FG's list of pre-election Budget gifts still growing
Insulation grants and 9pc VAT for booming tourism sector to stay
Published 30/08/2015 | 02:30
The Government is expected to extend popular home improvement and energy efficiency grants in next year's Budget 2016, the Sunday Independent can reveal.
The tourist industry is also likely to benefit from an extension of the 9pc VAT rate, which has been a huge boost to the sector since it was introduced.
Finance Minister Michael Noonan's officials are currently examining measures announced in recent budgets as he prepares to unveil €750m in tax cuts.
Budget 2016 will be the Coalition's last ditch effort to restore confidence in the Government as the general election approaches.
On top of an expected Universal Social Charge (USC) cut of around 1.5pc, Mr Noonan is hoping to make changes to inheritance tax, which has become an election issue in recent months.
The home renovation grant, which allows homeowners claim tax relief of more than €4,000 on home refurbishments, has seen a huge take up since it was first introduced. The grant also acted as a much needed stimulus for the construction industry. Energy efficiency grants for homeowners and businesses have also proved popular since introduced.
"There's no fiscal imperative to get rid of any of those grants - but obviously the Government has to assess if the measures are effective or if there a more effective ways of doing it," said a Government source.
"The only reason Noonan would change them is if it was believed there would be better ways of doing it," the source added.
The source said "thousands of contractors" around the country have benefited from home improvement grants.
"The only way it would go is if Noonan was to do something even bigger but I don't think there's anything planed," the source added.
The 9pc VAT for the tourism industry has been widely deemed a success by Government and those working in the sector. The industry has applied huge lobbying pressure to retain the rate and it is understood it will be in place for at least another year.
With the economy growing and Exchequer returns exceeding expectation, the Government will have more to spend than it has for any budget since it took power.
However, due to strict European Union budgetary rules, it can only make tax cuts totalling €750m. An additional €750m earmarked for services will also be fought over by ministers in coming weeks.
"The employment figures are very strong, growth is very strong so you will have economists saying there is no need for an expansionary budget, so whatever he does on the tax side will be very measured and focused," a finance source said.
There is an expectation the controversial USC will be significantly cut but it is unlikely the €70,000 cap on the top rate will be increased - meaning high earners will not fully benefit from the cuts.
A Labour source said the party want to ensure low income earners as much as middle income earners benefit.
Mr Noonan, meanwhile, is coming under pressure from backbenchers to not only focus on low and middle income earners in the budget but also give something to the elderly.
The older vote will be hugely important to the Government in the general election and TDs are anxious they benefit from Budget 2016.