Minister for Finance Michael McGrath has defended his Budget 2024 against criticism that it is light on supports for businesses at a time of high inflation, saying measures to help households, with tax deductions and an increase in the minimum wage will bolster demand for goods and services.
“The most important thing we can do for the business community is to help their customers – and we’ve helped their customers in this budget through the whole range of cost-of-living measures,” the Minister told The Irish Times on Thursday as he attended an insurance conference, the European Insurance Forum, in Dublin Castle.
“We’re giving more money back to people and that, ultimately, will ensure that there is a demand for the goods and services that the businesses across Ireland produce.”
While Mr McGrath announced in Budget 2024 on Tuesday that a new €250 million scheme is being established to help firms with the rising cost of doing business, Isme, the small business group, estimates this will average €1,923 per eligible business when the cost of the 12 per cent minimum wage increase and auto-enrolment for pensions next year will be €3,228 per employee at or near the minimum wage.
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Accountancy firm Azets Ireland’s head of tax, Alma O’Brien, described Budget 2024 as “a missed opportunity to fully unlock the growth potential of Irish SMEs”, as the grapple with rising costs.
Aside from the minimum wage increase, the budget also saw the universal social charge (USC) being reduced for the first time in five years, while the earnings threshold for that charge and the standard rate of income tax have = been increased.
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Meanwhile, Central Bank of Ireland Gabriel Makhlouf said the Government’s decision to break its spending rules for a giveaway €14 billion budget may drive up inflation and risk damaging investment in the country. The budget increases core expenditure by 6.1 per cent, breaching a 5 per cent spending rule the Government had adopted in 2021.
In an interview from the International Monetary Fund’s (IMF) annual meeting in Morocco, Mr Makhlouf said he would have taken a “less expansionary” approach and warned the fiscal package risks undermining efforts to cool inflation.
Mr Makhlouf welcomed the Government’s decision to set up a sovereign wealth fund and infrastructure and climate fund to bank some of the windfall corporation tax receipts from multinationals operating in the country. “That sort of long-term building of economic resilience is to be welcomed,” he said.
Separately, Mr McGrath told insurance executives at the conference in Dublin that they must now pass on the benefits they are experiencing from the Government’s insurance reforms in recent years.
These included: the setting up of a judicial council, which introduced guidelines to lower personal injury awards; establishment of a claims database; a balancing of a property owner or business’s duty of care with personal responsibility of customers or members of the public; and greater focus on insurance fraud.
“It’s now up to your sector to reflect these reforms and the new insurance environment – in reduced premiums and greater availability of cover, in particular for sectors that heretofore proved more difficult to insure,” he said.
“It’s also up to the industry to defend these reforms in order to ensure that the benefits are sustainable and are felt by all.” – Additional reporting, Bloomberg
