Budget shaped by need to avoid overheating economy, says Taoiseach

Taoiseach Micheál Martin and Tánaiste Leo Varadkar have admitted that the budget will only lead to a modest increase in most people's standard of living.

Mr Martin said the scope for tax cuts and welfare increases was curtailed by the fact that resources are limited and there is also a chance of overheating the post-pandemic economy.

On the issue of tax relief, Mr Martin said that the changes in the Budget will give protections to workers, and younger ones in particular, in the €35,000 to €40,000 bracket.

“This Budget can’t do everything, but it certainly moves to protect people in respect of cost of living increases - that’s reflected particularly in housing, health and education, childcare and various social welfare increases,” he told Newstalk.

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“We’ve come through a once in a century pandemic, coming out of that is the extraordinary statistic that between this year and next year 400,000 jobs will come back to the Irish economy which reflects the macro economics decisions we made which were sensible and put the economy back on an even keel.

"There's only so much to go around, the economy is bouncing back, inflation is happening globally. It has impacted Ireland, it would make no sense to reduce the purchasing power of people by overheating the economy with too much allocation."

Purchasing power

Ireland had the second highest minimum wage now in Europe, said Mr Martin, but he accepted it was not the highest in terms of purchasing powers.

The reduction in costs for healthcare would help people on low incomes in terms of access to free GP card, drug repayment, the abolition of charges in paediatric hospitals, he added.

On increases to the carbon tax, Mr Martin says there is no easy way to do this. “One cannot have a painless way to dealing with the climate challenge. It is destroying our planet, we owe it to the young people and our children, that we do everything we possibly can to deal with this crisis.

“It’s an existential crisis and all the international research and evidence is that carbon taxes do work as a disincentive towards fossil fuels.”

Tánaiste Leo Varadkar has said that he believed most people would be moderately better off “whether it’s a consequence of the income tax measures or the social welfare measures”.

The Budget provided an increase in funding for public services, it also “threw a lifeline” to businesses, he said. he added, however, that “no one Budget can solve all problems. It was one day’s work.”

Mr Varadkar defended the 30 cent per hour increase in the minimum wage, saying it had been the recommendation of the Low Pay Commission and it would help ensure that wages kept up with inflation which is currently at 2.8 per cent.

Defray costs

The trebling of the allowance for people working from home was not designed to make working from home the norm, it was to help defray costs, he said.

The country was moving to a new phase post-pandemic, and this measure was to help people make a choice if they wished to work from home.

The Budget had retained the Help To Buy scheme as the Government wanted to help people own their own home.

“We want to do something to help all workers, that’s why we brought in indexation of tax brackets.”

Mr Varadkar also said that the Zoned Land Tax was fundamentally different to the Vacant Site Tax.

“ZLT applies to around 8,000 hectares of land around the country. We’re saying to companies who own that land to get planning permission, get building and if you don’t do that you will face tax.”

Mr Martin also defended the new Zoned Land Tax which he described as “quite radical”. It was separate from the Vacant Land Levy and would mean that entire swathes of land were now subject to tax if development did not go ahead, he said. The objective was not to raise funds but to put land into use.

“It’s quite a massive amount of zoned land that will fall to this measure - in terms of any land that is sold for housing and that’s serviceable will be subject to this tax. It will take time, because the entire country has to be mapped - each local authority will have to produce to maps.

“The Revenue Commissioners will be implementing it, and I think it’s the real velvet revolution of the housing strategy”.