The Government is preparing to unveil Budget 2022 on Tuesday and, until this weekend, the room for manoeuvre appeared to be limited.
Unexpectedly strong economic forecasts over the weekend have dramatically improved the outlook for public finances and could lead to late pressure on the Minister for Finance Paschal Donohoe to go that little bit further.
There are still some discussions ongoing around the fuel allowance, for example, but the feeling is that most of the headline measures have now been nailed down.
Here is everything we know so far:
Budget 2022
Tuesday’s budget package is expected to amount to about €4.7 billion. Some €3.2 bn of this is committed to existing pay and spending increases, €1 bn will be available for new initiatives and €500 million allocated for tax measures.
Welfare and pensions
Welfare payments including the fuel allowance are to increase by €5 under a deal struck by the Minister for Social Protection Heather Humphreys ahead of the publication of the budget tomorrow.
Pensioners will receive an extra €5 a week while other welfare payments such as the jobseekers payment and maternity benefit will also increase by the same amount from January. The Christmas bonus will be paid in full while the back-to-school allowance will increase by €10.
The €5 increase in the fuel allowance will take effect from budget night, however, as Ministers remain concerned about backlash over the planned increase in the carbon tax.
Income taxes and work
It is widely expected that one of the headline tax measures will involve the indexing of tax credits and bands to offset the impact of inflation on people’s take-home pay. Much of the €500 million for tax measures will be spent on this. There may also be good news for those who are still working from home. At present, employers can give €3.20 a day tax-free to their employees.
Alternatively, workers can claim a proportion of home expenses back themselves. It is expected that this system will be updated with workers able to defray the cost of utilities against the tax they pay. If the minimum wage increases in January, an increase in the USC thresholds, to keep the tax burden of those on this wage at a similar level, is likely.
Carbon tax
Carbon tax will rise by €7.50 per tonne as part of efforts to reduce greenhouse gas emissions by 7 per cent per year. This means an estimated €1.28 extra on a 60 litre tank of petrol and €1.48 more for a full fill of diesel from midnight tomorrow. Increases in the cost of other fuels such as kerosene (900 litre tank up €19.40), natural gas (average annual usage up €16.95), coal (40kg bag up 89c) and peat briquettes (12.5kg bale up 20c) would not kick in until May.
Childcare and parenting
A childcare package of about €100 million next year is expected, and this may rise to €200 million annually once ramped up. As part of this, fees will be frozen for many parents and there is likely to be expanded access to subsidies for working families and unemployed people.
The Minister for Children Roderic O’Gorman has already indicated that he hopes to make changes to the National Childcare Scheme (NCS) next year and increasing the income limits to access the scheme is one measure under consideration. It is understood that a new direct investment in childcare services will improve staff pay in return for a commitment not to increase fees. Separately, an extra two weeks of parent’s leave is set to be introduced from next August so that parents of a newborn can take up to seven weeks off work supported by the State.
Education
Details emerged on Monday of a budget deal for 1,000 special needs assistants and more than 400 special education teachers. A significant expansion of the Deis scheme was also in prospect while an increase in the Susi student grant for the first time in 10 years has also been mooted.
Health
The Department of Health is set to receive less than €1 billion in direct Covid-19 funding next year, down from €2 billion in Budget 2021. About half of a total Covid-19 spending package of €6.8 billion will be held back as a contingency fund. The renewed focus on medical waiting lists will see a funding package of more than €200 million mobilised to tackle backlogs. Spending on a women’s health package will quadruple to €20 million, while the Department of Health will be allowed to retain some of its underspend to fund more staff increases. It has also been reported that free GP care for children up to the age of seven will be a feature of the budget. Improvements to the drug refund scheme are also on the cards as is a new €10 million package to rollout free contraception.
Climate
More than €200 million is set to be earmarked for retrofitting in excess of 20,000 homes, with half to be spent on 4,500 free home upgrades for low-income or energy-poverty households. The remainder will be given in grants. Some €360 million will go on active travel measures.
Cigarettes and alcohol
It is expected that there will be 50 cent imposed on a packet of 20 cigarettes. Alcohol looks likely to remain untouched as the Government is aware of the pressure on the hospitality industry because of the Covid-19 pandemic.
Aviation and tourism
A €100 million recovery package for the tourism sector is planned, focused on sustainable recovery, festivals and nightlife activities. The Department of Tourism will also target UK and US visitors with flagship events such as an American football college game. A basic income guarantee scheme for artists will be piloted from January. Some €25 million will be put aside to help venues put on events after the next reopening date of October 22nd.
Housing
Spending on housing is set to rise to €4 billion. This will include nearly €200 million in funding for homeless services and €85 million for retrofitting. An extension to the Help to Buy scheme is expected. The scheme offers a tax rebate to first-time buyers of new homes and is due to run out at the end of the year. It appears as though the parameters of the scheme will remain the same in terms of how much a person can claim back.
Policing
The number of new gardaí to be recruited is expected to rise from 500 to a new figure of 700.
Business supports
The Government has made it clear that it intends to phase out the pandemic unemployment payment but an extension to the business support known as EWSS (employment wage subsidy scheme) will be announced. There are indications that it may be needed all the way up to next summer but Ministers may find a middle ground and announce its extension until spring.
The primary qualifying criteria for the EWSS is that the employer must be able to demonstrate that they are operating at no more than 70 per cent of their previous turnover level and this is unlikely to change. The question is around how the scheme is recalibrated, or whether the subsidy rates change.
