Revealed: Proposals for higher welfare payments and extended paid parental leave

Officials at the Department of Finance have also recommended hikes in fuel costs and enhanced working from home supports
Revealed: Proposals for higher welfare payments and extended paid parental leave

Budget 2022 will be announced on October 12. 

Increases in social welfare and pension payments, and enhanced paid parental leave are among a suite of measures proposed by the Department of Finance for next month's budget.

Hikes in fuel costs and enhanced working-from-home supports have also been recommended in the department's tax strategy papers, published in advance of the budget, which is due to be unveiled on Tuesday, October 12.

A €5 increase in both the State pension and basic social welfare payments is recommended, while new parents will also be able to avail of seven weeks' paid leave from next August, up from five weeks at present, at a cost of €14.6m. The entitlement will increase to nine weeks from August 2024.

Those availing of the leave can also claim parent’s benefit of €245 a week, provided they have adequate social insurance (PRSI) contributions.

Officials in the department have recommended that the cost of fuelling your car and heating your home should be increased, and higher stamp duty for larger homes should also be included in the budget.

File Picture: Larry Cummins
File Picture: Larry Cummins

On welfare, should the measures proposed by officials be adopted, a widowed welfare recipient could stand to be €13.50 better off per week when various measures are taken into account.

On top of a €5 increased in the State pension, the document also puts forward a hike of €2.50 per week in the Living Alone Allowance, costing the State an additional €23.5m each year. Additionally, the telephone support allowance could be doubled to €5 per week in acknowledgement of the need for broadband access, costing the State €17.8m per year.

The cost of increasing the State pension would cost between €160m and €175m extra, the report states.

The document outlines a €5 weekly rate increase for working-age social welfare recipients, noting that these payments have not been increased since March 2019. The estimated cost of this measure would be between €203m and €217m per year.

Increasing the fuel allowance by €3.50 per week to offset the planned increase in the carbon tax is also mooted. This would bring the annual value of the allowance to just under €882 per household and would cost an estimated €36.8m in a full year.

In a report on personal taxation rates, it was stated that increasing income tax, PRSI, and USC income bands by 1% in the upcoming budget would cost €183m, while warning that inflation is running at between 1.5% and 3%.

Officials have also recommended revamping the working-from-home allowance in light of the greater move to remote working. The new system would be a per-day rate, replacing the current system which requires claimants to track and submit utility bills and claim tax back.

The pandemic has seen a huge increase in working from home, much of which is expected to remain in some form. File Picture: iStock
The pandemic has seen a huge increase in working from home, much of which is expected to remain in some form. File Picture: iStock

It is proposed that an increase in the percentage of utility bills which can be claimed as an expense to 20% or 30%, and there is also an option of a working-from-home tax credit.

However, the reports state that there are also equity concerns from the perspective of the personal income tax system, as well as broader policy questions around the potential for shifting the traditional costs of employment from the employer to the State.

Under the proposals, the cost of filling up the car is set to rise from next month, under measures set to be announced in the budget, with a full tank of diesel likely to go up by almost €1.50, while the cost of petrol will rise by €1.28 for a full tank from October 13. A 12.5kg bale of peat briquettes will cost 20c more from May.

The carbon tax rate currently stands at €33.50 per tonne, but is expected to increase to €41 per tonne on budget day as part of its commitment to reach €100 per tonne by 2030.

The reports also recommend the Government should consider charging a higher rate of stamp duty to overseas buyers.

It also states that ministers Paschal Donohoe and Michael McGrath should consider applying the higher rate of 2% that currently applies to homes sold for over €1m to the full value of the property.

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