THE run up to the Budget has started in earnest, with speculation about how many hundred million Mr Quinn has to "give away" and the usual sound and fury from lobby groups and Opposition parties. Perspective is easily lost among the flood of reports and comment. So here is a brief guide to Budget 1996.
How important is the Budget? The Budget is a drop in the ocean in terms of the overall Exchequer finances. The Government spends around £13 billion in a year and takes in almost as much in tax and other revenues. The Government has already presented its main spending plans in the Estimates and even in these the arguments were about a couple of hundred million pounds. The Budget itself will involve changes of maybe £200 million in tax revenues and £100 million in further spending.
How will Mr Quinn use the scope he has on Budget day? First, he will announce some further spending increases above and beyond what was announced in the Estimates. He has already set an overall limit for spending this year, a smart manoeuvre no doubt designed to stop any last minute pleas from the spending Departments for yet more cash. Budget day will see a social welfare package, probably costing around £80 million, and some other measures to address long term unemployment.
What about taxes? Much will be made of tax "cuts". Mr Quinn will have some room for new tax reliefs. He is certain to further expand the standard 27 per cent income tax band, meaning taxpayers will have to earn more before moving to the 48 per cent band. He is also likely to reduce employees PRSI, the tax which hits the low wage earner the hardest. Last year, a new measure excluded the first £50 of earnings from PRSI and this may be extended. Personal allowances and exemption limits should also be increased.
But what is the bottom line for people's pockets? For social welfare recipients, income levels should rise slightly ahead of inflation. But, in cash terms, increases will not be large. For example, a 4 per cent increase would mean an extra £241 for someone on short duration unemployment assistance of £60.40, or £3.10 on a £77.70 lone parent's allowance. Other specific measures may, mean a few extra pounds for some people for example last year's £7 a month increase in monthly child benefit helped large families in particular.
What about taxpayers? All Mr Quinn can do is to continue the gradual and modest improvements of recent years. But the cash benefits for most people will not be enormous, particularly as higher earners will continue to suffer from the progressive cuts in mortgage and VHI relief.
This year's package will be about as generous as 1995. Last year, after the Budget, a single person in the private sector was about £300 a year (less than £6 a week) better off on a salary of between £12,000 and £20,000. And this is before the loss to those with mortgage and VHI relief is counted.
Married couples did better, mainly because of the additional rise in child benefit which, together with the tax measures, left a couple with two children on £2,000 £30,000 more than £550 better off for the year (£10.50 a week). With child benefit unlikely to be increased by as much as last year, the gains in 1996 may be less.
So is that why the Budget never seems to leave the taxpayer better off? The limited amount given in tax reductions each year is one reason. The other is that some of the tax changes such as the increases in bands and allowances are needed just to take account of inflation. Otherwise wage increases would lead to a higher tax take, even though the taxpayer is no better off when inflation is taken into account.
What about the price of a pint? The old reliable may be hit to give Mr Quinn a bit more cash to reduce income taxes. But apart from cigarettes, no significant increases are likely because of the impact it would have on raising inflation.
Should we expect any Budget surprises?. Not many. One of Ruairi Quinn's main goals will be not to upset the economic applecart which led to record levels of growth and job creation last year.
