Budget 2016

USC cuts, minimum wage hike, childcare and paternity leave measures announced

Eoin Burke-Kennedy, Dan Griffin Tue, Oct 13
LIVE: Budget 2016

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  • 12:06

    Leaks, leaks and more leaks...the Cabinet appears to have more holes in it than our national water utility. Most of the measures in Budget 2016   have already been revealed, presumably with the Government's consent.

    USC reductions, tax credits for the self-employed, a hike in the old-age pension, additional money for housing, more teachers, more gardaí...the list goes on. Will there be anything left for Messieurs Noonan and Howlin to announce? We'll see.

    By way of introduction, I'm Eoin Burke-Kennedy, and together with my colleague Dan Griffin, we'll be bringing you the latest news and analysis throughout the day.

    I’ll be doing the hard-edged economic analysis, Dan will be parsing the importance of Noonan’s tie and assessing what we can say about the mood of the Government from the typeface of the budget script.

    As always, feel free to mail us directly or tweet us @eoinbk @dangriffinIT

  • 12:29
    Our Business Editor Cliff Taylor writes: the Government will hail the new knowledge development box as a "big thing" to encourage businesses to spend more on research and attract FDI . However it has been drawn up with the OECD looking over our shoulder.

    The incentive will offer a lower tax rate on profits emerging from research but the OECD scrutiny means the rules will be restrictive. While it will be of some interest to multinationals and to Irish firms the gains for most will be limited enough .
  • 12:46

    EoinBK: It's somewhat quaint to hear the phrase political budget bandied about...as if it could be anything else.

    The addition of €1.5 billion via the supplementary estimates calls into question the Government's notion of a modest expansion.

    The Coalition appears to be walking a fine line between fiscal rectitude and pre-election giveaway.

    Defenders of the Government's stance will insist the expansion - whether it's €1.5 billion or €3 billion -  accounts for a modest slice of the State's GDP and can't be compared to the reckless pre-election giveaways of 2002 and 2007.

    However, the economist's position (Keynesians anyway), is that you don't add petrol to a  healthy blaze, meaning an expansionary stance on top of 6 per cent growth is a recipe for overheating the economy.

    The Government's own Fiscal Advisory Council and the Central Bank have said as much, but they stopped short of criticising the Government's plans, insisting the size of the expansion is open to interpretation.

  • 12:55
  • 12:56
  • 13:05
    EoinBK: We're hearing from political correspondent Fiach Kelly that Minister for Children James Reilly will be allocated €85 million on childcare. This will go towards free pre-school - available to children from three years of age until they enter primary education, parents will be given three enrolment windows - September, January and April.
  • 13:10

    Dan Griffin: Our social affairs correspondent Kitty Holland reports that as many as 6,000 lone parents will benefit from reforms to the One Parent Family Payment in this afternoon's Budget. Increases in the Family Income Supplement will benefit up to 60,000 low-income families.

    Single parents will no longer be compelled to take up work when their youngest child reaches the age of seven. They may still receive support until their youngest child is 14 without having to seek work.

    The income disregard for the Jobseekers' Transitional Payment is bring increased from €60 a week to €90.  This is a payment onto which lone parents must move when their youngest child reaches seven years, until they are 14. The balance of any income will now be assessed at 50 per cent instead of 60 per cent.

  • 13:13
    EoinBK: Many firms already give staff paternity leave. The Irish Times gives us two weeks. Legislation to give effect to the introduction of two weeks' paternity leave is expected to be brought before the Dáil next week. The measure will be announced in Noonan's Budget speech.
  • 13:25
    Dan Griffin: Just less than an hour to go now before Noonan gets to his feet in the Dáil. It will be interesting to hear the opposition reaction: will they criticise Budget 2016 for being a giveaway budget designed to buy votes come the general election or will they say doesn't give enough back to taxpayers?
  • 13:27
    Dan Griffin: On RTÉ now, Minister of State at the Department of Finance Simon Harris says the Budget is about "securing the recovery". Expect to hear a lot of that today. "This is not an election Budget," he adds. Expect to hear a lot of that too.
  • 13:30
    "Today's Budget is not so much about righting the wrongs of the past, it's about winning the election," says Sinn Féin's Mary Lou McDonald. But water charges should be scrapped, she says and low-wage earners should receive greater support.
  • 13:31

    Fianna Fáil's Sean Fleming: "This is all about the general election".

    So that's the party positions fairly well established then.

  • 13:37
    Eoin BK: Undoubtedly, the big move this year is around USC. It is expected to soak up about €600 million of the adjustment. The big element will be a predicted 1.5 per cent reduction on the 7 per cent rate, which applies to income between €17,000 and €70,000. This will put money back in the pockets of about one million middle-income workers.
  • 13:39
  • 13:48
  • 13:50
  • 13:59
    EoinBK: With 15 mins to go, we're hearing the cuts to USC may also be backed up with a pledge to get rid of the charge altogether during the lifetime of the next government. If ever there was a pre-election pitch.  
  • 14:06
    Dan Griffin: The Dáil is now full ahead of the Budget speeches, which are due to commence shortly. Before that though, the group leaders in the chamber are expressing their condolences over the separate deaths over the weekend of 10 members of the Traveller community in a fire in south Dublin and garda Tony Golden, who was killed on duty near Omeath, Co Louth.
  • 14:07
  • 14:08
    Dan Griffin: Taoiseach Enda Kenny says the Tricolour will fly at half mast on the days of the funerals.
  • 14:12
  • 14:27
    EoinBK: Gerry Adams verges on political, expressing sympathy for family of Garda Tony Golden while calling for extra Garda resources, prompting jeers around the House  
  • 14:28
    EoinBK: Ok, here we go, Noonan is on his feet...and giving us this year's Budget pre-amble - where we are and where we've come from. It rarely strays far from the Coalition's favourite narrarive, namely we were handed a banjaxed economy and we've fixed it, sidestepping the obvious fact that they are implementing the same policies of the previous administration, despite promising a radical break with the past.
  • 14:30
    Dan Griffin: Noonan is now outlining broadly what the Budget has in store: more doctors and nurses, more affordable and quality childcare, measures to help the self-employed, he talls the Dáil.
  • 14:32
    "We must keep the recovery going," Noonan tells the House. In other words, reiterating the mesaage the Government has been trying to sell to voters for the past number of months and, no doubt, in the months to come before the election.
  • 14:35
    Eoinbk: Noonan - 130,000 more people are now in work than at the low point in 2012 and this growth in employment is spread across the vast majority of the sectors in the economy
  • 14:35
    Dan Griffin: "My Department is forecasting growth of 4.3 per cent in 2016, taking accound of the figures endorsed by the Irish Fiscal Advisory Council,"Noonan says. "We are on track to recover all of the jobs lost". Unemployment is set to drop to 6.25 per cent by 2021, he adds.
  • 14:36
    EoinBK: Noonan - The forecast deficit for 2015 of 2.1 per cent is well ahead of our original target of 2.7 per cent and our excessive deficit requirement of less than 3 per cent of GDP.    
  • 14:38

    EoinBK: Noonan - Between the end of 2014 and the end of 2016, my Department is forecasting that the economy will grow by 18 per cent in nominal terms with revenue from taxation and PRSI increasing by just under €7.2 billion or 14.7 per cent while gross voted expenditure will increase by €2.25 billion or 4.2 per cent.  


  • 14:39
    Eoinbk: Nothing of any real substance yet...essentially Noonan is detailing the Government's CV
  • 14:39
    Dan Griffin: Noonan takes a swipe at Charlie McCreevy's "If I have it I'll spend it" comment from years ago. "The Government has confined to the history books the days of boom and bust and the attitude of, 'If I have it, I'll spend it,'" Noonan says.
  • 14:40
    EoinBk: Noonan - This Government has made significant progress in reducing both the size and cost of servicing the national debt. In addition to bringing the public finances under control, specific initiatives such as the Promissory Note transaction, the extension of maturities on our EU Loans and the early repayment of the IMF loans have also resulted in real and substantial savings to the Irish taxpayer.
  • 14:41
    Cigarettes are up by 50c from midnight, bringing the price of a pack of 20 up to €10.50 and bringing in €61.4 million for the exchequer.
  • 14:42
    EoinBk: Noonan putting emphasis on the benefits of a growing economy being "felt inside the door of every family"
  • 14:43
    Smokers group forest are quick out of the traps condemning the cigarette price increase as "unwarranted", "excessive" and "an attack on the poor".
  • 14:47
    EoinBK: Well-leaked in advance. The USC changes are as follows:

    Entry threshold goes up from €12,012 to €13,000, removing approximately 42,500 workers from the scope of the charge entirely. It is estimated that over 700,000 income earners will not be liable to USC at all from next year

    Also 1.5 per cent rate reduced to 1 per cent. The 3.5 per cent rate to 3 per cent. The 7 per cent rate to 5.5 per cent.  

    Noonan says this will reduce the marginal rate of tax to 49.5 per cent for all earners under €70,044
  • 14:47

    Dan Griffin: Noonan says the Budget changes mean workers will see an average of one week's pay increase: "All workers will gain a full extra week's wages," he says.

  • 14:48
    EoinBK:   Increase of €190 in Home Carer Tax Credit     to bring it up to €1,000 per year, aimed at helping single income married couples with children or who care for an elderly or incapacitated relative.
  • 14:49
    Dan Griffin: Capital acquisitions tax: Noonan announces an increase in the group A tax free threshold, going from €225,000 to €280,000.
  • 14:50
    Noonan announces new tapered PRSI credit with a maximum level of €12 per week or €624 in annualised terms to alleviate the step effect across a range of incomes. He says, this change will ensure that low income earners will see a significant improvement in net incomes.
  • 14:50
    The remaining pension levy of 0.15 per cent will end this year and not apply to 2016.
  • 14:51
    EoinBK: Noonan announces plan to postpone the revaluation date for the Local Property Tax from 2016 to 2019.
  • 14:55
    Responding to repeated complaints about disparity between take-home pay of employees and self-employed, Noonan announces Earned Income Tax Credit to the value of €550.This was leaked in advance.
  • 14:56

    Dan Griffin: Noonan now talking about encouraging entrepreneurs by introducing an earned income tax credit of €550, which could go up in subsequent budgets,

    He also says Capital Gains Tax relief of 20 per cent will for selling a business or part of a business will  be introduced in January, replacing the current rate of 33 per cent.

  • 14:57
    The 9 per cent rate of VAT to the tourism sector will remain in place.
  • 15:02
    EoinBK:   Film tax credit - cap on eligible expenditure upped to €70   million.

    Here's another big one. The Knowledge Development Box (KDB) - essentially the Government's replacement for the Double Irish loophole. Noonan to introduce it in the upcoming Finance Bill. He says it will be the first OECD-compliant KDB. Crucially, it will have a reduced 6.25 per cent rate of corporation tax.  
  • 15:02

    Noonan: "Retailers in Ireland currently face excessive fees for accepting card payments... A new EU regulation is halving the so-called interchange fees faced by retailers to 30 basis points for credit cards. I am having the corresponding fee for debit cards to 10 basis points."

    He adds: "To further encourage and incentivise greater usage of card payment by consumers I will recast the €5 stamp duty on debit/ATM cards. From the 1st of January, this stamp duty will be removed and replaced with a 12 cent charge per ATM transaction".

  • 15:06
    EoinBk: First bit of drama, Noonan stops his Budget speech to say "have you got a problem?" to Mattie McGrath. He had been going the Housing element of his budgetary measures
  • 15:07

    Dan Griffin: On transportation costs, Noonan says: "I am simplifying the rates of commercial motor tax by replacing the 20 existing rates with just five rates of commercial motor tax, ranging from €92 to €900 with effect from the 1st of January... the most significant reducation are concentrated on the larger goods vehicles. The maximum rate of commercial motor tax will be €900 per annum, down from €5,195."

    With no word on fuel, that should keep the road hauliers happy.

  • 15:09
    EoinBK: Noonan announces Nama will deliver 20,000 residential housing units by 2020, mainly starter homes. This will require funding of €4.5 billion, but will not compromise Nama's debt repayment committments
  • 15:10
    Dan Griffin:Summing up, Noonan says the Government will progressively abolish USC to reward work and reduce the marginal rate to no more than 50 per cent for all workers.
  • 15:10
    EoinBK: Here's the big election pitch: Noonan says he will "progressively abolish the USC to reward work and reduce the marginal rate to no more than 50 per cent for all workers to make Ireland more attractive for mobile foreign investment and skills, including for our returning emigrants."
  • 15:11
    EoinBk: Howlin now on his feet, more on "the distance we've travelled"
  • 15:12
    EoinBK: Backbenches getting rowdy now, Cean Comhairle repeatedly telling TDs to remain quiet
  • 15:13
    Dan Griffin: Hoteliers are happy, according to a press release that's just landed: "The Irish Hotels Federation (IHF) welcomes the retention of the 9 per cent tourism VAT rate announced today by Minister Noonan as part of Budget 2016."
  • 15:14
    EoinBK: Howlin: "When the Government was elected, the budget deficit stood at 12.5 per cent of GDP.   This year it will be 2.1 per cent. In 2010, the year of the infamous promissory notes, the headline rate stood at over 30 per cent.   A staggering deficit."
  • 15:15
    EoinBK: Here's Howlin speaking directly to voters: "I want to deal with one issue that generates considerable debate. It has become popular to say that under this Government, inequality has risen.   This is simply not true.Our adjustment has been a difficult one, but a fair one.   Those with the most have given the most."
  • 15:16
    Dan Griffin: Brendan Howlin says the minimumm wage will increase, from January to €9.15 an hour from €8.65.
  • 15:16
    Dan Griffin: And then he takes a swipe at Fianna Fáil. "We did more in the worst of times than our predecessor did in the best of times."
  • 15:18
    EoinBk: Howlin: "We protected core social welfare rates." One thing that always strike me is how little Labour makes of this point. Does the party feel its voters don't want to hear?
  • 15:20
    Dan Griffin: Howlin says an orderly unwinding of the finaincial emergency legislation that allowed the Government to freeze public service pay is the prudent and correct thing to do.
  • 15:21
    EoinBk: "Pay levels – like the public finances themselves – need to be managed in a responsible, sustainable way, with the long term interests of the country at their core."
  • 15:24
    EoinBK: The thorny issue of childcare now - one of Labour's broken pre-election pledges - another big announcement - Howlin's pitch to the electorate - children will be eligible for free childcare from three years of age, up until they are five and a half, or until they start primary school.
  • 15:27
    Dan Griffin: "Teachers educate the citizens of tomorrow," Howlin says, touching on the profound, before announcing that the pupil teacher ratio at primary level will fall from 28 to 1 to 27 to 1.
  • 15:27
    EoinBK: We're on education now: the allocation for 2016 will provide for over 2,260 new additional teaching posts, including 600 new resource teachers. This is in addition to the extra 610 special needs assistants and 190 resource teachers already announced this year.
  • 15:29
    Dan Griffin: As leaked, pensions are going up by €3 a week with the respite care grant restored to €1,700 and fuel allowances up €2.50 a week.
  • 15:31
    Dan Griffin: Free GP care for the under 6s will be extended to all children under 12, Howlin says. "Subject to successful negotiations."  
  • 15:31
  • 15:32
  • 15:33
  • 15:34
    EoinBk: "One of the worst legacies of the economic crisis is our dysfunctional housing market.   Years of underinvestment in social housing has led to an accommodation crisis, particularly in urban areas," Howlin says.  
  • 15:34
    Howlin says he is making €10 million available from the proceeds of the sale of Bord Gáis for an affordable housing scheme.
  • 15:36

    He announces a €50 million allocation for the 1916 centeneray celebrations.

    €2.2 billion goes to the Department of Justice, in 2016 funding is being made available to recruit and train a further 600 gardaí.


  • 15:38

    Dan Griffin: €25 million will be provided to help deal with the European refugee crisis.

    €2 million has been made available for an emergency aeromedical service. Helicopter ambulances.

  • 15:40
    EoinBK: Overseas aid now: "I am allocating over €640 million for Official Development Assistance. €486 million will be managed by the Department of Foreign Affairs, with the remainder being administered through other Government Departments and the EU Development Co-operation Budget."
  • 15:41

    Dan Griffin: Howlin is wrapping up. "In 2011, this Government made two key promises--" he says before being cut off by guffaws from the Fianna Fáil benches.

  • 15:42
    EoinBK: Heckling again. Howlin mocks FF, saying it saw the light before the ship sunk
  • 15:42
  • 15:46
  • 15:51
    Dan Griffin: Fianna Fáil's Micheal McGrath is on his feet responding to Budget 2016. He says now that the Government finally has scope to give something back in expansionary budgets, they're giving to the well off and failing the poor.
  • 15:52
  • 15:52

    EoinBk: And there you have it. Families, middle-income earners and self employed are the big winners in Budget 2016. There were also notable annoucements around housing, teachers, gardaí. Is it a pre-lection pitch? Of course, but will it be enough to keep the Coalition intact?

    Fine Gael is sure to fight the election along the same lines as the UK Conservatives, essentially 'we're the party you can trust on the economy'. If the LibDems analogy holds any weight, Labour is going to have a tougher time.



  • 15:54
    Dan Griffin: McGrath says the proceeds from the local property tax have been used by the Government to cut funding to councils and set up the "bloated super quango" Irish Water.
  • 16:00
    "Pensioners will not be fooled by this Government," says Fianna Fáil. Pensioners vote and all parties have them in their sights. The Government announced a €3 increase in all pensions. The courting has begun.  
  • 16:01
    Dan Griffin: The Irish Farmers Association says it's very pleased with measures announced in the Budget to ease the transfer of farm holdings from parent to child.
  • 16:02
  • 16:11
  • 16:18
    Ibec group Property Industry Ireland described the Budget as a "missed opportunity to boost private housing supply".

    Director Peter Stafford says Government is placing a significant reliance on Nama to deliver a huge proportion of Ireland's housing needs.

    "An opportunity was missed to encourage private building by reducing the cost of new housing through reduction of VAT and development levies," he adds.
  • 16:20
  • 16:25
  • 16:27
  • 16:27
  • 16:37

    Dan Griffin: Employers group Ibec has welcomed the consumer friendly elements of Budget 2016 but are whingeing a bit at the prospect of minimum wage workers getting a few extra cents an hour.

    According to a press release from Ibec organisation Retail Ireland "expressed disappointment at the increase in the minimum wage without any meaningful measures to offset costs for employers. The minimum wage increase is premature and will disproportionately impact the retail sector, where labour costs make up a large proportion of the cost base. The reduction of the employers' PRSI, aimed at offsetting the cost for employers, is simply not enough to encourage the creation of new jobs."

  • 16:41
    Dan Griffin: Small businesses seem to be broadly welcoming of the Budget. But Renua, "the party of small business", according to leader Lucinda Creighton, reckons Budget 2016 was a missed opportunity to encourage enterprise.
  • 16:43
    EoinBK: The American Chamber of Commerce Ireland appears reasonably happy with the Budget.   The organisation, which represent 700 US companies in Ireland, said the reductions in the USC rates will enhance Ireland’s competitiveness “in the international battle to retain and attract talent”.

    Chief executive Mark Redmond   also welcomed the introduction of a new tax credit and changes to the capital gains tax regime for the self-employed.  

    “This will boost the enterprise, start up and scale-up ecosystem in Ireland, which will play to the increasing trend among MNCs to seek out locations with strong local business ecosystems, and therefore will help Ireland maintain its attractiveness as a global FDI location.”

    He also welcomed the “certainty provided” by the updated International Tax Strategy which will be appreciated by companies investing in Ireland. He noted the details announced about the Knowledge Development Box, which will have a 6.25 per cent, are a welcome next step in implementing this strategy
  • 16:43
  • 16:56
    "Have you truly stolen Fianna Fáil's clothes?" asks Sinn Féin's Pearse Doherty in the Dáil, saying that former Fianna Fáil minister for finance Charlie McCreevy would be proud of Budget 2016.
  • 17:05
    Catherine Murphy TD, from the newly formed Social Democrats party says there are welcome elements in the Budget but it really focused on the next general election rather than the next generation. She says measures announced today might be reigned back in after the election, like the were following the 2007 election.
  • 17:10
    Families are the main winners from measures in  Budget 2016, with free GP care extended to under 12s, additional free pre-school childcare and a €5 increase in child benefit, write Irish Times reporters in our main online Budget report.
  • 17:14

    A double-income two-child household in which both adults earn €70,000 a year will be the big winners in Michael Noonan’s final budget as part of the current administration, writes Conor Pope.

    Most consumer-friendly budget 'since age of austerity'

  • 17:25
  • 17:30

    In early 2007, then-taoiseach  Bertie Ahern  stood up at a  Fianna Fáil  ardfheis and read out what was essentially his party’s economic manifesto for the general election later that year. There were more goodies and giveaways than the Late Late Christmas Show, writes Harry McGee.

    Listening to  Michael Noonan  and Brendan Howlin’s double budget speech on Tuesday, you were struck by the similarities.

  • 17:43
  • 17:46
    Budget 2016: What family groups have been the winners and losers since 2007?
  • 18:05
    The students aren't happy. A press release from the Union of Student in Ireland says 80 per cent of third level students wouldn't vote for the Government after seeing their Budget proposals.
  • 18:06

    “Although the increase of €3 million for the SAF is a positive,” Kevin Donoghue, USI president, said “Not reintroducing the postgraduate grants is disappointing. Fine Gael hasn’t taken the opportunity to fully invest in young people. Education is an investment, not expenditure. Young people and their families have suffered enormously because of the cost of college and not having an education will have a ripple effect on their futures – from training, refining current skills and employability, education is a major factor in the structure of economic recovery.”

  • 18:13

    Another organisation not at all pleased with Budget 2016 is the National Campaign for the Arts. "When the special provision for the 2016 Centerary Programme is excluded, the increased allocation of €4.5 million to the enitre department will do little or nothing to repair the significant damage suffered by the arts during the many years of relentless cuts and the standstill funding in 2015."

    "Ireland has long enjoyed an outstanding reputation for artistic excellence, at home and abroad, in the face of Government spending on arts and culture at just 0.11 per cent of GDP. This has placed Ireland at the bottom of the list of EU countries compared with an average of 0.6 per cent."

  • 18:24
  • 18:27

    The Fine Gael press releases from Deputies banging on about how brilliant the Budget is are also coming in thick and fast.

    To recap:

    Government: "Sustaining recovery"

    Opposition: "Election Budget"

    Interest groups: "Welcome measures"/"Missed opportunities"

  • 18:43
  • 19:01
    That's where we'll leave it for Budget 2016. There's tonnes on the site about what the measures announced today mean for your pocket and there'll be expert analysis in tomorrow's paper.  Thanks for reading.