How have five coalition budgets impacted your pocket?
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The Government’s fifth and final budget will include USC reductions, once-off payments, and increases for pensioners.
Is it a last chance to convince voters that this coalition has delivered for the people?
Budget 2025 is a far cry from the Coalition’s first budget in October 2020, when the Government was still feeling the aftershocks of Brexit and the country was right in the middle of a global pandemic.
Back in 2020, workers, parents, and pensioners saw very little change as the Government placed an emphasis on business, with a €3.4bn recovery fund and a Vat reduction for the hospitality sector.
Now, with the cost-of-living crisis very much impacting families and households, the focus of this final pre-election budget will be on putting money back into people’s pockets.
But how well have individuals, businesses, and families benefitted over five coalition budgets?
Covid placed an unprecedented strain on businesses across the country and resulted in the Government rolling out a number of temporary measures and subsidies, mainly in the first two budgets of its term.
A move on Vat, reduced from 13.5% to 9% in the first budget, provided relief to hotels and restaurants that had been severely impacted by lockdowns and travel restrictions.
However, the Government reverted to the higher rate of Vat last September.
Those in the sector have pointed to hundreds of job losses and business closures and ahead of this year’s budget had been calling for a reintroduction of the lower 9% rate for food services.
While the Coalition provided substantial financial assistance during the pandemic to help them through covid restrictions, and there have been one-off supports to help with massive spikes in energy bills, many in business, especially the hospitality sector, feel this hasn’t been followed up with longer-term or permanent solutions.
The first budget of this Coalition saw no increase in pensions or social welfare rates, but the Government would argue that it has more than made up for this with significant increases in subsequent years.
In 2020, the weekly non-contributory State pension stood at €237. This was raised to €242 in 2022 and reached €266 per week after last October’s announcement.
In the lead-up to this week’s budget, Social Protection Minister Heather Humphreys had been arguing for as much as €15 more on pensions as part of a range of increases.
However, it is now expected that pensioners will receive a boost of around €12 per week.
It means those who have retired are getting around €40 more each week from the State than when the Coalition entered Government.
Fuel allowance stood at €24.50 at the start of the Government’s term in office and is now at €33. The number of people eligible has been extended and it is likely that the Government will again expand the support to those over the age of 66.
Currently, anyone over the age of 70 can receive the weekly fuel allowance, provided they do not have an income of more than €512 a week for a single person, or €1,024 for a couple.
The cost of cigarettes has increased every year under this Government.
In total, across the past four budgets, a packet of 20 cigarettes has gone up by €2.25, with another hike expected this week.
On top of this, Finance Minister Jack Chambers has indicated that he will use this final budget to introduce a tax on vapes for the first time.
The carbon tax, which is applied to carbon-emitting fuels such as coal, peat, and oil, has also increased.
Energy suppliers are obliged to add the tax onto bills, and the levy currently works out at just over 1 cent (including Vat) for every kWh of gas used. Considering the average Irish household uses 11,000 kWh of gas every year, the carbon tax adds around €122 in total to the annual natural gas bill.
It is estimated that carbon tax also adds €141 per fill based on a 900-litre tank of home heating oil.
At the moment, the carbon tax adds around 15c to every litre of petrol and diesel, which is on top of Vat and excise duty.
However, the Government is always keen to point out that funds collected through the tax are pumped into green initiatives and other climate-related policies such as home retrofits and addressing energy poverty.
While parents have benefitted from a reduction of up to 50% in childcare costs over the last two budgets, tomorrow’s package will not include another subvention of fees.
Instead, Children’s Minister Roderic O’Gorman has stressed the need to bolster core funding to childcare providers and invest further in Deis and disability services.
Parents have benefitted from bonus child benefit payments as part of a raft of once-off cost-of-living payments in recent years and another double payment is on the cards ahead of Christmas.
However, the monthly rate has remained stuck at €140 across the lifetime of this Government.
Ministers have cited the high cost associated with even a marginal uplift as a reason for not touching the payment.
Families have, however, benefitted from other measures, including the free school book scheme that is expected to be extended to Leaving Certificate level as part of tomorrow’s announcement. Free hot school meals have also been expanded to more schools across the country.
Widening the tax bands has been a key priority of this Government.
When the Coalition entered power the threshold to enter the higher rate of tax stood at €35,300. This has increased incrementally and workers now do not start paying the 40% tax rate until they earn €42,000.
It is expected that Mr Chambers will again increase this threshold by €2,000 tomorrow, bringing the cut-off point up to €44,000.
One of the eye-catching announcements due as part of Budget 2025 is a move to reduce the 4% USC rate down to 3% and follows on from a reduction announced last October, again bringing down the amount of tax middle-income workers pay.
There have also been positive adjustments to tax credits.
The Government has been eager to state that average-salary workers will be €1,000 better off when tax changes and cost-of-living payments due to be announced tomorrow are considered.
However, others argue that inflation has eaten into many of the budget gains received in recent years.
To help with the cost of living, it is expected that this year there will be a pot of between €1.5bn and €1.6bn to give out on bonus social welfare payments, energy credits, a double child benefit payment, and other temporary supports.
However, many economists and think-tanks have warned that the Government is adding more pressure to an overheating economy with a budget spending splurge.
Irish Fiscal Advisory Council chairman Seamus Coffey recently warned that the extra money announced through tax adjustments and bonus payments will be effectively cancelled out by rising prices.
“The Government might put money back in people’s pockets, but by raising prices these indirect costs take out of their pockets in a lasting way,” he told the Budgetary Oversight Committee.
The estimated average weekly expenditure in 2022-2023 for all households was €1,007.47 according to the CSO, up from €837.47 in the 2015-2016 period when its previous household budget survey was carried out.
On average, households spent €63 on fuel and light each week, €161 on food, and €185 on housing. These amounts were all up on the 2015-2016 survey when the average weekly spend on fuel and light was €39, households spent €123 on groceries, and the cost of housing each week averaged out at €164.
Separate CSO data shows that between 2019 — the year before this coalition entered power — and 2023, the cost of energy rose by 58%, with energy prices more than doubling for many people over 2021 and 2022.
Although inflation for groceries has slowed, the average price of food and other household items jumped by 10% in both 2022 and 2023.
Barnardos has warned that a family who spent €80 a week on groceries in 2021 would have to find an additional €1,000 in 2024 to afford the same food.
The Parliamentary Budget Office, based within the Houses of the Oireachtas, has also said the Government’s failure to adhere to its own spending rules could cause inflation to be almost 2% higher than it would have been if it had followed the rules. It could be argued that while the Government is giving with one hand, it is fueling inflation, which is taking away with the other hand.