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Spending to save: Gamble that record €18bn Budget spree will ease Covid-19 crisis and Brexit impact

  • €18bn Budget largest in our history
  • National debt to reach €219bn due to Covid-19
  • Suite of supports for businesses in shutdown
  • Rural anger at carbon and motor tax hikes

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Minister for Public Expenditure and Reform, Michael McGrath and Minister for Finance Paschal Donohoe pictured at Government buildings for Budget 2021. 
Photo: Julien Behal

Minister for Public Expenditure and Reform, Michael McGrath and Minister for Finance Paschal Donohoe pictured at Government buildings for Budget 2021. Photo: Julien Behal

Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath, left, unveil Budget 2021 (Liam McBurney/PA)

Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath, left, unveil Budget 2021 (Liam McBurney/PA)

Minister Paschal Donohoe

Minister Paschal Donohoe

Finance minister Paschal Donohoe (right) and Public Expenditure Minister Michael McGrath arrive at the Dublin Convention Centre to deliver the budget. (Julien Behal/PA)

Finance minister Paschal Donohoe (right) and Public Expenditure Minister Michael McGrath arrive at the Dublin Convention Centre to deliver the budget. (Julien Behal/PA)

Finance minister Paschal Donohoe (left) and public expenditure minister Michael McGrath arrive at Government Buildings in Dublin before outlining details of Ireland's next budget. Photo: Liam McBurney/PA Wire

Finance minister Paschal Donohoe (left) and public expenditure minister Michael McGrath arrive at Government Buildings in Dublin before outlining details of Ireland's next budget. Photo: Liam McBurney/PA Wire

Minister for Finance Pascal Donohoe at Government Buildings on Budget day.
Photo: Mark Condren

Minister for Finance Pascal Donohoe at Government Buildings on Budget day. Photo: Mark Condren

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Minister for Public Expenditure and Reform, Michael McGrath and Minister for Finance Paschal Donohoe pictured at Government buildings for Budget 2021. Photo: Julien Behal

The Government is gambling on a massive Budget spending spree to save the country from the twin threats of the Covid-19 pandemic and Brexit.

Finance Minister Paschal Donohoe unveiled an €18bn Budget - the biggest in the history of the State - as he warned of "the invisible enemy" seeking to wreak havoc on our lives.

And in a move aimed at encouraging people to spend to help restore the economy, Mr Donohoe pointed to the "significant" rise in household savings during lockdown as he justified plans for massive State borrowing next year.

The minister said the first ever Budget jointly compiled by Fianna Fáil and Fine Gael was "unprecedented in both size and scale in the history of the Irish State".

"We have faced numerous difficulties since independence, but never one like Covid-19," he added.

He insisted that from the ashes of the pandemic, a stronger and more resilient Ireland can be built - and this Budget was a "bridge to that future".

The €18bn package includes a €3.4bn recovery fund aimed at helping the economy get over the Covid shock and a possible no-deal Brexit. Another €1.6bn has been set aside for capital projects including new homes, schools and roads

Business leaders welcomed a string of measures aimed at propping up industries over the winter months and into 2021, including payments of up to €5,000 a week for companies in tourism, hospitality and entertainment hit by Covid restrictions.

It also includes the biggest welfare package ever announced by an Irish government and included increases in several supports for older and vulnerable people and those living in poverty.

The fuel allowance, the living alone allowance and qualified child payments are to rise.

Most of those on the Pandemic Unemployment Payment and people in receipt of other welfare payments will get the Christmas bonus.

But were no increases in the weekly rate for the State pension, Jobseeker's Allowance or disability payments and plans to reduce the Pandemic Unemployment Payment to €203 next year are still going ahead.

There were no significant income tax cuts but people on lower incomes will see small reductions in the amount of USC they pay. There were also small tax cuts for the self-­employed.

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The most significant tax cut was the reduction of the 13.5pc VAT rate to 9pc for the hospitality and tourism sector.

The Green Party claimed credit for an extra €1bn being assigned to public transport, a major retrofitting scheme and privately claimed responsibility for major increases in ­welfare supports.

However, the Government faced strong criticisms from the opposition for what was described as a "Dublin Budget" by rural TDs who were infuriated by the rise in carbon and motor taxes. Some drivers of high-polluting cars will see their motor tax rise by €50, while VRT on new high-emission vehicles are also to rise.

Carbon tax will add about €1.20 to the cost of a petrol fill for a typical car, and €1.50 if it is diesel. The carbon tax on gas, coal, and home-heating oil will be held off to next May, as happened last year.

A 20-pack of cigarettes will rise by 50c to €14 for some of the most popular brands.

Record-breaking capital funding was allocated to the health service with major commitments made to fund around 2,600 hospital and community beds, along with a promise to hire 16,000 new staff in the sector.

A Department of Health source admitted the figures were "ambitious", but added: "we have to get this done and the HSE have said they can do it". Another health source said new education commitments and HSE employment frameworks would ensure the targets are met.

However, last night one Government minister said: "The HSE will spend it all right, but probably not on what it is intended for."

Similarly, €5.2bn was allocated to housing, along with a promise to build 9,000 social housing units before the end of next year. Housing Minister Darragh O'Brien's long-promised affordable housing rental and purchase scheme was allocated €110m but there was no detail of how it will work or when it will begin.

Speaking to the Irish Independent, Public Expenditure Minister Michael McGrath said Mr O'Brien was still "working on a scheme" but said affordable housing would be delivered through other ­initiatives in the interim.

"The scheme will be in place and affordable homes will be available next year," he added.

In his Budget speech, Mr McGrath said the "day will come" when Brexit and Covid are "behind us".

"The task of our Government is to guide our country through one of the most difficult periods in our history," he said. "Our sole motivation at all times will be to act in the best interests of the people we are privileged to serve."

He said the Government would set out plans to begin reducing the budget deficit next year.

Some €10bn in capital spending was announced for critical projects across all regions. This includes road projects such as the N56 in Donegal, the N4 in Sligo, the N5 in Mayo and the N22 and Dunkettle Interchange in Cork. Forty-one intercity rail carriages will be bought and up to 600 electric carriages will be part of the DART+ ­project.

There was also major spending in education where the teacher-pupil ratio was reduced. Higher Education Minister Simon Harris secured €50m which will be used to give every college student a one-off €250 payment.

Justice Minister Helen McEntee also received funding for 620 new garda recruits on top of an expected force of 14,500 at the end of 2020.

In summary: How Budget 2021 affects you

■ No income tax cuts for most PAYE workers, but small changes to USC will provide a modest benefit to low-income workers.

■ Changes to earned income tax credit threshold mean that self-employed workers can earn an extra €750 before paying tax.

Childcare

■ There are no measures to ease the burden of childcare costs or creche fees.

Welfare

■ Core social welfare rates are unchanged.

■ All welfare recipients will get a Christmas Bonus - 100pc of their weekly payment - including anyone on the Pandemic Unemployment Payment for four months.

■ Self-employed workers on the Pandemic Unemployment Payment can earn up to €480 per month without losing their PUP.

■ State pension age will not go up to 67 next year.

■ The fuel allowance goes up by €3.50.

■ The Living Alone Allowance goes up by €5.

■ The qualified child payment goes up €5 for over-12s, and €2 for under-12s.

Housing

■ If you're a first-time buyer, the Government's help-to-buy scheme has been extended until the end of next year, giving taxpayers access to a rebate of up to €30,000.

■ Nearly 30,000 households will be able to access grants for retrofitting to make them more energy efficient next year.

Motoring

■ Complex changes to vehicle registration tax will punish motorists with older and larger cars. Owners of higher emission vehicles face an increase of up to €50 in motor tax.

■ Carbon tax increase will add two cents to a litre of petrol and 2.5 cents to a litre of diesel from midnight.

Health

■ The Government will spend an extra €2bn next year to pay for a Covid test if you need it and PPE if you need that.

■ Another €2bn for non-Covid services aims to add 1,146 acute beds hospital beds, 5 million extra home care hours and other measures to tackle hospital waiting lists.

Sin taxes

■ If you smoke, you'll pay an extra 50 cents for a pack of 20 cigarettes.

■ If you drink, alcohol duty is unchanged meaning the cost of your pint, spirit, or wine is not affected.


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