Tax cuts and pension increases in pre-election budget bonanza 

A double child benefit payment is likely to be made this Christmas. Picture: File

Tax cuts for workers, pension increases, a double child benefit payment, and changes to inheritance tax are expected to form part of a pre-election budget bonanza.

However, vape users are to be hit with a new tax which will climb each year, while the reintroduction of a special Vat rate for the hospitality sector has been all-but ruled out.

Finance Minister Jack Chambers has made it clear that there will be a "very substantial package of support for pensioners and indeed, for those least well-off in our society" in the budget, on top of changes to USC and income tax to "put money back in people's pocket".

However, the Government believes there is no rationale to increase social welfare rates for the long-term unemployed in the upcoming budget, and instead Social Protection Minister Heather Humphreys will be focusing on increasing payments to carers, pensioners, and people with disabilities.

Jack Chambers indicated there will be a 'very substantial package of support for pensioners'. Picture: Damien Storan

Announcing the official establishment of the Future Ireland Fund and the Infrastructure, Climate and Nature Fund —  two long-term funds aimed at future-proofing the public finances — Mr Chambers strongly indicated:

• A significant increase for pensioners is on the cards;
•  9% Vat rate on gas and electricity will remain in place across the winter to help people with the cost of living;
• Changes to inheritance tax will be introduced to take account of rising house prices;
• Reductions in income tax through moves on the higher rate thresholds and changes to USC to help low-income earners.

Work is under way to introduce a tax on vapes and e-cigarettes from next year, with Mr Chambers confirming that the finer details are now being worked out with Revenue.

"It's our intention to make progress in that in this year's budget," he said.

"I expect the trajectory to rise. Once it's introduced in a particular budget, I expect that to rise in following years. Whether it meets the same threshold as cigarettes is obviously for a future government and a future minister to set that out."

Strongly signalling a move on inheritance tax, which Fine Gael has been pushing for, he said the levy represents a “a significant imposition on many families”.

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Children currently pay 33% capital acquisition tax on assets over €335,000 inherited from their parents.

The Department of Finance's recently-published tax strategy group papers state that raising the threshold at which inheritance tax is paid from €335,000 to €350,000 would cost just €15m, while raising it to €400,000 would cost €52m.

Heather Humphreys played down the prospect of a €20 across-the-board increase in social welfare payments. Picture: Brian Lawless/PA Wire

Meanwhile, Ms Humphreys has played down the prospect of a €20 across-the-board increase in social welfare payments, saying that it would cost €1.5bn and would leave other government ministers without budget increases.

I think given the fact that we’re at full employment, I’m not sure if there’s a policy rationale for increasing the payments on those who are long-term unemployed.

Ms Humphreys also signalled that parents could be in line for a double child benefit payment this Christmas, describing the measure as being “extremely popular” last year.

“I had many people saying to me that meant a difference because we had a few bob in our pocket before Christmas and it’s an expensive time for any parent," she said.

“There’s very few that don’t need the child benefit. If you’re rearing a family, there’s a lot of costs involved in it and I think the child benefit is a very, very important payment that comes in every month.”