Sunday 25 June 2017

Charlie Weston: Measures will push many households over the edge

Charlie Weston

Charlie Weston

Large numbers of households are just one or two bills away from financial collapse. . . and the pity of it is that there is more to come

FEW escaped the pain yesterday, but for families the hits were many and savage. Tax rises, cuts to child benefit, new charges on putting money into a pension, changes that will have a knock-on impact on private healthcare costs, and a string of other changes, will bite hard.

For a family on the average income of €55,000, calculations by this newspaper put the bill at €3,000.

And all of this comes on top of three previous austerity Budgets that vaporised large chunks of money from the average household.

Some of this would be manageable if it was not for one wallet-sapping fact: the vast majority of households are so heavily indebted that they can barely cope with the loss of any more income.

This means the charges, cuts, and tax rises announced yesterday have the potential to tip many families over the edge, financially. As it is, large numbers of households are just one or two bills away from financial collapse.

An unexpected medical bill or a big problem with their car could be enough to push many into arrears on other important bills like the mortgage or rent.

And the pity of it is that there is more to come, with another three Budgets set to impact hard on everyone until 2014.

No wonder most people were left reeling as the cold reality of the Budget set in after weeks of leaks and spinning.

For those people with children, the changes in child benefit will be a big blow. The rate for the first two children will fall by €10 for each child. This means the monthly payment drops to €280, from €300 at the moment.

For those with three children the impact of the changes to child benefit will amount to €480 a year.

And the tax changes are every bit as bad as we had expected.

A married couple with one income will suffer tax hikes of around €1,250 a year if they are earning the average gross income of €55,000 a year.

This is due to the reduction in the tax credits, which effectively means higher tax for all those in the tax net. And it would seem that there is little encouragement to save, whether it is to put together a rainy day fund in the bank or put aside money for a pension.

The tax on savings -- deposit interest retention tax -- will shoot up to 27pc. This is obviously a bid to get some of the almost €100bn households have stashed in the banks out of accounts and spent in shops.

Pensions' savings will get more expensive. From next year, anyone putting money into a pension will have to pay PRSI (pay related social insurance) and the new universial social charge on their pension contributions.

This will mean that our family on €55,000, who are putting aside 6pc of their gross income on a pension, face additional costs of €300 just to maintain the same level of contribution as this year.

A raft of other hits will also bash households. Higher petrol and diesel prices will cost the average driver around €72 a year.

If a family has a child who is in college the cost will rise by another €500 in college fees to €2,000 a year for the first child.

Families with members of a trade union will lose a tax credit worth €70 a year.

Those families who use public transport to get their children to school will see a rise of €50 a year in this cost.

And the cost of private healthcare is sure to rise after the Government pushed up the cost to healthcare providers of using beds in public hospitals.

It is not just young families that were hit.

Some 300,000 low-paid people have been brought into the tax net.

Pensions will suffer from the change over to the universal social charge.

This will mean that a person over the age of 70, who has a medical card, will be €1,000 worse off.

Irish Independent

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