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Campaigners compare Taoiseach’s promise unfavourably with Justin Trudeau’s actions

about 7 hours ago

Hugh Linehan

Minister for Culture Heather Humphreys. Photograph: Laura Hutton/File/Collins




There is “huge disappointment” across the arts sector at its 2018 budget allocation, the chair of the Arts Council has said.

Sheila Pratschke said the council’s funding of €68m for next year – an increase of €3 million from 2017 – would allow it to meet existing commitments but would severely hamper efforts to broaden support to artists and organisations nationwide.

The increase of less than 5 per cent compares with an 8 per cent increase last year following several years of cuts.

“While this will be a very difficult year for us and those we fund, we trust that the Taoiseach and Government will stand over the promise to double funding to the arts and culture sector by 2024,” said Ms Pratschke in reference to a promise made in May by Mr Varadkar.

The National Campaign for the Arts also expressed deep disappointment at what it described as minimal increases.

  • Budget 2018 main points: everything you need to know

  • Budget 2018: Increases in housing, health and social welfare

  • Budget 2018: Have questions? Our expert team is here to answer to answer them

“This is despite the Government greatly raising expectations in the last year through its high-level initiative, Creative Ireland, whose stated aim is to raise the priority of arts, culture and creativity across Government, and the Taoiseach’s campaign pledge to double investment in the sector,” it said in a statement, which made an unflattering comparison between Mr Varadkar and Canadian prime minister Justin Trudeau.

“(Mr) Trudeau actually delivered on his pledge in his first budget last year, setting out a concrete five-year programme of increases,” it said. “The NCFA therefore calls on the Taoiseach as a matter of urgency to set out a concrete and credible path to delivering his pledge and to clarify if this commitment still exists.”

In his budget speech, Minister for Finance Paschal Donohoe announced an additional €13m – €9 million in current and €4 million in capital spending – for Department of Culture, Heritage and the Gaeltacht .

Minister for Culture Heather Humphreys has allocated €8.5 million of that sum to arts and culture, including an additional €1.5 million for the Irish Film Board – a 9 per cent rise.

There were also increases for Culture Ireland, which promotes Irish culture overseas, and for targeted initiatives by local authorities and in education. Irish Film Board chair, Dr Annie Doona welcomed the news. “We look forward to being in a strong position next year to increase our support for the development and production of Irish films and animation. screen industries,” she said.

Ms Humphreys also announced, separate from the 2018 funding, that there would be additional capital funding of €90 million for culture, heritage and the Gaeltacht for the period between 2018 and 2021.

“This represents an increase of almost 50 per cent in my department’s capital budget over that period, and will, for the first time, allow for incremental planning on a multi-annual basis, to benefit our national cultural institutions and regional arts infrastructure, in particular,” she said.

Fund to be given an initial injection of €1.5bn from the Ireland Strategic Investment Fund

about 8 hours ago

Charlie Taylor

Announcing the fund in the Dáil, Minister for Finance Paschal Donohoe said it is an important step in “strengthening the national finances in a changing and risky world, especially in light of Brexit”




The establishment of a so-called rainy day fund will help absorb “inevitable” future economic shocks, the Government has said.

A new consultation paper was published as part of Budget 2018, outlining the basis for setting up the fund, the announcement of which has been broadly welcomed.

The fund, which will start in 2019, is to be given an initial injection of €1.5 billion from the Ireland Strategic Investment Fund (ISIF) and annual exchequer contributions of €500 million.

Announcing the fund in his Dáil budget speech, Minister for Finance Paschal Donohoe said it was an important step in “strengthening the national finances in a changing and risky world, especially in light of Brexit”.

Fianna Fáil backed the setting up of the fund with the party’s finance spokesman, Michael McGrath, describing it as “the right thing to do”.

  • Budget 2018 main points: everything you need to know

  • Budget 2018: Increases in housing, health and social welfare

  • Budget 2018: Have questions? Our expert team is here to answer to answer them

Inside Business Budget 2018 Podcst

“Such a fund is a sensible part of budgetary policy and would be a sure sign we have matured and learned the lessons of the past,” he said.

Plans for a rainy day fund to help balance the economy were first unveiled in the 2016 Summer Economic Statement.

Vulnerable to fluctuations

Outlining the reasons for such a fund, the Government’s consultation paper notes that the Irish economy is extremely vulnerable to fluctuations.

“Our economic history – especially the most recent history – highlights the importance of creating a fiscal safety buffer to help absorb the shocks that are inevitable in the future while, at the same time, ensuring the long-term sustainability of the public finances,” it states.

The consultation paper suggests that drawdowns from the fund would be linked to a fixed, defined purpose such a specific emergency.

Research shows that rainy day funds governed by stringent requirements typically accumulate more and, in turn, were more effective in mitigating against shocks. An additional benefit is that countries whose funds operate under strict rules can receive a better sovereign rating, which can lead to a reduction in the cost of borrowing.

EY chief economist Neil Gibson said while termed as a ‘rainy day’ fund, the new pot was essentially “a Brexit mitigation fund.”

“Given the lack of clarity surrounding the UK’s exit from the EU, there is merit in this approach. However, many interest groups would argue that this money should be spent now on challenges which are already known,” Mr Gibson said.

Siptu president Jack O’Connor referred to it as a “totally unnecessary ‘pet project’ fund”.

Corporation tax to remain at 12.5%, health spending to reach total of €15.3bn

about 15 hours ago
Updated: about 8 hours ago

Mary Minihan

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Pat Leahy and Cliff Taylor of The Irish Times discuss the ‘tax and spend budget,’ and its implications. Video: Bryan O’Brien

Paschal Donohoe at Government Buildings prior to his Budget 2018 speech. Photograph: Cyril Byrne




Minister for Finance Paschal Donohoe has announced increased spending of €1.2 billion in Budget 2018 which will fund developments in the housing and health sectors and pay for tax cuts and social welfare payment rises.

The point at where workers face the higher rate of income is being increased, the cost of the Universal Social Charge will fall for most people and the price 20 cigarettes is to rise by 50 cent from midnight.

Social welfare recipients will see their payments increase by €5 and measures lowering the cost of prescription charges for medical card holders were also announced.

One of the main revenue raising measures will be a 4 per cent increase in the stamp duty on non-residential property, which rises to 6 per cent from midnight. Mr Donohoe said the rate had been cut from a high 9 per cent – charged between 2002 and 2008 – in order to stimulate the market and that this had worked.

Housing will be one of the areas where spending increases most with the Minister noting the “corrosive impact of homelessness” on the State in his speech. He announced an allocation of €1.8 billion for housing next year, which he said would help to fund the building of 3,800 new social homes next year.

Mr Donohoe said spending on health was already at a record level but he added that “our health service needs improvement” before announcing an increase in funding for the department of €685 million, bringing its total budget to €15.3 billion next year.

Among the main measures announced are:- €5 increase for all weekly social welfare payments and an 85 per cent Christmas bonus will be paid this year.

– Entry point for higher rate of income tax to raise by €750 to €34,550

– Main 5 per cent USC rate cut by 0.25 per cent to 4.75 per cent; 2.5 per cent rate cut to 2 per cent

– Increase in commercial stamp duty from 2 per cent to 6 per cent

– A sugary drink tax of 30 cent per litre on drinks with 8g of sugar per 100ml and 20 cent per litre on drinks with 5g to 8g of sugar per 100ml.

Pupil Teacher Ratio

Spending on education will top €10 billion next year, which the Minister said was a new peak for the sector. There will be 1,300 more posts in schools next year, Mr Donohoe said, and the pupil-to-teacher ratio will reduce to 26:1.

  • Budget 2018 main points: everything you need to know

  • Budget 2018: Have questions? Our expert team is here to answer to answer them

  • Conor Pope: Bad luck, sunbed-loving smokers with a taste for sugary drinks

Paschal Donohoe’s speech

He said there will be an additional 800 gardaí next year and another 500 civilians will also be hired to work in the force. There will be €63 million more invested in the justice budget to help develop a “modern police force”.

Mr Donohoe said Ireland’s corporation tax rate will remain at 12.5 per cent. He said corporation tax has seen “unprecedented change and reform in recent years”.

He announced a tapered extension of mortgage interest relief. The relief was due to expire at the end of this year, but will now run until 2020, although will fall to 25 per cent in that year. The relief currently benefits those who purchased a home between 2004 and 2012, and is worth about €850 on average a year and is, according to Revenue, claimed by some 292,500 homeowners.

The Minister announced €20 million more for childcare measures including a further extension of two years free pre-school years.

Rainy Day fund

To “further protect the economy”, he announced that he will establish a rainy day fund of €1.5 billion from Ireland’s Strategic Investment Fund.

He said ramping up capital expenditure too much “would be a dangerous and simplistic” move that would “overheat the construction sector and in turn our economy”.

While the VAT rate will not change for the tourism and services sector, Mr Donohue announced an increase from 13.5 to 23 per cent for sunbed services, on health grounds.

Brexit will bring permanent changes to our trade patterns , he said, and small and medium businesses will need to change. A Brexit loan scheme will see up to €300 million available to SMEs including food businesses “given their unique exposure” to Brexit, to help with their short term investment needs.

An increase of €64 million in the budget for the Department of Agriculture, Food and Marine (to €1.5 billion next year) would also help protect against Brexit, he said.

At the beginning of his speach, the Minister referenced unemployment numbers in recent years. He said unemployment is at 6.1 per cent, its lowest since 2008. Mr Donohoe says it will fall to 5.7 per cent next year, close to the level considered to be full employment.


Following the speech, Fianna Fáil took a swipe at the Government’s housing and health policies even as it welcomed measures in the budget which the party said it secured as part of the confidence and supply agreement.

Finance spokesman Michael McGrath warned the Government it would be judged by how it tackles the homeless and housing crisis in particular.

The party’s public expenditure spokesman Dara Calleary said the Taoiseach had promised a doubling of arts spending, but the outcome was a 4 per cent increase.

He referenced the new Strategic Communications Unit in the Department of the Toaiseach (the so-called Government “Spin Department”), which will cost €5 million to set up, despite the Taoiseach previously saying it would be cost-neutral.

Sinn Féin finance spokesman Pierce Doherty criticised the Government’s the record on the health service He said Fine Gael’s tax cutting measures will “return us to the boom and bust” approach of the past.

“What does it mean for the parents who have watch their children in pain” because of the crumbling health services, said Mr Doherty.

Labour leader Brendan Howlin said it was a “stand still” budget for the two main policy areas of health and housing, with no real vision outlined by Fine Gael.

In a series of tweets, Solidarity criticised the announcements on the basis of measures benefitting builders and landowners, with nothing for young people. “Extra fiver a week will pay a massive 2 hours of average Dublin rent, before any further increases.”

‘Squandered opportunity’

Social Democrats TD Catherine Murphy said the Government’s plan to address the housing crisis was a “squandered opportunity that will devastate future generations.”

The Residential Landlords Association of Ireland called the budget “extremely disappointing” and said it would do little to tackle the shortage of rented accommodation.

Siptu president Jack O’Connor said the package was “a slick piece of political presentation but morally indefensible”.

The Irish Council for Social Housing has said Budget 2018 “demonstrates that the Government is investing in social housing”.

The Irish Heart head of advocacy Chris Macey welcomed the introduction of the sugar-sweetened drinks levy.

Indecon found no evidence of increase either in prices or supply in first eight months of three-year programme

about 8 hours ago

Dominic Coyle

Minister for Finance Paschal Donohoe announced no change in the Help to Buy incentive for first-time buyers after a report by consultants Indecon found that abolishing the scheme now would create uncertainty and damage confidence in the housing market. Photograph: Alan Betson




Abolishing the Help to Buy scheme would create uncertainty and damage confidence in the housing market, a report on the scheme has found.

The report by consultants Indecon says getting rid of the incentive now “would likely impact on the levels of new builds”.

In the event, Minister for Finance Paschal Donohoe made no mention of the scheme in his budget speech, in which increasing housing supply was a major theme.

There had been pressure earlier in the budget process to close down the scheme. However, as budget day approached, it had been anticipated that the minister would announce plans instead to amend it.

Help to Buy, which was announced in the last budget and came into force in January, allows first-time purchasers of newly built homes or self-builds to claim relief of income tax paid up to five per cent of the price of the property and a cash maximum of €20,000. The properties concerned must be worth no more than €500,000.

Indecon says there were 2,970 applications under the scheme up to the end of August for sums of €42.65 million, including €5.7 million in relation to self builds.

  • Budget 2018 main points: everything you need to know

  • Budget 2018: Increases in housing, health and social welfare

  • Budget 2018: Have questions? Our expert team is here to answer to answer them

The figure includes some retrospective applications as first-time buyers were allowed to claim for relevant purchases dating back to July 2016.

The Government has budgeted for claims of €50 million a year over the three year term of the scheme.

The average claim, according to Indecon’s figures, was for €14,360. It said that 16.3 per cent of claims were for refunds of less than €10,000 and almost 54 per cent were for sums of less than €15,000.

The report takes issue with certain “deadweight” under the scheme relating to people whose incomes meant they had no need of such support. It also questions whether the loosening of mortgage lending rules by the Central Bank means that some borrowers have less need of the scheme.

Acknowledging that it is still early days for the incentive, it suggests that targeting the scheme “to provide greater support to assist individuals or couples with average incomes to fund deposits may be appropriate”.

A survey of building contractors undertaken by Indecon for the study found that 57 per cent of builders had not increased their prices as a result of the scheme.

Indecon warns that if applications for Help to buy accelerate, it could lead to inflationary pressure sin the sector “if there is not an adequate supply response”.

However, it found no evidence of an impact on the price of homes for first-time buyers as a result of the scheme to date.

It also noted that there appeared to be no “significant overall impact to date on the level of supply”, though it said the time lag involved in the sector meant this was not surprising.

With the allegations of sexual assault and sexual harassment — now with audio tape — swirling around Hollywood mogul Harvey Weinstein, politicians and actors may be wondering what they should do with money donated to their causes by Weinstein.

Do they give it back? Keep it? Or find something more meaningful to do with the funds? Some have already taken action: Chicago Mayor Rahm Emanuel donated $11,000 that Weinstein contributed to him to a nonprofit that counsels girls. Continue reading

Driven by the ideology of Brexit, the British government cannot deliver economic growth

about 9 hours ago

Chris Johns

Delegates carrying pro-Brexit bags at the annual Conservative Party conference. Photograph: Carl Court/Getty Images




Productivity growth is the only thing that matters for the economy. All of the current sound and fury in the stock market, arguments over the size and deployment of the fiscal space and whether or not capitalism has much of a future are secondary to productivity. All of these things, in the end, are determined by productivity growth.

It’s an arcane and difficult topic. “Output per worker disappoints” is, in the US and UK at least, a common headline that usually attracts little attention and, in any event, rarely makes the front page. Until recently anyway.

In Britain the independent Office for Budget Responsibility has again reduced its estimates for UK productivity growth. It’s a game it has had to play pretty much consistently since the great financial crisis, which means its been constantly revising down its estimates of trend economic growth. Less growth means less tax revenues.

This matters in a myriad of ways. In particular, it means that the UK chancellor will have much less room for manoeuvre to allocate cash for housing in particular and, more generally, to end the austerity that the British public detests.

The UK government’s attempts to outflank Jeremy Corbyn’s promises to renationalise key industries, abolish student fees and to end the housing crisis will founder for lack of money. Corbyn, it seems, will finance these commitments via extra borrowing and the printing press (“people’s QE”).

Generational divide

For all sorts of strange reasons, not least the ongoing disintegration of the Conservative Party, Corbyn’s retro-socialism is attracting students, anyone affected by high housing costs and those suffering a decade-long flatlining (or even decline) of real incomes. That’s pretty much everyone under 50: a generational divide in the UK that is becoming starker by the day.

Restoring or boosting productivity growth should be the UK government’s priority. Right now, probably the only priority.

It used to be, implicitly at least, in the DNA of Conservatives. They used to understand that the way to keep businesses happy and middle class aspirations alive is to boost the economy.

Theresa May speaks (sort of) about the restoring the “British dream”, the one about children being better off than their parents. This can only be achieved via productivity growth. Without such growth there is stagnation and no dream. It really is as simple as that.

The key problem for the Conservatives is that their DNA has become corrupted. They used to be able to claim (with partial justification) that they represented an ideology-free, safe pair of hands. “Trust us with the economy and your ambition” summarises many a previous Tory manifesto. Today the party is in the grip of zealots and is driven by a single issue an ideology: Brexit.

The end of one or two previous Tory governments often came because they became gripped by a single idea. Margaret Thatcher and the poll tax comes to mind: an issue that led to her demise but one that is wholly trivial compared to the ideological madness of Brexit.

Living standards

What’s Brexit got to do with disappointing productivity growth?

We know that many economies suffered recession-induced low productivity in the wake of the financial crisis. Recessions always do that. Economic slumps are calamitous for living standards in both obvious and subtle ways. Historically, economies have nearly always bounced back, driven by recovering productivity growth.

If the UK economy had, since the crisis, performed roughly as it has done in the past it should now be perhaps 10 per cent to 15 per cent bigger than we currently observe. That’s a massive gap: an awful lot of cash gone missing.

That kind of economic growth would have transformed the public finances and the Conservative Party’s fortunes. Arguably, David Cameron would not have lost the Brexit referendum: there would have been far fewer disgruntled British voters. Productivity growth really is everything.

What has gone wrong?

Simon Wren-Lewis, a leading Oxford professor, convincingly argues that it is entirely a self-inflicted wound. After the financial crisis came totally unnecessary fiscal austerity: that depressed everything, including the electorate and productivity growth.

But the effects of the crisis have long since faded, and George Osborne, austerity’s original author, has similarly departed the scene. His ideological mistake was, of course, his determination to shrink the size of the state, to cut government spending in the teeth of a severe recession. That he quietly abandoned austerity long before he was sacked is now largely forgotten.

Fiscal cutbacks

So, if the effects of the crisis and Osborne fiscal cutbacks are now firmly in the past, why is disappointing productivity growth still with us? There is a new suspect: Brexit.

The sheer incompetence of the current UK government has merely added to massive uncertainties of what a post-Brexit future looks like. Productivity-enhancing investments in R&D, capital equipment, buildings and software are all taking second place to decisions over whether or not to move activities overseas.

The Conservatives know they have to boost living standards if they are to stand any chance of survival. So they have to remove the single biggest barrier to productivity growth. That would be Brexit.

Scylla and Charybdis, rock and a hard place: pick your metaphor. It’s going to get even uglier.

Flat rate or progressive are the two options

Sat, Oct 7, 2017, 09:30
Updated: Sat, Oct 7, 2017, 11:55

Donal de Buitleir

At present there are three different taxes on income in Ireland: income tax, USC and PRSI.




The Minister for Finance Paschal Donohoe has said he intends to merge the universal social charge and PRSI into a single social insurance payment. This proposal, which might be implemented over a number of budgets, raises a number of issues. It also has the potential to shift part of the tax burden from the young to the old, which could give rise to controversy.

At present, there are three different taxes on income in Ireland: income tax, USC and PRSI. Income tax will yield about €16.5 billion, USC €3.7 billion and employee PRSI €2.7 billion in 2017. The combined effect of USC and PRSI is to add up to 15 percentage points to the marginal rate of tax.

At present, USC and employee PRSI are applied to different tax bases and have different rate structures and thresholds. For example USC does not apply to deposit interest while PRSI does not apply to occupational pensions or income accruing to people over State pension age (currently 66). Neither USC nor PRSI apply to welfare payments or capital gains.

Key principles

In approaching this issue, it is useful to set out some key principles.

First, the objective should be to levy the unified charge on as broad a base as possible. All the evidence suggests that taxes with broad bases and low rates are preferable to taxes with narrower bases and necessarily higher rates.

Secondly, after taking account of different circumstances, people with the same incomes should pay the same amount of tax. For example, a pension of €30,000 derived from the public sector pension scheme yields nearly four times as much USC as a private sector pension of the same amount derived from a combination of the State Contributory Pension and a private scheme.

Thirdly, major discontinuities in the rate structure should be avoided. For example, an increase of €1 in income can lead to an additional USC liability of about €60 when the threshold of €12,012 is reached.

The issues

A number of issues arise:

How should the tax base be as broad as possible?

What threshold should be used ?

How should self-employed be treated ?

How should welfare payments such as dependency allowances and child benefit be treated ?

Should the new unified tax be on a cumulative or non-cumulative basis ?

What deductions/exemptions should be allowed for PRSI purposes ?

Should the new unified tax have a progressive rate structure ?

Broadening the tax base

Since 2009 there have been a number of extensions to the PRSI base. These include the abolition of the employee ceiling for charging PRSI, the abolition of relief from PRSI previously applied to employee pension contributions, the abolition of the employee PRSI-free allowance as well as the extension of the PRSI base to unearned income such as rental income, investment income, dividends and interest on deposits and savings.

There is scope to broaden the base further by extending PRSI liability to

“ Income arising to persons of State Pension age (now 66). Such income is currently liable to USC except for welfare payments and deposit interest

“ Capital gains and income subject to exit tax .

The thresholds
At present USC is payable on all income once that income exceeds €12,012. Employees pay PRSI in any week once income exceeds €352. Self-employed are liable for PRSI once income exceeds €5,000 per annum (minimum charge €500). Under a unified tax these thresholds should be aligned.

The treatment of self-employed individuals should be aligned with that of employees in so far as the threshold for liability should be the same. In addition the higher rate of USC imposed on self-employed persons with incomes over €100,000 should be the same as that imposed on others with the same income. Separate consideration needs to be given to the conditions which both self-employed and employed people need to satisfy in order to qualify for welfare benefits.

Welfare payments

At present, all welfare payments are exempt from both USC and PRSI though all are charged to income tax except child benefit.

The exemption of social welfare pensions from USC costs about €350 million and it would seem fairer to treat this income for USC and PRSI in the same way as it is treated for income tax.

Other exemptions

Where the qualifying conditions for rent-a-room relief are satisfied, the income in respect of which the relief applies is exempt from PRSI and USC. Where the qualifying conditions for rent-a-room relief are not satisfied, the income is subject to PRSI and USC in the normal manner. It would seem simpler to continue these exemptions.

Cumulative or non-cumulative

USC and income tax are charged on a cumulative basis in that liability is based on the total income received during a calendar year. On the other hand liability to employee PRSI is determined on weekly or monthly basis. Self-employed individuals pay PRSI on an annual basis.

Provided any administrative difficulties can be overcome, it would seem fairer if all taxes on income were paid on a cumulative basis.

Income distribution effects

Extensions of the PRSI base have the potential to raise considerable sums at existing rates of PRSI and, as such, would have significant income distribution effects. In particular, there would be a rebalancing of the tax burden from the young to the old. A change to a system where tax liability is related to income where those with the same income pay the same tax inevitably increases tax on older people who enjoy relatively favourable treatment under the current regime.

Rate structure

At present, employee PRSI is charged at a flat rate once income exceeds a particular threshold while USC has a progressive rate structure. It would be very difficult to have a progressive PRSI rate structure under the present non-cumulative system as this would disadvantage those with variable earnings. The question arises whether or not the new unified PRSI should be charged at a progressive or flat rate.

A flat rate system would be simpler. Given that we already have a progressive rate structure for income tax it may be sufficient to have one element of the system with a progressive structure.

Dr Donal de Buitléir is director of