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budget 2020

Just a few days out from the Budget, what can we expect?

All will be revealed on Tuesday.

WE ARE JUST three days out from this year’s Budget, and one thing we can bet on is it won’t be a windfall budget by any means. 

Finance Minister Paschal Donohoe has been downplaying any expectations for giveaways, telling all around him that he will be “safe” and “cautious” as his Budget 2020 is based upon a no-deal Brexit. 

Unlike other years, Donohoe had to consider two scenarios when drafting this year’s Budget.

One, in which there is a real possibility of a no-deal Brexit, and the other, in which it is all relatively smooth sailing after the Brexit deadline of 31 October.

Due to the deadlock over the Irish backstop, the minister has decided to err on the side of caution, and opted for Budget option A, in preparation for a possible no-deal Brexit. 

Speaking at the Fine Gael presidential dinner in Dublin last night, the Taoiseach said the most “prudent” thing to do is plan for a no-deal Brexit. 

He said Tuesday’s Budget has to be “different” because of Brexit. 

“So, we will not be able to afford tax and welfare packages on the scale of our last three Budgets.  There will, however, be a modest and targetted welfare and a minimal but targetted tax one. 

“However, I don’t want anyone to think for a second that this will be an austerity budget.  Or that there will be cutbacks.  We don’t need to take that journey again,” he said.  

So what can you expect?

The Budget talks between Fine Gael and Fianna Fáil were described as “slow” by TD Michael McGrath, who said quicker progress had been made in negotiations in previous years.

While Donohoe had plans to have talks done and dusted by Friday, it is understood they continued this weekend. 

Meanwhile, demands from the Independent Alliance members tend to be on an individual basis, so with less money in the pot this year, everyone is competing for their own brief. 

Earlier in the year, the Summer Economic Statement set out a fiscal space of some €700 million. So, as far back as June it was well flagged that Tuesday’s would not be a giveaway budget.

What wasn’t flagged (not even to Fianna Fáil) was that the figure appears to fall short of that €700 million (though Donohoe states he is still working off that figure). 

McGrath said it came to a surprise to him, and changed Fianna Fáil’s expectations of what it could achieve. 

The departments of Health, Education, Social Welfare, and Justice will also require supplementary estimates amounting to €450 million before the end of the year to meet their commitments. 

Donohoe also confirmed that he is going to have to dip into the corporation tax take to shore up the overruns in the health budget. 

So, with the mood most certainly dampened before Tuesday, and with politicians appearing to be squabbling of the scraps of Budget 2020, what can we expect?

Tax changes are back on the agenda after Taoiseach Leo Varadkar stated that there could be some “modest cuts”. 

There will be nothing of the sort promised by the Taoiseach earlier this year when he committed to increasing the point at which people pay the top rate of tax to €50,000 for a single person and €100,000 for a double-income couple. 

The Taoiseach admitted at the beginning of the summer that he may have spoken too soon, signalling no changes to any tax brackets. 

shutterstock_449662882 Shutterstock / Bildagentur Zoonar GmbH Shutterstock / Bildagentur Zoonar GmbH / Bildagentur Zoonar GmbH

Now it appears, however, that there is “some scope” for tax cuts, though they will be targeted. It is understood that the self-employed may benefit from this measure, with other supports for entrepreneurs also in the plan. 

Carbon Tax is another given, with it likely to be increased by €5-€7 on Tuesday. It has been flagged that this could result in prices at the petrol pumps going up on midnight on Tuesday evening, though the minister does also have the option to defer it until January.

Either way, expect queues at the petrol forecourts all day Tuesday.

The government will outline that the tax revenue raised from the new carbon levy will be ring-fenced for climate action policies. There will also be some measures included to ensure that those in fuel poverty are not impacted, but whether they will be deemed acceptable by those opposed to the charge will be another thing. 

Additional funding for public transport, particularly in rural Ireland, is set to be announced in a bid to offset any criticisms about the undue cost people living in the countryside will face when the price of running their cars rises. 

shutterstock_146626955 Shutterstock / Sopotnicki Shutterstock / Sopotnicki / Sopotnicki

In terms of electric vehicles, the government has big ambitions to get over a million of the cars on the road by 2030. However, grants are costly to the State, and rather than aggressively prioritising the issue, it is understood the money dedicated to the plan falls short of what it will take to see real, societal change to electric. 

Keep an eye out for grants in renewable energy also. 

Social Welfare is the item that has caused the most trouble in the Budget talks. Over the last number of years, there have been increases across the board in social welfare payments. This year, Fianna Fáil’s Willie O’Dea, as well as those in the Independent Alliance, have been calling for another increase in the State pension.

During the summer, when Social Protection Minister Regina Doherty usually gives a nod and a wink that an increase is on the way, was more coy. As of Friday afternoon, Fianna Fáil said the government had yet to present their social protection package to them. McGrath said talks on the package would continue over the weekend, but he said nothing was being taken off the table. 

Donohoe said the social protection package will be “smaller in scale and will be targeted”.  He said there are a few small options that he is considering. 

The Taoiseach has said that modest and targeted spends on social welfare will feature on Tuesday.

The Christmas Bonus which was slashed during the recession has been gradually restored over the years. The minister revealed on Friday that this will be paid out at 100% rate – just as it was at the end of last year.

shutterstock_1172622316 Shutterstock / kryzhov Shutterstock / kryzhov / kryzhov

Housing is another big issue, with the Taoiseach confirming last night that the help-to-buy scheme is set to continue. However, Varadkar said the government is working on “some modifications” to the scheme.

He said this is to ensure “that it actually is helping young couples” and not subsidising those “who can already well afford to buy”.

Fianna Fáil is understood to have insisted that it remain in place, with no changes, something their finance spokesperson reiterated during the week. 

There has been speculation that the scheme would be reformed and capped for houses costing up to €250,000. Currently the cap is much higher at €500,000.

Fianna Fáil’s Housing spokesperson, Darragh O’Brien has said he doesn’t see the point of lowering the help-to-buy threshold to €250,000 as it would squeeze out any buyers in Dublin and see the scheme “shut down in all but name”.

However, the Taoiseach’s comments last night would indicate that a lower cap is to be introduced.

Affordable housing is another big item to look out for on 8 October. Both Fianna Fáil and the Independent Alliance are understood to be pushing for some meaningful scheme or programme to be rolled out to help people get their foot on the property ladder. 

Childcare has been mooted for an increase this year, with the government making it no secret that gradual increases is how they see the path forward in terms of providing supports for parents. The National Childcare Scheme, which was announced in last year’s Budget, is only taking applications from this month, so watch out for announcements that are made, but have rollout dates earmarked for 2021. 

The Health budget has been a thorn in the side of this government, but it is understood there could be an extension of free GP care for those aged under-eight and free dental care for those aged under-six.

Home-help hours, which have been highlighted throughout the summer, is an issue that both Fianna Fáil and members of the Independent Alliance have included on the Budget wish list, so expect to see additional funding to tackle the rising wait times. 

Earlier this year, the government announced that it wanted to increase the availability of free contraception such as condoms in a bid to reduce crisis pregnancies.

The minister has said he also wants the contraceptive pill to be free for women. 

It is expected an announcement on the issue may be made in next Tuesday’s Budget. While it is not expected that such a provision would kick in immediately, it is envisaged that a commitment to roll out free contraception in late 2020 could be on the cards. 

shutterstock_428987464 Shutterstock / pichetw Shutterstock / pichetw / pichetw

Brexit and business will be the priority in this budget. The government is working on specific supports for certain sectors who will be impacted by a no-deal Brexit.

It is believed the packages are still being signed off on, but it is hoped that loans, grants and support packages will be accessible in the case there is a disorderly Brexit. 

Donohoe said on Friday that the planned deposit of €500 million into the country’s Rainy Day Fund would not be made this year because the government expects it may have to borrow next year to deal with the Brexit fallout. The minister said he could not justify borrowing money, only to sidle it off to a savings fund. 

Speaking at a Fine Gael fundraiser last night, the Taoiseach said:

“This budget is different. It’s a no deal budget so it has to be more conservative than previous budgets and what that means is no across the board income tax cuts and no across the board welfare increases.

“But there will be room for a package of modest ones targeted on the poorest and those most in need and there will be a tax package, albeit a minimal one, correcting some anomalies and unfairnesses that need to be corrected.”

He said the exact figure of the Brexit packages still has to be settled on, but added that that it will involve a “financial package to save jobs and businesses that are viable in the long term but may be vulnerable as a consequence of Brexit”.

“So as you can imagine, the area’s most affected will be the ones most protected.

“That’s agriculture and the food industry, fisheries, also exporters’ to the UK and the tourism industry as well and we’ll have to as well have a focus on the border region, which could be very much affected too.”

And in other items, school transport, additional school places for those with disabilities, more resources for the National Treatment Fund, and support for Bord na Móna workers are among last-ditch Budget demands being made by government.

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