Ireland's 2021 Budget announcement: largest since records began

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Today Minister for Finance Paschal Donohoe announced the 2021 Budget and it’s the largest on record for Ireland - €17.75 billion. The total value of support measures to date amounts to €24.5 billion, nearly eight times last year’s Budget plan.

Mr Donohoe began his address by inspiring the nation, he said: "The test we face, further demanding challenges await. The challenge is great and yet we will prevail, from the ashes of this pandemic together we will build a stronger and more resilient Ireland."

He said that the Budget is completely unpinned by the continued presence of the virus and the absence of a vaccine. Hence a significant investment in health, social welfare, education, housing and business support. There are no notable changes to income tax bands or tax credits, but there are a few adjustments to consider.

 

Health

An extra €4 billion for the health service. This will include investment in Covid protection, extra beds, dementia and care home support, drugs rehabilitation, disability and mental health support. Including:

  • Five million extra homecare hours
  • €5 million for development of community-based dementia support
  • €50m for new drugs and €25m for Healthy Ireland and National Drugs Strategy
  • €38m for mental health under the 'Sharing the Vision' initiative 
  • €100m for disability new services

 

Business

There will be a new Covid support scheme to provide targeted support for businesses temporarily closed, due to the pandemic, will get a maximum of €5,000 per week. The Government will make a payment based on their 2019 average weekly turnover. Other business support programmes include:

  • VAT for hospitality will be reduced to 9% from November 1st until December 2021
  • Capital investment of €10.1 billion in 2021
  • €500m in additional expenditure for businesses in addition to tax measures
  • Commercial rates waiver extended for the final quarter of this year at a cost of €300m
  • 10,000 upskilling opportunities and 4,000 new apprentices
  • €55m for a tourism business support scheme and €5m for tourism product development

 

Social welfare

There is €8.5 billion to support people, families, communities and businesses to survive the challenge of Covid, with a Contingency Reserve of €2.1 billion to support public services and income support. This means increases of:

  • Living Alone allowance to €19 from €5
  • Fuel allowance to €28 from €3.50 (per week)
  • The qualified child payment for over-12s is rising by €5 and by €2 for under-12s
  • Rise in the pension age to 67 on 1 January 2021 will no longer go-ahead
  • Self-employed on PUP can take up some freelance work and not lose their benefit
  • Christmas bonus to be paid to those on PUP and other welfare if they have been on that for four months instead of usual 15

 

Education

The Department of Education will have an €8.9bn budget with €80 million extra for school buildings and €270m for Higher Education building projects. €2bn will be put towards children with special education needs and 900 additional SNAs and 403 additional teachers. Other support measures include:

  • €132 million for the National Broadband Plan
  • New €50 million to provide once-off financial assistance to full-time third-level students. The measure is likely to be worth €250 to each student
  • €3.3bn budget for the Higher Education Department
  • SUSI grant for postgraduates will rise by €1,500 to €3,500 and income eligibility threshold has been changed

 

Housing

€5.2 billion will be allocated to the Department of Housing, that’s an increase of €773 million from 2020. Mr McGrath said it was a “record level of funding”. Other investments include:

  • €500 million for the construction of 9,500 new social housing units
  • 'Help to Buy' scheme extended until the end of 2021 at the higher max €30,000 rate
  • Stamp Duty scheme which refunds a portion of stamp duty paid on acquisition of non-residential land where it is then developed will be extended until end Dec 2022
  • €65m for deep retrofitting of existing social housing
  • €22m for homelessness programmes including additional beds
  • €110m for affordable housing package for affordable and cost rental

 

Tax

Full-time workers on the minimum wage will remain outside the top rate of USC (Universal Social Charge), the ceiling of the second USC rate band will be increased to €20,484 to €20,687. There will be no broad changes to income tax credits or bands, and the 12.5% corporation tax rate remains in place. Changes to Vehicle Registration Tax (VRT) based on emissions to incentivise people to buy low emission cars. There are also changes to:

  • Self-employed income tax credit to rise by €150 to €1,650
  • Pack of 20 cigarettes will increase by 50c, where it’s €14 for the most popular pack of cigarettes
  • Carbon tax increases by €7.50 a tonne from midnight
  • An additional €100m of carbon tax revenue will be put towards energy efficiency of our homes
  • Broadband costs for those working from home can now be claimed as a tax relief

 

Brexit

Much like Covid, another assumption that underpins the budget is no trade deal between the EU and the UK. €340 million voted expenditure will be spent on Brexit support in 2021. This includes an additional allocation for compliance expenditure in 2021.This means:

  • Providing ports and airports with an additional 500 staff bringing the total provision for approximately 1,500 for operationalising checks ahead of January 1st
  • €600 million to the capital budget in addition to a planned increase of €1 billion for 2021 under the National Development Plan

We hope you’ve found this overview of Ireland’s Budget 2021 useful. If you want a full report of the Financial Statements made by Minister Donohoe and Minister McGrath, there are resources at the bottom of this article.

Conclusions and closing remarks

Michael McGrath, Minister for Public Expenditure and Reform said he and Mr Donohoe wanted to give people hope based on realism. He said, “The day will come when Covid-19 and Brexit are behind us. A new economy, a green economy will emerge, and so too will a greater understanding of how much we rely on each other and so will a greater appreciation of the simple things that perhaps we often took for granted."

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Here are some resources we used to build this article:

http://budget.gov.ie/Budgets/2021/Documents/Budget/Budget%202021_budget%20speech_DFinance.pdf

http://budget.gov.ie/Budgets/2021/Documents/Budget/Financial%20Statement%20from%20Minister%20McGrath.pdf

http://budget.gov.ie/Budgets/2021/Documents/Budget/The%20Budget%20in%20Brief%20-%20A%20Citizen's%20Guide%20to%20Budget%202021.pdf

http://budget.gov.ie/Budgets/2021/2021.aspx

https://www.irishtimes.com/news/ireland/budget-2021-the-highlights-1.4379664

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