Tuesday 25 October 2016

Childcare, €300m tax cuts, welfare hikes - your guide to Budget 2017

* Half a percentage has been chopped off the three lowest rates of the Universal Social Charge (USC)
* Minister Noonan announces €1 billion annually will be put into "rainy day" fund after 2018
* A pack of 20 cigarettes will cost over €11 from midnight after being put up 50 cent
* A sugar tax is to be introduced from April 2018
* The pension will rise by €5 per week from March
* All weekly social welfare payments will increase by €5
* Extra 4,500 public service workers announced

Catherine Devine and Cathal McMahon

Published 11/10/2016 | 13:25

(Stock picture)
(Stock picture)

Minister Michael Noonan has announced cuts to the Universal Social Charge, increases in the cost of cigarettes and a sugar tax as part of Budget 2017.

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In his opening address at the Dáil Eireann at 1pm today Minister Noonan said the budget package is €1.3bn split three to one in favour of spending over tax cuts.

His cabinet colleague Minister for Public Expenditure and Reform Paschal Donohoe announced a further 4,500 public service jobs and revealed that the most money ever will be spent in the Health budget.

In his first budget since the general election Minister Noonan has revealed that Brexit means he has cut the economy growth forecast from 4.2% in 2016, 3.5% in 2017.

He added that a new debt to GDP ratio of 45% is to be reached by the mid-2020s, explaining that we must move away from "boom and bust cycles"

He explained: "Brexit has increased the risk to the Irish economy and we must put in place measures to prevent against possible shock."

Finance Minister Michael Noonan announces Budget 2017
Finance Minister Michael Noonan announces Budget 2017

Finance Minister Michael Noonan revealed breaks for tourism, food and agricultural businesses most directly hit by the UK's decision to pull out of the European Union.

"Whatever the final settlement, what we know with certainty is that Brexit has increased risk to the Irish economy and, as well as introducing specific measures to assist particular sectors of the economy, we must also put in place safety nets to protect us against future economic shocks," he said.

Mr Noonan said "economic shock absorbers" would allow Ireland deploy resources to reduce or eliminate the impact of future economic shocks linked to the EU referendum result.

Outlining his tourism measures Minister Noonan said a special VAT rate of 9pc for tourism sector will be maintained to act as a buffer against weakness in sterling.

The Capital Gains Tax on start-up business is to be halved to 10pc on gains of up to €1m.

For farmers, Minister Noonan has revealed that a new loan fund with "highly flexible" interest rates of below 3pc is to be made available to help run farms.


In a widely anticipated move he announced that first-time buyers will get 5pc tax rebate on the cost of a newly built house. The maximum rebate is €20,000 on purchases up to €600k.

Landlords will also get a boost with the news that there will be an extra 5pc in mortage interest relief. And also good news for homeowners with the announcement that they can rent a room out for €14,000 a year without paying tax.

The Inheritance threshold (category A) up by €30,000 to €310,000

Half a percentage has been chopped off the three lowest rates of the Universal Social Charge (USC). This means that a worker on €50,000 will gain an extra €5 a week as a result.

The 5.5pc rate - which affects thousands of middle income earners - is to be reduced by 0.5pc.

And the two lowest rates - 3pc and 1pc - will be cut by the same.

Finance Minister Michael Noonan said medical card holders and those over 70 will now pay a maximum of 2.5pc USC on their incomes.

The DIRT on savings is to be reduced by 2pc next year to 39pc. Minister Noonan has signaled it will be reduced by another 2pc each year until 2020.

Tax credit rises for the self-employed will rise by €400, bringing it to €950. This is expected to benefit 147,000 workers.

In what will possibly be the most discussed points Minister Noonan revealed that a packet of cigarettes will cost over €11 for the first time after the minister announced an extra 50c is to be placed on a packet of 20.

He explained: "You'll be pleased to hear this is the only tax increase in the Budget".

A sugar tax is to be introduced from April 2018 in line with a similar move by the UK.

Mr Noonan said it's important that the tax is "as effective as possible, as fair as possible, and minimises the administrative burden on businesses".

He said that production and supply chains for such drinks in Ireland and the United Kingdom are "highly integrated" and that's why he's holding off on bringing in the tax until April 2018, when the British government will introduce theirs.

Mr Noonan announced the beginning of a public consultation process for the sugary drink tax.

The minister said Ireland's 12.5% corporation tax rate will not be changed and "nobody in Europe or anywhere else is asking for it to be changed".

He explained that offshore tax evasion is to be targeted on foot of revelations in the 'Panama Papers' and the  Revenue Commissioners are getting an extra €5m.

Minister Noonan concluded by saying:  "It makes sense to avoid the mistakes of the past that could overheat our economy."

Minister for Public Expenditure and Reform Paschal Donohoe took to the floor immediately after his party colleague and he started by saying that he will announce €11,500 a day spending for every person in the country over the next 40 minutes.

Here is how it will affect you:


He explained that there would be an additional 4,500 public service workers to be hired including nurses gardaí and teachers.

There will be 2,400 new teachers next year, of which 900 will be resource teachers.

There will be funding for 1,000 new nurses and a further 800 gardaí will be recruited in 2017.

It's forecasted that there will be 43,000 more jobs at the end of 2017 across all sectors.



Minister Donohoe announced €1.2bn for housing in 2017, including 47,000 social houses.

An additional €105 million for housing assistance payments scheme. This brings budget for this to €153 million, increase of 220pc compared to 2016. This will enable additional 15,000 households to avail of this payment and will mean that over 21,000 applicants for social housing will have their housing needs met next year.

A Help-To-Buy scheme for first-time buyers in the form of a 5pc grant on new-build homes. Maximum rebate is €20,000 on purchases up to €600k.

The Help-To-Buy scheme will be back-dated to July 19th and run until the end of 2019.

There will be a boost for those who want to earn extra money by renting out a room in their home.

Landlords get an extra 5pc in mortgage interest relief, while homeowners can rent a room out for €14,000 a year without paying tax.

He said confirmed that there would be an additional €1.2bn for housing in 2017, including 47,000 social houses.

There’s going to be an extra €28 million for emergency homeless accommodation.

The Home Renovation Incentive Scheme has been extended until 2018.



In the area of health he said Minister Simon Harris is to get an extra €497m next year bringing the total spending to €14.6bn. This is the highest health budget in history.

€50m was announced to to tackle hospital waiting lists, including €20m for the  National Treatment Purchase Fund.

As part of the jobs measures funding was announced for 1,000 new nurses.

Medical cards for 10,000 children in need of domiciliary care.

Prescription charges have been cut for over-70s while the home-care credit will rise by €100 to €1,100.

Packs of cigarettes will go up by 50c. The move brings the standard price of a packet of cigarettes to €11 from midnight.

Mental Health Minister Helen McEntee is to get €35m for initiatives, although not all of this will be allocated in 2017. She was also get a significant capital budget for the redevelopment of St Ita's Hospital in Portrane.

The respite care grant for carers will was restored to its previous level of €1,700. The programme for government is committed to an increase in the carer’s tax credit, likely to be by €200, and carer’s benefit.

A sugar tax is to be introduced from April 2018 in line with a similar move by the UK.



In total funding for childcare in the State will be €465m -  a rise of 35pc

Affordable childcare scheme will see a subsidy made available to all parents from Sept 2017. We understand it's worth at least €20 a week.

The threshold for parents’ eligibility will be set at a combined gross income of €80,000. It will be capped at €8,000.

All families, no matter what their income levels, will be entitled to as much as €900 a year, if the child is in 40 hours per week of childcare. The payment will apply on a pro-rata basis of a State subsidy of 50 cent an hour of childcare. This will be paid directly to the childcare provider. This would mean a child in care for 40 hours a week would receive an €80 subsidy a month.

Home Care Tax Credit is to be increased by €100.

Two weeks of paternity benefit will be available to fathers from September 1 and the Department of Social Protection will pay €230 a week. The cost of the introduction is €5 million this year, rising to €20 million in a full year.

The move was welcomed by the National Women’s Council Director Orla O’ Connor:  “The proposed package is a breakthrough for the provision of childcare in this country. After almost two decades of campaigning by NWCI and other advocacy groups, the Government is finally acknowledging its responsibility to tackle the enormous affordability crisis in childcare.

"The childcare package is the first step to developing a publicly subsidised universal childcare model, similar to the models available in many other European countries.”


€9.5bn to be spent on Education - including recruitment with an emphasis on resource teachers.

A new €500 annual Cost of Education Allowance will be made available to Back to Education Allowance participants.

There will be 2,400 new teachers, including resource teachers and special needs assistants. This will not reduce the pupil-teacher ratio but will keep pace with demographic demands.

Third level education sector is to get an extra €36.5m in 2017.



Pensioners will save €5 a month when prescription charges for medical card holders over 70 are cut in Budget 2017.

This comes on top of a €5 increase in the weekly pension which will kick in from next March 1.

There will also be an increase in the Christmas bonus which means an extra €24 for pensioners.


An additional 800 gardai will be hired and trained in the coming year as part of an accelerated programme to recruitment to bring the overall strength of the force to 15,000.

The recruitment of civilian staff will also be speeded up in 2017 to help fill existing shortfalls in personnel and release a large number of desk bound trained officers for frontline duties.

More funding is also being made available to continue existing garda operations against serious crime as well as the nationwide Operation Thor, cracking down on urban and rural burglaries and robberies.

A five year reform and investment strategy is also being established.

Overall funding for Justice will rise to €2.5bn.



An extra €16m is being made available to the Department of Defence to fund a variety of programmes including the deployment of 498 personnel on overseas missions including the involvement of the Naval Service in Operation Pontus to search for and rescue migrants in the Mediterranean.



A new loan fund with interest rates of below 3pc and "highly flexible" is to be made available to help farmers.

Farmers who have an "exceptionally poor year" can step out of income averaging and only pay the tax due on a current year basis

Government sources say a €150m scheme, which is partly being funded by the EU, will be unveiled by Agriculture Minister Michael Creed.

€25 million for new animal welfare scheme for sheep to support sheep sector.

Government are putting an extra €50m to help climate change scheme.

€44 million package for flood relief schemes.


Transport and infrastructure

Minister Donohoe has announced that he is allocating €15m to progress the National Broadband Plan to provide high-speed internet to the regions

Transport Minister Shane Ross will get €319m for regional and local roads, and funding to open Luas cross-city in 2017.

He added that the government are putting an extra €50m to help climate change schemes.

Transport Minister Shane Ross is getting €319m for regional and local roads, and funding to open Luas cross-city next year.

Owners of commercial vehicles above a certain size had their motor tax significantly reduced. The maximum rate is now €900 compared to then top level of €5,195. Unlikely to see any changes for private vehicles this time out.

Fuel prices to stay the same.

VRT relief (€5,000) on electric vehicles extended for five years to give motor industry and consumers a chance to invest in cleaner technology.

Extending VRT relief on hybrids for two years.

Starting measures to help reduce dependence of larger vehicles on diesel so that natural gas used as a vehicle fuel will be taxed at the new minimum rate of excise for eight years.

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