Free childcare extension among budget measures

Free childcare services are to be extended to thousands of toddlers as one of the main giveaways in Taoiseach Leo Varadkar’s first budget.

Increases in welfare-related payments, modest tax cuts for workers and home-building measures will also be announced.

The Government is set to unveil some €900m in extra spending for services and tax cuts next year.

A key initiative from Children’s Minister Katherine Zappone will see thousands of extra toddlers, aged three to four, getting access to free childcare under a €30m plan to extend services to families.

Under existing rules, while the free pre-school year support is available for families sending their children to creches, not all parents are able to benefit as their child was born late in the year.

Under new measures, up to €30m will be given to creches to ensure the free pre-school year is available regardless of what month they were born.

Fianna Fáil last night secured a reduction in class numbers by one pupil, to a maximum of 26 per class.

Social Protection Minister Regina Doherty has also secured increases in qualified child payments. The weekly €29.80 per child will be increased to €32.30.

The minister was last night also fighting to secure across-the-board weekly rises for pensioners, carers, and jobseekers. The expected €5 weekly rise may be held back until March for some groups.

Fianna Fáil were in talks last night with Finance Minister Paschal Donohoe on when the increases would start.

Overall, Ms Doherty is expected to secure a €350m to €400m package, which will also see lone parents allowed to work and earn more while still claiming benefits.

Modest tax cuts through reduced USC and tweaks to the higher income tax rate will also be announced. On average, workers may only get an extra €4 a week.

While increased taxes on diesel or alcohol were being ruled out, sources warned Mr Donohoe may change his mind before he unveils his budget at 1pm today.

The Government are also expected to signal the creation of a new agency, which will be linked to Nama, to help builders construct cheaper homes.

However, the Help-to-Buy scheme for first-time buyers looks set to remain and a report will likely rule out claims the €20,000 grant was inflationary for home costs.

The Government will also unveil a Brexit package, expected to include supports for exporters, while moves to expand diplomatic and trade services will also be flagged.

Elsewhere, families will benefit from a €10 cut in the threshold for the drug payment scheme and prescription charges will fall to €2.

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.