2014 Budget Summary

Main points of Budget 2014 announced by Minister Michael Noonan TD:

– No increase in excise duty on auto fuels or home heating oil.
– No change on the standard VAT rate or VRT rates.
– Corporation tax rate remains at 12.5%.
– New Start Your Own Business scheme.
– Home renovation tax incentive scheme to be introduced.
– 10c increase on 20 cigarettes + 10c on pint of beer, 50c on 75cl bottle of wine.
– New anti-fraud measures to tackle VAT.
– Capital Gains property purchase exemption extended to end of 2014 for 7 years.
– DIRT tax on savings to rise to 41%, up from 33%.
– No sick benefit for the first six days of illness (up from three days).

The SIMI submission with regards to the swappage scheme did not feature in the Ministers speech.

Michael Noonan said that the 2013 deficit will be 7.3%. He added they will bring in a deficit of 4.8% in 2014, we will bring in a small primary surplus, demonstrating that our national debt, which has been rising for so many years, is under control.

He added “We will achieve these targets by an adjustment of €3.1 billion, €2.5 billion of which will consist of expenditure cuts and tax increases”.

The Finance department is forecasting GDP growth of 0.2% this year, strengthening to 2% next year. But some commentators say that this could slip into negative growth before the year-end.

This forecast is better than the 1.8% growth forecast endorsed by the Irish Fiscal Advisory Council because it takes account of the budgetary measures that Ministers Noonan and Howlin announced today.

Mr. Noonan introduced a new Start Your Own Business scheme to assist individuals who have been unemployed for at least 15 months to start their own unincorporated businesses by giving them a two-year exemption from income tax.

This scheme, in combination with the new Home Renovation Initiative, will assist construction workers to return to work.
Mr Noonan said: “No sector has been hit harder since 2008 and a return to a normalised construction and development sector is needed to provide jobs for the thousands of unemployed construction workers.

He introducied a home renovation tax incentive scheme. The Home Renovation Incentive will provide an income tax credit to homeowners who carry out renovation and improvement works on their principal private residences in 2014 and 2015.

The incentive is payable over the two years following the year in which the work is carried out. The credit will be calculated at a rate of 13.5% on all qualifying expenditure over €5,000 up to a maximum of €30,000

Mr. Noonan says creating jobs is the primary objective and he is introducing 25 pro-business and pro-jobs measures.

Mr. Noonan said that Ireland’s corporate tax strategy has three key elements: rate, reputation and regime. He added: “The tax rate is settled policy. We are 100% committed to the 12.5% corporation tax rate. This will not change.”

DIRT tax on savings to rise to 41%, up from 33%,

All maternity benefit to be standardised at €230 a week. A fall of €32 per week for most working women.

No sick benefit for the first six days of illness (up from three days).

The Government has decided that the banking sector should make an annual contribution of €150 million to the Exchequer for the period from 2014 to 2016.

The Pension Levy introduced to fund the Jobs Initiative in 2011 will be abolished from the 31st of December 2014 ( in 15 months time). However, Minister Noonan introduced an additional levy on pension funds at 0.15%. He said that levy will be on the same basis as the one that yielded over €100 million each year from 2003 to 2005.

Contributions to pension schemes will continue to attract income tax relief at the marginal rate of tax.

In relation to medical insurance relief, I have decided to cap the amount of premium on which tax relief will be available to €1,000 per adult and €500 per child.

There is no increase in excise duty on auto fuels or home heating oil.

Excise duty on a pint of beer or cider, and a standard measure of spirits, is being increased by 10 cent, the duty on a 75cl bottle of wine is being increased by 50 cent.”

With effect from midnight tonight, excise duty on a packet of 20 cigarettes is being increased by 10 cent with a pro-rata increase on the other tobacco products.

There is no change in the standard VAT rate or Vehicle Registration Tax (VRT) rates.

Minister Noonan decided to keep 9.5% VAT rate for tourism and hospitality sector because he said it is important that we reinforce success when possible. To support the tourism sector, I have also decided to reduce the Air Travel Tax to zero with effect from the 1st of April 2014.

Minister Howlin took over and started by saying that the expenditure measures he is announcing for 2014 amount to €1.6 billion out of an overall consolidation of some €2.5 billion.

He said that the total 2014 allocation for activation places in education and training and work experience is €1.6bn.

This will provide nearly 300,000 places in work, education and training programmes across the Departments of Social Protection and Education and Skills, an increase of 18,000 or 7% since 2012.

94,000 will be reserved for the long-term unemployed, an increase of 78% on the 2012 provision.

Pathways to Work 2 sets out our strategy for tackling unemployment and, in particular, long-term unemployment.

Extension of the €100 reduced rate of Jobseeker’s Allowance and Supplementary Welfare Allowance to existing recipients who reach 22, and for new entrants aged up to 24 on or after 1 January 2014.

The reduced rate of €144 will apply to those reaching 25 from January 2014.

National Lottery sale:
Minister Howlin had previously said that €200m of this dividend is ring-fenced to ensure the construction of the National Children’s Hospital, under the direction of his colleague, the Minister for Health.

Here are some of the remaining proceeds of the sale of the lottery licence will be used for:
– road maintenance and repair works;
– a new round of Sports Capital Grants;
– the building of a new National Indoor Training Arena at the National Sports Campus;
– the Better Energy Programme;
– housing adaptation grants for older people and people with a disability;
– the National City of Culture Initiative
– the development of a large scale multi-functional events centre in Cork;
– the Wild Atlantic Way Driving Route tourism project;
– and a number of 1916 Commemoration Projects

Minister Howlin said that in line with the Programme for Government, he was allocating €37 million to fund the roll out of Free GP Care for children aged 5 and under as a first step in our programme to provide Free GP Care for all.

Other health measures include: €25 million from a lowering of the income thresholds for the Over 70s Medical Cards to €900 per week for a couple and €500 for a single person

€30 million for private bed charges in public hospitals.

Health savings measures include €50 million on drugs from generic substitution and reference pricing and €113 million from a review of all medical cards to remove ineligible and redundant cards.

Over the course of the last five years, the Public Service has reduced in size by almost 10%.

The cost of the pay bill has fallen even further, by some 17%, and the Haddington Road Agreement with Public Service unions earlier this year will permit that cost to fall further again.

Minister Noonan said:”In recent times, I have come to the view that there are areas of the Public Service where we simply need to provide some additional staff, after five years of downsizing.

For this reason, the target for Public Service numbers next year has been adjusted to allow some scope for additional staff in our classrooms, hospital wards and for frontline policing.”

Some interesting numbers announced included those of a growing population, which increased by almost 350,000 between 2006 and the last census in 2011.

Medical Card holders have increased by 540,000 or over 40% between 2008 and 2012, from 1.35 million to 1.89 million.

The number of people of pensionable age has increased by 65,500 or 13.5% since 2008.

Numbers in Education have increased by 78,000 or 8%, from 961,000 in 2008 to 1,039,000 last year.

The numbers in receipt of Jobseeker’s payments have increased by almost 200,000 or 130% between 2008 and 2012.

The Government also announced a pilot phase for a new model of financing social interventions in Ireland called Social Impact Investment. This uses private capital to provide better outcomes for citizens.

To determine the potential for Social Impact Investing in Ireland, the pilot phase is seeking private sector investment partners to provide long-term stable homes for homeless families in the Dublin region.