Budget 2022
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Budget 2022: The Highs & Lows Neil McDonnell, Chief Executive, ISME We welcomed one of the most-leaked budgets ever on 12th October. It’s hard to believe a Minister was dismissed some years ago for leaking budget details; this year politicians were apologising to journalists for having no more information to leak. As in previous years, we had a significant number of “asks” on the table for the budget. It wasn’t all bad, so let’s look at what’s welcome, what’s understandable, and what’s yet to be done.
WELCOME The phased withdrawal of the EWSS; partial maintenance of the commercial rates waiver; the additional capital expenditure on infrastructure and housing; the (limited) measures for start-ups and entrepreneurs; and additional measures for green business and the digital economy are all welcome.
T H E B U S I N E S S O F I R I S H S M Es
The widening of the standard rate tax band by €1,500, and the €50 addition to the earned income credit are as welcome as they are long overdue. Our marginal rate entry point at €36,800 is still €4,133 below the current average industrial wage. The childcare package announced is similarly longoverdue. However, we are concerned at the “fees freeze” condition in the Department’s proposal, which is worrying in a sector where payments have already been frozen for many years. The Federation of Early Childhood Providers wants to pay workers the higher “Mercer” scale, and will also have to pay yearly adjustments to their staff. Government proposals must allow the indexation to achieve this. Lastly, we welcome the fact, as set out in the Fiscal Advisory Council Flash Report on the budget, that Government did not use the additional tax revenues identified this year to finance additional expenditure. Ireland is already a highly indebted country, and this would have made our problems worse.
UNDERSTANDABLE There was a significant focus in the budget on managing cost-of-living issues for the low paid, particularly now as inflation is back.
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September’s inflation level was 3.8% annualised, a level we have not seen for years. And inflation in energy costs is even higher. Therefore, it was no surprise that old-age pensions and fuel allowances were increased. We understand why Government won’t embark on major tax reform with a Commission on Taxation and Welfare in the pipeline. But in truth we don’t need a Commission to tell us that significant reform is required. In our Jobs Kill Zone Report, we set out four simple, vital reforms that Government could make to encourage the low-paid to seek better pay, promotion, and upskilling: 1. Fix PRSI to eliminate the high marginal rate on additional income in the income Transition Zone from €18k to €22k. 2. Set the basic rate for qualifying for the medical card at more than 30% above the comparable Jobseeker’s assistance rate. 3. Replacing the child element in Jobseeker’s payments and all other welfare schemes by increasing Child Benefit, phasing out Working Family Benefit, and at the same time making the Child Benefit taxable 4. Significantly increasing the income thresholds for access to social housing. Reform or remove the link between income and local authority rent. Increasing what is already the second-highest National Minimum Wage in Europe to €10.50 will do nothing materially useful for the low paid. Government needs to focus on the cost of living for workers, and must stop taking actions that increase the cost of rent or property. We are losing our international competitiveness.
YET TO BE DONE Budget 2022 included spending measures that permanently increase our State spending by 5% per annum. This has to be paid for. In order to do so, ISME proposed a “Solidarity Tax” for PAYE workers earning over €100,000, by extending the 3% USC surcharge levied on the self-employed to them (or introducing a 43% marginal tax rate for PAYE workers earning over €100,000). This didn’t happen.
