Monday 18 December 2017

John Downing: Budget 2017 snap analysis

Budget is not bad news – but you may struggle to find the good.

John Downing

John Downing

IF YOU’RE a smoker with a sweet tooth, then the news is certainly bad.

Michael Noonan has whacked yet another 50c on the 20 fags, bringing it over €11.  And there is a plan for a “sugar tax” to come the year after next.

The rest of us can conclude that the news is not bad – but we may struggle to find where the good is in Michael Noonan’s sixth and Paschal Donohoe’s first Budget.

True, we would have taken the hands off these moneybags ministerial duo for even a fraction of this package less than five years ago when it was all doom and gloom.  Presenting his first Budget on December 6, 2011, Michael Noonan gouged a total of almost €4bn out of the economy via spending cuts and tax hikes.

The only crumb of very cold comfort the Limerick veteran could offer was that if the Eurozone economy picked up – Ireland might recover quickly.

Beginning his speech today, Mr Noonan said the economy will see GDP growth of 4.2pc in 2016  and a more conservative than previously flagged rate of 3.5pc in 2017.

And, continuing a trend he modestly began in his third Budget back in October 2014, he presented spending increases and tax cuts of €1.3bn in total.  He said that is in part possible because there are over two million people are at work this year – back at boom-time rates.

But British voters’ decision on June 23 to  exit from the EU represents a "real risk" to the Irish economy. "We want to avoid any move towards a hard border with Northern Ireland or indeed any charges that reverse what is a common economy on this island," the Finance Minister said.

So, from 2018 onwards the Government will set aside up to €1bn every year as “a rainy day fund.” In the same vein the 9pc special tourism VAT rate for catering and hospitality to help it attract British and other overseas visitors.

The big puzzler will surround he “help to buy” scheme for those trying to buy their first home. Mr Noonan said the scheme will see first time buyers get up to maximum a 5pc grant on newly-built homes up to a total of €20,000. But it’s only for new-builds and second-hand houses are excluded.

There is a boost for those who earn extra money by renting out a room in their home.  The tax free rental allowance under the 'rent a room scheme' is being increased to €14,000 per year.

The Universal Social Charge (USC) changes were well-flagged. The rates for all workers will be cut by 0.5pc.  The entry threshold for USC rises by €104 taking all those on minimum wage outside of the top rates.

No surprise that Mr Noonan re-stated that Ireland's 12.5pc corporation tax rate will not change.  His assertion that no one in Europe was looking for it to be changed was puzzling.

But it was only one of many puzzles we can continue to grapple with.

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