Budget 2024: USC cuts and up to three new household energy credits under consideration

Cuts to universal social charge (USC) for workers, a new round of up to three household energy credits, and a scrapping of the planned excise increase on petrol and diesel are being considered as preparations for the budget enter the final week.

Ministers will be meeting with Paschal Donohoe, the Minister for Public Expenditure, in the coming days as they make final pitches for their departments’ spending plans.

Minister for Finance Michael McGrath meanwhile is working to finalise a tax package in the order of €1.15 billion.

Negotiations for the Department of Health’s budget are set to be particularly difficult given the €1.1 billion overrun expected for 2023.

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The Government has previously flagged that there is about €5.25 billion available for new core spending across all departments.

Further sums will be made available for once-off cost-of-living measures – much of which will be paid out before Christmas.

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However, the Government has sought to dampen expectations on the scale of the once-off package with senior figures repeatedly suggesting it will not be as high as last year.

The Irish Times understands that it remains the intention for new spending to include increases in weekly welfare payments of at least €10 – with a matching of the €12 increase last year still a possibility.

A reduction in USC and other tax relief for workers through changes to income tax bands are under consideration as part of the tax package.

One option being considered is a 0.5 per cent cut to at least some USC rates, though which rate or rates the cut would apply to has yet to be decided.

Another option for cutting USC which is being examined is to change the threshold at which the tax is applied – a measure that would benefit lower- to middle-income earners.

Separately, there is also expected to be a continued rise in the cut-off point for the standard rate of income tax – which currently stands at €40,000. An increase of between €1,000 and €1,500 has been mooted.

Increased tax credits are also being discussed.

More energy credits are being considered amid continued high household bills, though they will be lower than the total of €600 in such supports announced in last year’s budget.

Options being discussed are two credits of €200 each or three credits of €100-€150.

With petrol and diesel prices not far off €2 per litre at the pumps, a source said it was “almost certain” the planned restoration of the full excise rates, due to take place from the end of the month, would not go ahead.

The possibility of raising the rent tax credit for tenants from €500 to a sum closer to €800 is still on the table.

However, a source sought to play down the breadth of different tax measures that can be achieved within the €1.15 billion, saying “it all adds up quickly” and there are “no decisions made as yet”.

Mr Donohoe last week warned of a risk that the overspend on the health service could jeopardise spending plans for the budget.

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In a meeting with Mr Donohoe this week, Mr Donnelly is expected to continue to make the case for additional funding be allocated to the health service for existing and new measures in 2024 despite this year’s overrun.

He has blamed increased demand for health services and inflation for the increased spending needs, but cost-saving measures are also being demanded by government colleagues.

Negotiations that have already taken place over the health budget were described by Minister for Enterprise Simon Coveney on Sunday as “pretty intense”.

He also told RTÉ's The Week in Politics that his own priority was “a very strong support package”, including once-off supports before the end of the year for small and medium enterprises (SMEs), start-ups and family businesses.

Elsewhere, Dóchas – a network of international development and humanitarian organisations – called for urgent budget action on climate change, conflict and hunger.

It said it was “time for the Irish Government to make good on its promise to spend 0.7 per cent of Ireland’s GNI [gross national income] on overseas development assistance in the countries and communities globally who need it the most.”