The State’s independent budgetary watchdog has sharply criticised Tuesday’s bonanza budget, warning that it “repeats Ireland’s past mistakes of pumping billions into the economy when it is at full employment”.
In an initial “flash” response to the budget published on Tuesday night, the Irish Fiscal Advisory Council warned “Ireland needs a more serious vision that delivers on the economy’s needs without repeating the boom-to-bust pattern of its past.”
It said the large spending increases would drive inflation, adding an estimated €1,000 to the cost of a typical household’s yearly outgoings.
“Large budget packages in recent years have put money back in people’s pockets,” said the advisory council. “But they have taken it away by pushing up prices.”
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The advisory council was also critical of the one-off benefits that have now been repeated for the third year in a row. “The same supports could have been provided to those most in need at a much lower cost,” it said.
It added that the Coalition should be saving more of the exceptional surpluses that the boom on corporation tax receipts – and the Apple tax judgment – have generated.
Asked about criticism from the watchdog, Minister for Finance Jack Chambers replied the Government had stuck to the parameters it set out in the summer economic statement.
“I think we’ve struck the right balance in the overall package we’ve delivered today,” he said, arguing the Government had put money into long-dated future funds and running an exchequer surplus.
On the persistence of so-called “once-off” measures, he argued last year’s budget was notable for a package of €2.7 billion when tax measures were included, half a billion euro more than that announced on Tuesday.
Minister for Public Expenditure Paschal Donohoe said the future funds, the surplus and adherence to the summer economic statement showed a commitment “absolutely not to go back to the ways of the past”. He added the Opposition would spend “every cent of the surplus tomorrow”.
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With much of the contents of the budget reported in advance of the announcements, there were few surprises in speeches by Mr Chambers and Mr Donohoe.
One surprise, however, was the announcement by Mr Chambers of a new stamp duty rate of 6 per cent for residential properties of more than €1.5 million in value, with the higher rate applying to the portion of the sale price above €1.5 million. A stamp duty rate of 2 per cent will apply to the value above €1 million, with the portion of the price below €1 million attracting a 1 per cent rate.
There was disquiet among some Fine Gael TDs at the move, with one describing it as “something introduced by a Fianna Fáil Minister”, though they were cheered by changes to inheritance tax thresholds, which will mean reduced tax bills for those who receive large inheritances.
The changes to inheritance tax thresholds will cost €88 million, while revenue raised from the “mansion tax” will likely be about €80 million.
Mr Chambers downplayed fears it would hit substantial transactions involving multiple units, saying the new rate would apply only to individual property sales above €1.5 million. Estate agents said there had been a flurry of activity on Tuesday evening to complete transactions before the tax was due take effect at midnight.
Ministers and Government backbenchers hailed the extra spending, with special enthusiasm for the series of one-off payments, including the double child benefit payment and the double welfare payment, including old age pensions, which will all be made before Christmas.
Bulging exchequer finances meant the Government was able to spend big but also record a large surplus and boost capital spending.
Reaction elsewhere was mixed. Employers and business lobby group Ibec said the “overall mix of spending is clearly geared towards electoral priorities” but added that there were “some key measures aimed at the medium term including significant investments in infrastructure and skills, which are very welcome”.
Trade union umbrella group Ictu said the budget was “highly irresponsible” and had displayed no long-term strategy to fix long-term structural problems.
Environmental group Friends of the Earth said it was “flabbergasted at the astronomical cost of the untargeted universal energy credit of €250 to every household.
“That will cost €500 million, more than the total retrofitting budget for the coming year,” it said.
