Limbering up for the swings and roundabouts in Budget 2015

Today’s Budget will be the first in seven years that does not deliver crippling cuts to services and level unpopular charges on the Irish people.

It is also the first to be delivered by a fiscally sovereign Government, free from the imposing presence of the IMF and EU bailout partners.

Yet it takes place against the backdrop of growing anger over the imposition of water charges, as demonstrations on the streets and by-election results have shown. So, when Finance Minister Michael Noonan rises to his feet today, he faces a difficult balancing act — not just financially, but also politically.

Its main features will be:

Water Charges 

Although this is being described as a ‘non-austerity’ budget — next year’s spending plan will contain €500m from water charges levied on every household in the country — which were announced in previous years. 

Dáil statements last week suggested the Government did not fully grasp the degree of public anger over the charges, with the Taoiseach saying it would cost just 50 cent a week per person, and the Tánaiste questioning how those opposed to charges could afford mobile phones.

It is now accepted by all Coalition TDs that something has to be done to limit damage from this unpopular charge. Measures to alleviate the water charge are expected to come in the form of a tax relief to off-set up to €100 of the charge.

There is also expected to be a broadening of the eligibility for welfare payments which will offset the cost of water charges for the unemployed.

This will still leave in place the big concern about costs for families with teenagers over 18 living at home.

A break for families  Since its introduction in 2009, the Universal Social Charge has slashed the take-home pay of all earners. There is likely to be some changes to the unpopular tax which could see a rising of the income threshold at which it is charged — currently at €10,036 — rather than cutting the rates.

Other changes expected include a reduction of the higher rate of income tax, from 41% to 40%, and a rising of the income threshold at which people pay this rate, currently €32,800 for an individual earner.

The Government will argue that it’s easing income tax for low and middle earners. It is true that changing the band will benefit those closer to the average wage.

However, reducing the rate itself will also benefit those on higher wages.

Jobs and Housing

The Taoiseach told the Dáil last week that his Government would respond to what he described as a “serious supply-and-demand situation” with a housing package in the Budget.

This is likely to include a mechanism to fund social housing in a strategy spanning beyond the lifetime of this Government. This, it will be argued, will tackle the massive social problem of homelessness while simultaneously providing a jobs boost.

Pension Levy Mr Noonan has left his options open in relation to the 0.75% levy on private pension funds and has indicated to Fine Gael backbenchers that it will be cut. However, don’t be fooled by thinking this is an easing back of an unpopular measure. The 0.6% levy — introduced in 2011 to fund the Government’s jobs initiative — was supposed to be a temporary measure and was due to be abolished altogether last year.

Instead, Mr Noonan not only extended it by a year but added a further tax of 0.15% — to fund an “insurance” for any state liability for a pension fund collapse — also meant as a temporary measure for 2014 and 2015.

Despite costing an average of €2,500 per person, and being described by the opposition as a “raid on savings”, it has prompted very little protest from the public. Mr Noonan may well decide to scrap it entirely, but there is some concern that it’s a soft saving that he’ll be tempted to partly keep.

Health Budget

Since the onset of the economic crisis, more than €1bn net has been cut from the health budget — and up to €3bn cut, if our growing, ageing population, with an increasing burden of disease, is accounted for.

The HSE has repeatedly failed to meet its budgets, requiring a bailout towards the end of the year to keep hospital doors open.

In 2012, it went over budget to the tune of €500m: in 2013, it overspent by €350m requiring a €200m bailout and €150m of extra savings. It is on course to run to €500m this year.

Last year’s health budget was a shambles, with the then health minister, James Reilly, blamed for failing to identify savings, prompting Public Expenditure Minister Brendan Howlin to impose cuts of €666m, including €113m in medical card “probity”.

Current Health Minister Leo Varadkar has asked for a “neutral budget” for next year which would amount to the sum his department was allocated last October, plus the €500m it has overspent. It is expected the Department will get an additional €300m for 2015.



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