LAST UPDATE | 7 Oct 2023
PEOPLE CAN BE optimistic that their living standards will improve following the roll out of tax and expenditure measures due to be unveiled on Budget Day, according to Finance Minister Michael McGrath.
Speaking to reporters in Dublin this evening, McGrath said the budget he plans to announce on Tuesday will give “optimism that living standards are about to improve for people”.
He said people can expect their “incomes will rise ahead of the rate of inflation, that people will make gains in real terms and their life will be better. And I think that is fundamentally what we will be laying out,” said the finance minister.
We know that a lot of people are genuinely hurting.
“The truth is that it’s a mixed picture. Many people have been able to absorb the cost of living increases, with a degree of comfort, but for others, it has put them on a real strain.
“And I think when you look at the big picture, over the last 12 to 18 months, some people have had a deterioration in their living standards because their income hasn’t increased in line with inflation. I do believe that that is about to change and I think what we will lay out on Budget Day,” said McGrath.
Tánaiste Micheál Martin all but confirmed that more energy credits were on the way for households, stating that “energy is clearly still an issue with many households. It was more severe last year, but it’s still it’s a significant issue. We want to get people through the winter”.
While coalition leaders, the finance and public expenditure minister, are set to meet tomorrow to hammer out the final budget details, it is understood that this evening there are a number of “outstanding” issues.
McGrath told reporters that he spoke to Public Expenditure Minister Paschal Donohoe this evening, stating that he’s “in the trenches”, working hard trying to settle a number of outstanding votes.
“On the tax side, my work is essentially complete in terms of finalising proposals for the party leaders but as is always the case, we don’t have an agreed budget until everything is agreed.
“That would involve I think, a lengthy and detailed discussion tomorrow evening, on both the tax and the expenditure side. And hopefully we can conclude on all the substantive matters tomorrow evening with only a small number of outstanding items going over to Monday,” said the finance minister.
However, while there is a need to put more money in people’s’ pockets, the minister also said there is a need to prepare for any shocks in the future.
“The sands are shifting internationally,” he said, stating there was a need to quickly establish the Government’s reserve fund for “future generations”, as well as people of working age right now.
“There’s a lot of uncertainty, a lot of volatility. We’ve had a reminder of that with our corporation tax receipts in the last couple of months. There’s no cause for panic, but I think it is a reminder of us to act now and to take advantage of the opportunity that’s there,” said McGrath, indicating the fund is something the Government might have to use sooner rather than later.
As indicated by McGrath this evening, budget negotiations are set to come down to the wire this weekend, as the final details are worked through with departments.
While Housing Minister Darragh O’Brien has said it will be Monday before his department budget is agreed, it is understood that Social Protection Minister Heather Humphreys is working hard to ensure the roll out of the new pay-related-benefit scheme forms part of next week’s budget announcement.
A few weeks ago, the minister said the scheme was at an advanced stage.
This scheme ensures Jobseekers’ payments are linked to worker’s previous salaries.
It’s part of a wider reform piece involving a small increase in PRSI and the flexible pension age 66-70, for those that wish to avail of it. It is believed the such measures are still part of this weekend’s negotiations, however Humphreys is understood to be keen to get it over the line.
The biggest headache in the budget talks is the Department of Health, along with the Department of Children – both of which had to receive supplementary estimates this year after budget overruns.
This in turn, is understood to be eating into new spending for 2024.
As first flagged by The Journal in August, there is a €1.1 billion shortfall in the health budget, which has resulted in the roll out of cost saving measures, such as the ban on the recruitment of any new managers and administrative staff for the rest of this year.
This has resulted in industrial action being taken by staff yesterday.
A question mark hangs over what other areas within Health Minister Stephen Donnelly’s budget might be hanging in the balance.
A senior source said that the health budget will continue to be worked on this weekend, and while “challenging”, they said an agreement would be reached.
One Government source stated that no matter what budget agreement is reached, the Department of Health will require another supplementary budget in the year ahead.
In terms of the Department of Children, further doubt was cast over whether the Government would renege on its commitment to another 25% cut in childcare costs, something that was promised last year.
When asked about the potential childcare cut in this year’s budget, Martin told The Journal this evening that negotiations between departments are continuing and are “challenging in terms of the estimates”.
He said they want to make further progress on what was rolled out last year, however, he said inflation and population growth need to be factored in.
Two key areas of the budget under the spotlight are the renters tax credit and new tax breaks for landlords. Housing Minister Darragh O’Brien told The Journal this week that he is pushing to get the rent credit increased from €500 per year, but was tight lipped as to whether it would be doubled.
Changes in the tax treatment for small landlords was something that Government has already agreed to do, he said, however the extent to how the tax breaks might be linked to more security of tenure for renters is yet to be revealed.
Speaking in Spain where he was attending an EU summit during the week, Taoiseach Leo Varadkar confirmed that the budget would include supports for people to help with electricity bills.
“The detail of that hasn’t been worked out, but what I can say is that people will get help with their electricity bills over the course of the winter. Electricity prices have fallen, but they’re still substantially higher than they would have been two winters ago. We understand that as a Government, and we have the money to help people with those bills, and we will.”
While Government sources state that it is commonplace for budget talks to extend into the weekend before budget day, and even the night before, one minister told The Journal that the public’s expectation level “hasn’t a hope of being met”.
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