Thursday 21 November 2019

Leo's election Budget will target tax, pension and welfare packages

Leo Varadkar. Photo: REUTERS/Lisi Niesner
Leo Varadkar. Photo: REUTERS/Lisi Niesner

Jody Corcoran and Philip Ryan

The Government will this week introduce an Election Budget which will benefit landlords, the self-employed and squeezed middle-income earners, the Sunday Independent can reveal.

Boosted by an additional €1bn in Corporation Tax receipts, both Fine Gael and Fianna Fail will then seek to claim credit for what is expected to be a €1.4bn Budget package ahead of a looming general election.

Taoiseach Leo Varadkar last night fired the opening shots at Fianna Fail ahead of what is almost certain to be the last Budget before the election, either late this year or in the first half of 2019.

Signalling tax, pension and welfare packages, Mr Varadkar also announced that the Budget would “fully reverse the cuts made by governments of the past”. But he added: “We’ll balance the books. There will be no deficit for the first time since the crash.”

Fianna Fail, meanwhile, is laying claim to most of the Budget measures designed to alleviate the property crisis in what that party is calling a Housing Budget.

The Sunday Independent has learned that a significant tax break is to be introduced to incentivise the purchase and retention of rental property with tenants in situ.

It is also understood that there will also be a five-fold increase in the affordable housing scheme, bringing the allocation to €300m over three years.

Fine Gael’s Social Protection Minister Regina Doherty, meanwhile, plans to announce the extension of jobseeker’s benefit to around 310,000 self-employed and small business owners. The party will also be laying claim to most of the tax benefits for middle-income earners, amounting to around €300m.

In effect, the self-employed will be entitled to the weekly social welfare payments should they become unemployed, in what is being hailed as a major new policy decision.

In an indication that an election is on the way, Mr Varadkar, in a speech in Dublin last night, referred to the country’s “humiliating bailout” and troika oversight of austerity measures. He said: “We should never forget the political failures which put us into that chasm 10 years ago.”

In an address to his party’s Presidential Dinner, Mr Varadkar also referred to Fine Gael as “the United Ireland Party”.

Last night, senior Fianna Fail sources dismissed Mr Varadkar’s “political” address, but also described his united Ireland comments as “wreckless and feckless”.

While Fianna Fail is laying claim to property-related measures, as well as increased spending, Mr Varadkar last night claimed restored weekly payments to carers, people with disabilities, widows, and the blind, and lone parents with young children.

Last night, Fianna Fail’s Social Protection spokesman, Willie O’Dea, said he was “amused” to see Fine Gael attempting to claim credit for what were around €900m of social welfare measures introduced at the influence of Fianna Fail.

As Fine Gael and Fianna Fail do battle over credit for the Budget, the Sunday Independent has also learned that there is to be a five-fold increase in the affordable housing scheme, bringing the allocation to €300m over three years.

In effect, local authorities and housing co-operatives will receive a €50,000 subsidy from the Department of the Environment to build affordable homes which will cost buyers €190,000, rising to €255,000 in Dublin.

Should such properties be sold on within five years, then the original purchaser will be liable to repay the €50,000.

Furthermore, mortgage interest relief is to be restored on a tapered basis up to 100pc for around 400,000 mortgage holders who bought homes at the height of the Celtic Tiger.

In effect, these householders, many of whom subsequently fell into negative equity during the crash, are to receive a benefit of up to €700 each.

It has also been confirmed that the Government is expected to allow local authorities to build more social housing without lengthy approval processes.

The Sunday Independent understands that a new measure is to be introduced which is designed to incentivise the retention of rental properties with sitting tenants. As property prices have risen, there are widespread reports that many landlords are attempting to cash in by selling rental properties, therefore reducing the stock of rental properties.

Vendors tend to sell with vacant possession on the basis that such properties will achieve higher prices. As a result, many tenants are forced to find alternative rental accommodation.

The plan is to introduce a 4pc capital gains tax relief for a landlord who buys and retains a rental property with a tenant in situ.

The landlord would have to retain the rental property for a minimum of five years to achieve a 20pc capital gains tax benefit.

If the property is sold or is no longer rented to tenants in less than five years, then no relief would apply.

However, if the property is sold or ceases to be let after five years, then CGT will be reduced by 4pc for each year it was a rental property. On an average rental property bought for €300,000, the net taxable gain to the landlord would be €30,000 after five years.

Meanwhile, the Sunday Independent understands that a substantial affordable housing scheme is also to be introduced in the Budget.

Those eligible to participate in the scheme will be on incomes up to €50,000 a year for a single earner and €75,000 for dual incomes.

Local authorities and housing co-ops, which will borrow to build and sell the homes, will receive the €50,000 per unit subsidy from the Dept of the Environment and use the sales price to repay the loan. Should a purchaser sell an affordable home within five years, they will be liable to repay the €50,000 subsidy.

There is sufficient State-owned land for 42,000 homes. The affordable homes will be located on such lands where "affordability is an issue", according to FF sources.

Last night, Mr Varadkar said the housing emergency was "many years and perhaps decades in the making", adding that the country had "not yet turned the corner but I do believe we will".

However, he claimed credit for almost 2.3 million people at work as well as rising incomes and falling deprivation.

He also claimed credit for reduced USC, an increased minimum wage and State pension, extra gardai, "the lowest teacher-pupil ratio ever", subsidised childcare for working parents, reduced prices for medicines, the "stabilised" cost of health insurance, extended eligibility for medical cards, as well as more infrastructure investment.

As he arrived for Fine Gael's annual Presidential Dinner in Dublin last night, the Taoiseach said people will be able to keep "more of their hard-earned money" in 2019.

It was put to Mr Varadkar that the flow of good news from the Dept of Finance, including an unexpected €1bn corporation tax windfall, pointed towards an early election.

He replied: "I would see this budget as not an election budget. I would see it as a budget that is very much in line with budgetary and economic strategy of the last couple of years."

Sunday Independent

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