Ireland finds extra cash for ‘modest’ budget boost
Vacant site levy hiked, new housing agency introduced
DUBLIN (Reuters) – Ireland’s finance minister sought to raise over €800 million additional revenue in a budget on Tuesday to give taxpayers a “modest” break and help tackle a housing crisis.
He also sought to balance the state’s books for the first time in a decade.
Ireland started reversing years of savage spending cuts and tax hikes in 2014 – about the time its economy began to rebound sharply from a deep financial crisis.
But hemmed in by European Union borrowing rules, Paschal Donohoe initially had far fewer resources this year than in those expansionary budgets.
In the event, he boosted the budget package to €1.2 billion from the mere €350m. available chiefly through a 4 percentage point increase in stamp duty on commercial property, ensuring income tax cuts will not go into one pocket and come out the other.
“On this budget day we build on progress that would have looked impossible only a few short years ago,” Donohoe told parliament in his first budget speech as finance minister.
While Ireland’s economy has posted the fastest growth in Europe for the past three years, sluggish sentiment surveys suggest many consumers are seeing few benefits amid increasing living costs, particularly in rents and rising house prices.
By increasing the relatively low threshold at which people hit the higher rate of income tax and trimming the amount they pay, Prime Minister Leo Varadkar said an average family would be a “modest” €500 to €600 better off a year.
Varadkar knows that with the agreement with their main rivals to back the minority administration set to expire in just over a year’s time, the small boosts will likely be the last to filter through to voters’ pay packets before the next election.
The government stuck to its ratio of over 2:1 in favor of spending increase over tax cuts, increasing current spending in line with the 3.5% growth in the economy as services try to keep pace with a population that is also the fastest growing in the EU.
But Donohoe focused much of his speech on housing as the government scrambles to boost a chronic under-supply across the country, including a significant increase in a planned levy on vacant sites that owners fail to build on.
He will also siphon off €750m. from the state’s sovereign wealth fund, the Ireland Strategic Investment Fund, to start a new body that will offer debt finance to builders and be staffed by executives from the state’s “bad bank,” NAMA.
After last year’s “Brexit proof” budget was criticized by business for not doing enough to shield it from key trade partner Britain’s departure from the EU, a new €300m. Brexit loan scheme was introduced to help small and medium businesses with shortterm working capital.
The government has said previously that it can only consider major interventions such as asking for specific EU assistance when the shape of Brexit becomes clearer.