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At a glance: Your guide to the 2023 Budget

An €11bn budget has been announced today, the biggest budget in the history of the Irish State. The Minister for Public Expenditure and Reform, Michael McGrath, said the Budget is delivered today against an “extraordinary backdrop of uncertainty and challenge”. The Minister said that while the budget seeks to respond to challenges facing the people of Ireland with “unprecedented resources”, it would not be possible to “meet every need”.

“But this Budget will make a difference, and people will see that quickly,” he said today.

Many of the cost-of-living measures announced are due to take effect within a matter of weeks, however Budget Day only really kick-starts the process of new supports, one-off supports, tax changes, and financial allocations, with many of the measures announced today anticipated to take months to pass.

Several one-off supports have today been announced, including electricity credits of €600 for all households (to be paid in four instalments of €200), a one-off €200 payment to those on Living Alone Allowance, and a one-off €500 payment to people on Disability Allowance, Invalidity Pension and Blind Pension. Tackling climate change was described as “our defining challenge” by Finance Minister Dohohoe, which would be responded to with “courage and resolution”.

However, Budget 2023 has been described as a “catch-up budget” to deal with the Government’s inaction over the past year. Below are some of the key elements of the 2023 Budget:

COST OF LIVING CRISIS

Presenting Budget 2023, Finance Minister Paschal Donohoe told the Chamber that while Ireland has emerged from the worst of the Covid crisis, the country now faces a “further economic challenge”. Outlining the cost of living crisis crippling many people nationwide, he said that Budget 2023 was a “Cost of Living Budget” focused on helping individuals, families and businesses to deal with rising costs.

“If you are an older person, you are having to spend more of your pension on heating your home; if you are looking after a family, you are facing higher grocery bills; if you are running a small business, you are trying to cope with increases in the cost of energy,” he told the Chamber.

As part of the measures enacted to grapple with the cost-of-living crisis, described as “the worst in a decade” prompting a fall in living standards, an income tax package worth €1.1bn was announced. The standard rate cut-off point will increase by €3,200 to €40,000.

The main tax credits (personal, employee and earned income credit) will increase by €75, while the home carer tax credit will rise by €100 to support stay-at-home parents. The Help to Buy Scheme will continue at the current rates until the end of 2024, whilst the Government announced the introduction of a new tax credit of €500 annually for renters. Every Irish household will receive a €600 electricity credit, with the first payment to be made before Christmas, with an additional two payments in the new year. There will also be a once-off double payment week for core social welfare recipients. However, the cost of cigarettes is set to rise again under the budget, with an additional 50 cent to be charged on a pack of 20.

HOUSING CRISIS

Under Housing for All and the National Development Plan, the Government has announced €4.5bn in public funding for the provision of social, affordable and cost-rental homes.

In his Budget 2023 speech, Mr McGrath said he was allocating a “record €6.2bn in Exchequer funding to the Department of Housing, Local Government and Heritage of which the majority, €3.5 billion, will be capital investment”. Additionally, a total of  €1.7 billion will be allocated to the Department of Housing in 2023 in order to help deliver the social housing new build target of 9,100 homes.

There was no ban on rent increases, despite similar measures announced to ease pressure on tenants in the UK. in addition,

  • Funding will be made available to support 8,800 new HAP tenancies and 800 RAS tenancies
  • 9,100 new-build social homes, 5,500 new affordable homes for sale and rent and 6,500 new social homes will be supported
  • Funding to deliver 37,000 home energy upgrades

EDUCATION

The Budget has also outlined a Free School Book Scheme for primary school pupils to commence in autumn 2023. In addition, the National Childcare Scheme hourly subsidy is to increase from 50c to €1.40. Other changes include:

  • The provision of over 660 additional mainstream teachers, over 1,190 SNAs and 680 special education teachers 
  • An increase in the National Childcare Scheme hourly subsidy from 50c to €1.40 
  • A €500 increase in post-graduate contribution grant for eligible families
  • Over 4,800 additional places on craft and consortia-led apprenticeships and 4,000 places on craft apprenticeship programmes will be supported

CHILDCARE

A double Child Benefit payment will be made to all qualifying households, worth €140 per child in addition to the normal monthly payment. An additional lump payment of €500 to those in receipt of the Working Family Payment, will be payable in November. in addition,

  • Extra funding was announced to support a reduction in the cost of childcare. The scheme, which will cost a total of €121 million, will mean a reduction of up to 25% in the weekly cost of those availing of the National Chilcare Scheme. “This measure will put up to €175 a month, or €2,106 a year, back in the pockets of parents next year,” Michael McGrath told the Dáil.
  • A further €59 million will be allocated for the recently established Core Funding model which will provide for extra hours and extra capacity in the sector. 
  • The Minister said the childcare budget would reach €1 billion next year – 5 years ahead of target.

HIKE IN CARBON TAX

The rate per tonne of carbon dioxide emitted for petrol and diesel will go up from €41 to €48.50 from 12 October as per the trajectory set out in the Finance Act 2020. This means that there will be an increase of just over two cent VAT inclusive per litre of petrol and diesel.

“However, I also recognise the sharp cost of living challenges currently being faced by society, so the government is therefore proposing to offset this carbon tax increase with a reduction to zero of the National Oil Reserves Agency (NORA) levy,” Minister Dohohoe said.

“The NORA levy which is collected at a rate of 2 cent per litre (VAT exclusive) will help offset the carbon tax increase which means that the price at the pump will not go up as a result of taxes or levies,” he added.

RESPONSE TO UKRAINIAN REFUGEE CRISIS

An additional €11 million was today announced for the continued response to the Ukrainian refugee crisis at community level to “help integrate arrivals from the Ukraine into local communities”.

RURAL AND COMMUNITY DEVELOPMENT

The Government also announced an investment of €390 million for Rural and Community Development. “Recognising the increased cost of living for all sectors €10 million is also being provided directly by the Department for immediate supports to community groups to assist in managing increased costs,” Mr McGrath said.

HIGH-VISIBILITY POLICING

The need for high-visibility policing was also a focus, with the funding for recruitment of a further 1,000 Gardai into Gardai college next year announced.

TRANSPORT

The Minister for Public Expenditure and Reform announced the allocation of €3.5bn to support the delivery of a range of transport projects next year. Mr McGrath said that capital funding of €2.6bn to transport represents the “highest level of capital investment since 2008”. He said this will progress BusConnects, MetroLink and the DART+ Programme.

“In addition, I am extending the 20% public transport fare reduction and the Youth Travel Card discount of 50% on all operators’ services to end 2023,” Mc McGrath added.

WINDFALL ENERGY TAX

“Turning to revenue raising measures; much work is underway in the EU on capturing the windfall gains of energy companies,” Mr Donohoe said, adding: “It is not fair for companies to earn excess profits from the current volatility in the market.

“Ireland aims to be part of this EU-wide response to high energy prices. If this is not possible, this government will bring forward our own measures”.

ONCE-OFF MEASURES

The Budget included a string of once-off payments for carers and students, including:

  • An additional payment of €500 to those who qualify for the Carer’s Support Grant to be made in November, and all recipients of the Living Alone Allowance will receive a once-off payment of €200 before Christmas.
  • A once-off payment of €500 to those who qualify for Disability Allowance, Invalidity Pension and the Blind Pension will be made in November.
  • A once-off reduction in the Student Contribution of €1,000 for eligible students in the 2022-2023 education year, and a once-off double monthly payment for those in receipt of the SUSI maintenance grant.
  • A once-off €1,000 increase to the postgraduate fee contribution grant.

VAT

  • Hospitality: The 9 per cent VAT rate which is currently in place to support the tourism and hospitality sectors will continue until 28 February 2023.
  • Newspapers: The government said it was aware of the “critical role that newspapers play in our society, from reporting on local communities to holding those in power to account”. The Budget announced a reduction on the VAT on newspapers from 9 per cent to zero from 1 January 2023. Although Minister Donohoe said this implementation was in line with the “government’s commitment to support an independent press” as well as the recommendations made by the Future of Media Commission’s recommendation on the matter, however, for some media companies and newspapers which have been forced to close, the change will come too late. 
  • Health Products: “Many Deputies in this house have contacted me seeking the removal of VAT on defibrillators and were told that it was not permitted under the EU VAT Directive,” the Finance Minister stated, adding: “However, after much negotiation it is now possible for member states to apply a zero rate and I am happy to announce that I will apply this rate to these life-saving devices from 1 January. I will also apply a zero rate of VAT to hormone replacement and nicotine replacement therapies, as well as the small number of period products that are currently subject to a 9 per cent rate”.
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