Monday 23 September 2019

Budget team discovers an extra €1bn

Extended maternity leave plan for preterm births

Finance Minister Paschal Donohoe. Photo: Tom Burke
Finance Minister Paschal Donohoe. Photo: Tom Burke
Philip Ryan

Philip Ryan

A powerful new Dail committee has told Government it should dramatically change its Budget calculations to free an additional €1bn for tax cuts and spending.

A draft report by the Budget Oversight Committee, which has been seen by the Sunday Independent, tells Minister for Finance Paschal Donohoe he can increase the amount of revenue available to him by changing his calculations.

The committee, chaired by Fine Gael TD Josepha Madigan, reported that the Government can expand the so-called 'fiscal space' while staying inside the strict European Union rules.

The committee was set up for the first time by the Government last year to advise ahead of the Budget. It has access to the recently established Parliamentary Budget Office.

The landmark report found that in calculating the available fiscal space for 2018 and beyond, the Department of Finance excludes the 2015 GDP growth rate of 26pc and instead uses a growth rate of 5.5pc for that year.

"This decision significantly reduces the GDP reference rate and therefore the permissible increase in public expenditure," it stated.

The move was recommended to the committee by the Irish Business and Employers Confederation (IBEC) and Irish Congress of Trade Unions (ICTU).

But a source close to Minister Donohoe said the Government would not be able to change the calculations this year as the Exchequer has not received enough tax revenue to redefine the fiscal space.

The Budget Oversight Committee's report also urges the Government to protect the 12.5pc corporation tax rate due to the potential economic threats posed by Brexit and fight off any attempt by the EU to make changes to tax codes that could result in a loss of business.

Concerns were also raised in the report over the 9pc VAT rate offered to the tourism sector.

The committee recommended the Department of Finance review the current rate to establish the impact it has had on job creation.

The report also specifically suggests a 'city tax' in some regions where the tourism industry has rebounded.

"The committee also notes the discrepancy between the comparatively high cost of hotel rooms in some areas of the country, coupled with one of the lowest VAT rates, and this may indicate that the vat rate could be subsidising areas in little need of a subsidy," it stated.

Elsewhere, the committee recommends that all available Budget resources should be used to alleviate the cost of childcare. It also suggests expanding the primary school system to include pre-primary care and education.

It has also emerged that the Government will use the Budget to extend maternity leave and benefits in the cases of premature births.

Once legislation is implemented, the State will pay benefits to mothers for the period of time between the actual birth of a baby and when the statutory maternity leave would have commenced. There are approximately 4,500 premature births annually.

The Government is also planning to introduce state-funded fertility treatment for couples who cannot afford services from private clinics. Such services can cost would-be parents around €4,000 to €4,500 per course.

The measure was first announced in early 2016 by Leo Varadkar when he was Minister for Health.

"We want to make life easier for new families and those who are struggling to become a family," a government source said.

Sunday Independent

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