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'Family friendly' Budget predicted with general election on horizon

Published 12/10/2015

Michael Noonan (right) and Brendan Howlin are poised to unveil the Budget
Michael Noonan (right) and Brendan Howlin are poised to unveil the Budget

Ireland's hard-pressed middle income earners are set to reap modest rewards when the country's budget is announced tomorrow.

Only weeks or months from the next general election the electorate is in line for a softening-up with sources in the coalition Government billing the limited restoration to pay packets as "family friendly".

The 600 million euro tax reform package will include cuts to the deeply unpopular and burdensome income tax levy, the Universal Social Charge (USC).

It is one of the central planks of Budget 2016.

The USC rates will be altered - the top cut by 1.5% bringing it from 7% to 5.5%; the middle from 3.5% to 3%; and the lower from 1.5% to 1%.

The bands will also be changed slightly as the lowest paid will pay the levy only after earning about 13,000 euro as opposed to the 12,012 euro as it currently stands.

This is also being done to help those on the minimum wage which is being increased by 50 cents to 9.15 euro (£6.35).

On the old reliables, sources said there would be no increases to excise on wine, beer or spirits but cigarettes are likely to be hiked as the number of smokers in Ireland this year fell below one in five for the first time.

Finance Minister Michael Noonan takes to his feet in the Dail parliament at 2.15pm followed by a second speech by his colleague in finance, Minister for Public Expenditure and Reform Brendan Howlin at about 3pm, to outline how the Government will spend its limited resources .

Other major initiatives on the tax front include new credits for the self-employed which are expected to be worth about 500 euro a year and which will be built on over the next three years.

Ultimately the plan is to create a tax credit worth about 1,600 euro for those who want to be their own boss.

A new tax rate for the so-called "knowledge box economy" is also being devised by Mr Noonan.

The Government began initiatives on that front over the last year and they are to be cemented with a 6.5% business tax rate for companies that use Ireland as their base for R&D, spend a significant amount of money on research and register patents for newly created products in the Republic.

Entrepreneurs and start-up enterprises are to be enticed with a reduced capital gains tax rate while there has also been pressure on the Government to move on inheritance taxes.

On the family front, child benefit will increase by at least five euro, as promised.

Free pre-school childcare is also to expanded and an announcement is expected on paternity leave to bring Ireland into line with the UK and other European countries.

Other welfare payments should also improve such as the Christmas bonus for the unemployed and the restoration of some of the carer grant.

These limited give-aways follow years of swingeing austerity and will widely be seen as the Fine Gael-Labour coalition Government's attempts to get the backing of families and middle Ireland for the next election.

Taoiseach Enda Kenny gave his clearest indication at the weekend that he remains focused on going to the polls next spring.

The light relief will also be seen as way to build on the modest growth in consumer spending which many economists believe is the logical next step in Ireland's economic revival.

The country is already enjoying the fastest growth rates in the EU five years after going bankrupt after the property market collapsed, the banks were saved in a 64 billion euro (£47 billion) bailout and the International Monetary Fund and the European Commission oversaw fiscal affairs.

On the jobs front hundreds of new positions are expected to be cleared for teaching and the Garda, a timely investment in the wake of the murder of an officer at the weekend.

There is also expected to be more detail on a housing fund as the homelessness crisis has deepened over the last year.

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