.
  • Special Vat rate of 9% likely to be retained for hotel, restaurant and tourism sector.
  • The reintroduction of the €850 bereavement grant, while sought, is by no means guaranteed.
  • Housing assistance payments are likely to be increased — potentially allowing local authorities increase discretionary rent supports they give out.
  • Overall, extra spending for 2018 could be €900m or more, with €600m going on services and €300m on tax cuts, a split in line with the Fianna Fáil government support deal.

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