€1bn Budget package signals end to austerity, Government claims

By Mary Regan, Irish Examiner Political Editor

€1bn Budget package signals end to austerity, Government claims

By Mary Regan, Irish Examiner Political Editor

The Government claims the €1bn package of welfare hikes, reduced income tax and a public recruitment drive signals the end of a punishing age of austerity in a country battered by a spectacular economic nosedive.

However, critics said while the Government gave with one hand, water charges will effectively see them take everything away with the other.

Trumpeting the turnaround from bankruptcy to one Europe’s fastest-growing economies, Finance Minister Michael Noonan said the burden would now be lifted for those worst hit by years of cutbacks.

“The road we have travelled to get to this point has been very difficult and the Irish people have made major sacrifices, but the policies pursued by this Government have worked and the recovery in the Irish economy is well under way,” he said.

But analysts, opposition parties, trade unionists and poverty campaigners says the looming water tax – which will cost householders several hundred euro a year for drinking water and washing – will offset any savings announced in the Budget.

A worker on a €70,000 salary will be €746 better off while a low-paid worker struggling to make ends meet on €15,000 a year will have just €115 more in their pockets, critics say.

Water bills will start coming through letter boxes in January, charging on average €176 for one adult, with an extra €102 for every other adult in a household.

Other measures include:

* A €5 per month increase in child benefit from January with plans to add another €5 in 2016;

* 1,700 new full-time teaching posts including 920 teachers, 480 resource staff and 365 special needs assistants;

* Top tax rate falls by 1% to 40%;

* Standard tax rate moves from by 1,000 to 33,800 for single individuals;

* Universal Social Charge (USC) altered to take 80,000 low paid workers out of the net;

* A new USC rate of 8% introduced for incomes over 70,000 and an 11% rate for self-employed income over €100,000;

* Special 9% VAT rate for the hospitality industry retained;

* 0.6% tax on pension lump sums saved will stop at the end of the year while a secondary 0.15% levy rate will run until the end of 2016;

* Dirt tax to be refunded up to 2017 for first-time buyers who use the money to finance deposits worth up to one fifth of the cost of their first home;

* Water charge income tax relief up to a maximum of €500 will apply to each household;

* The price of a packet of 20 cigarettes will break through the €10 barrier with a 40c increase;

* €9 a week increase to the living alone allowance to benefit 180,000 older people;

* 25% Christmas bonus payment for social welfare recipients this year;

* Back to Work family dividend will be introduced allowing families to claim the €29.80;

* €2.2bn three-year fund for social housing to build 6,700 homes;

* Taxes frozen on alcohol, petrol and diesel;

* No changes to motor tax or Vehicle Registration Tax;

* €100 a year for those on household benefits packages and the free fuel allowance scheme - 653,000 households will benefit.

Poverty campaigners St Vincent de Paul said any benefits from tax cuts will be wiped out by both the new utility bill and property taxes.

“While this budget has been described by Government as the first step in major a road to recovery SVP believes that it is not a recovery that is fully committed to many who are socially deprived,” a spokesman said.

Analysts with Davy Stockbrokers said the combined cuts for income tax, USC, VAT and excise will on balance make little changes to household finances.

Trade union Mandate said the package will redistribute wealth from the lowest paid to the highest earners.

Mandate General Secretary John Douglas said: “To claim this is the end of austerity is disingenuous at best.”

The Unite union, which has more than 100,000 members, said it was not an end of austerity but a new phase: recovery for a few, continued squeeze for the rest.

Regional secretary Jimmy Kelly said: “It is clear that water charges are the elephant in the room of the Government’s budgetary policy.”

Unite claims 70% of workers – those on less than €32,800 a year - will see no benefit from income tax cuts and only marginally from USC cuts and those not in the tax net, earning less than €12,000, will get no relief.

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