Budget 2012 presented the new Government with a real challenge as we had to reduce our debt to GDP ratio to 8.6% . None of the decisions have been easy. No Government wants to be cutting spending and increasing taxes but we simply don’t have a choice as our State is spending €18 billion more than we are taking in.
We also depend on our International Partners the EU/IMF/ECB for funding so these targets must be met in order to ensure we can continue to pay Nurses, Teachers, Firemen, Council Workers etc.
Protecting the most vulnerable in society is a cornerstone of this budget as well as tackling those in negative equity who are struggling with mortgage repayments.
I welcome the commitment not to introduce full college fees and to ensure class sizes remained as they were. I along with many Government colleagues made our feelings clear on the unacceptability of proposed disability allowance cuts and am glad that these proposed cuts are now paused and won’t form part of the Social Welfare Bill. This is real democracy at work.
Some of the headline announcements in Budget 2012 include:
– No increase to income tax
– Exemption from the Universal Social Charge for another 330,000 persons, with the threshold rising from earnings of €4004 to 10,036.
-Mortgage interest relief for first time buyers who bought at the height of the boom, between 2004 and 2008 rising to 30%.
-Vat rate of 9% on tourism and hospitality extended to open farms
– Stamp duty on commercial transfers reduced from 6% to 2% which will also benefit farmland
– Corporate tax rate to remain unchanged
– Relief for existing and new farmers under the stock relief proposals
I know that this budget creates hardship for some and make some burdens heavier. With savings in the order of €3.8 billion to be made, it is simply not possible for every sector of society to remain unaffected. Anyone who tells you they can take this figure out of the economy without any hardship is engaged in fairy tale economics.
Some would have us reneging on our debt commitments in relation to our banks, but this is simply not acceptable to the ECB, who are providing use with 150 billion to fund this state.
Were we to unilaterally renege on our obligations and commitments, as some would have us do, then we would soon end up like Greece, a basket case economy, riven by political turmoil and with huge public and private sector job losses forced on us. Ireland is not Greece.
There is a sense of fairness in the Budget with 330,000 lower paid, part time and seasonal workers set to receive relief from the Universal Social Charge . The exemption will be raised from just over €4,004 to 10,036 .
We know that cuts alone will not get this economy working again, and therefore Government has followed through in prioritising job creation. I welcome the announcement of a labour Market Activation Fund to deliver 6,500 places for long term unemployed as I worked hard to advocate such a position within Fine Gael while in opposition.
The news that mortgage interest relief will be increased considerably for those who bought homes at the height of the boom, between 2004 and 2008, will be of benefit to those in mortgage trouble. We are raising this relief to 30%, and again this is an issue Fine Gael campaigned on during the course of the General Election and fulfils our commitment in the Programme for Government.
Two areas which will be of direct benefit to County Clare are the commitments in relation to tourism and agriculture. Our agri food sector is one of our strongest performing sectors. I welcome the application of the reduced VAT rate to include open farms and believe there are opportunities here for Clare farmers to benefit, given our strong tourist product.
The unchanged 9% VAT rate for the tourism sector will allow us maintain competitiveness with other European destinations, and this, coupled with moves to examine seriously the governance model at Shannon Airport will assist this area enormously.
On the agri food side of things, I welcome the reduction in commercial stamp duty to 2%, which will also apply to farms. This will make it more cost effective for farm holdings to be passed down between generations at a rate of 1%, and also encourage more young farmers back onto the land. On this front also, we have looked at the area of farm partnership and an enhanced 50% stock relief for all registered farm partnerships will apply, with 100% relief for certain young farmers. These reliefs will be made available until December 2015.
Overall, given the circumstances, this is a budget which I feel gets the balance right between essential cuts and assisting vital growth in the economy. It is a first step, but a significant first step, in getting Ireland back to work.