What the summer economic statement means for your pocket

The Government's summer economic statement provides some key pointers of what policy will mean for your pocket. Here are the key points.

1. Your USC bill will continue to fall – but if you are a high earner you may not see much net gain. USC cuts have been the focus of budgets in recent years and this will continue. We don't know exactly how the next budget will be framed, but it is likely that the main USC rate – cut from 7 per cent in the last Budget to 5.5 per cent - will drop again.

In previous budgets, tweaks in the higher USC rates have been used to claw back gains from higher earners. However, the document indicates that in future the PAYE tax credit will be removed from higher earners as a mechanism to offset the USC cuts .

In net terms this means middle income earners – certainly those earning up to €70,000 and possibly a bit more – will gain, but that higher earners will have little or no net gains from the cut in the main USC rate.

Who exactly is defined as a higher earner remains open to question. Fine Gael remains committed to phasing out the USC in the years ahead, saying it plans to do so over the next five budgets.

2. There will be gains if you are self-employed: Pre-budget, there were promises of measures to help the self-employed.

The statement commits to continuing the introduction of the earned income tax credit for self-employment, until it equals the PAYE tax credit by 2018. This suggests that the earned tat credit, which was introduced at €550 in January 2016, will increase to €1,010 in 2017 and to €1,650 by 2018. This means up to €550 extra for self-employed people in each of the two years 2017 and 2018. There is also a commitment to introduce a PRSI scheme for the self-employed.

3. There are measures to help entrepreneurs: Business owners have long complained about the high level of capital gains tax. The last budget announced a cut from 33 per cent to 20 per cent in the capital gains tax rate for those selling their business, subject to certain conditions.

This is to fall to 10 per cent next year. There is also a promise to deliver €1 billion per year to SMEs from new sources of finance, a recognition of the continued constraints on bank lending.

4. There are certain specific commitments aimed at the low-paid: the document promises to push ahead with the promised introduction of a working family payment , which supplements, on a gradual basis, the income of a household.

The document also says the Government will support an increase of the minimum wage to €10.50 over the next five years, from €9.15 now.

5. If the government is right, there will be more jobs: The forecasts remain optimistic on economic growth, and predict that total employment will rise by about 50,000 this year, bringing the total numbers at work back over 2 million.

6. If the government is right, there will also be more money in the year ahead for budget giveaways: The official forecasts see about €1 billion available to increase spending and cut tax in next October's budget.

This would be less than the €1.5 billion last year.

However, assuming we hit our budget targets, the amounts available for tax cuts and spending rises after 2018 will rise sharply, to more than €3 billion a year. An incentive for the government to stay in office, perhaps? And remember, there is a commitment to spend €2 extra for every €1 given in a tax cut through the Government’s term.

7. And the "bads": Apart from the clawbacks for higher earners mentioned above, the statement is light on bad news.

However, there are two significant things. First, it says the Government will not increase tax credits and tax bands for inflation. With wages rising, this will mean a higher income tax take as a percentage of people’s income – a stealth tax rise in other words.

This will to some extent offset the benefits of the USC cuts . Also, the document refers to “increasing taxation on measures that promote healthier lifestyles.” While this is not spelled out, it suggests further hikes in tobacco tax and the promised introduction of a tax on sugary drinks, along the lines of what happened in the UK.