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Budget 2021 main points: Up to €5,000 a week for Covid-hit firms, hospitality VAT rate cut

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Hospitality sector –

A new scheme for businesses which closed because of Covid-19 will provide a maximum of €5,000 per week. The Government will make a payment based on 2019 average weekly turnover. The scheme is effective from today until the end of March next year, with the first payments in mid-November.

The scheme will operate when Level 3 restrictions are in place and cease when they are lifted. If restrictions are extended a subsequent claim can be made. Businesses must demonstrate turnover has been severely impacted by up to 80 per cent to qualify.

A reduced VAT rate for the hospitality sector from 13.5 per cent to 9 per cent will be introduced with effect from November 1st until December 2021.

To support small and medium sized businesses, debt warehousing provisions will be extended for a period of a year with no interest. A €30 million fund will be administered through the Ireland Strategic Investment Fund.

A new variant of the Employment Wage Subsidy Scheme will kick in after the current scheme ends next spring.

The cost of a packet of cigarettes will rise to €14, with excise duty going up by 50 cents.

On tourism, Minister for Public Expenditure and Reform Michael McGrath also announced an additional €55 million for a “tourism business support scheme and €5 million for tourism product development.”

Tax – 

On corporation tax, Mr Donohoe said €7.5 billion has been generated this year in corporation tax receipts. The 12.5 per cent rate remains in place. Mr Donohoe warned changes to international tax framework could mean changes are on the horizon for the corporate tax landscape.

Work will commence on the development of a tax credit scheme for the digital gaming sector. There will be no broad changes to income tax credits or bands as “resources must be focused on saving jobs and on protecting our health” Mr Donohoe said. There will be some specific changes, however.

In order to ensure salary of full-time worker on minimum wage will remain outside the top rate of USC, the ceiling of the second USC rate band will be increased to €20,484 to €20,687, a move which will give a “modest benefit” to workers whose income is above that amount.

The weekly threshold for the higher rate of employers PRSI will go from €394 to €398 to ensure there is no incentive to reduce working hours for a full-time minimum wage worker.

For the self-employed, Mr Donohoe said he would implement a Programme for Government commitment to equalise the earned income credit with the PAYE credit by raising it by €150 to €1,650.

There will be increase in dependent relative tax credit from €70 to €245.

On climate change, carbon tax will be increased by €7.50 from €26 to €33.50 per tonne of CO2. Legislation will be provided to increase the tax each year by €7.50 up to 2029 and by €6.50 in 2030 to achieve €100 per tonne.

In terms of changes to taxing and cars, a modified new structure of rates and bands will be put in place with lower VRT rates for cars with lower emissions. The nitrogen oxide surcharge bands will also be changed so that higher emitting vehicles pay more.

Brexit – 

This is the worst global pandemic in a century, Mr Donohoe said, calling Covid-19 “an invisible enemy”.  In that vein, the Government plans to face this “daunting” threat with a total budgetary package of almost €18 billion. Some €3.4 billion of this will be for a recovery fund. Capital expenditure will increase to €10 billion.

Two major assumptions underpin the budget: that there will be no trade deal between the EU and the UK, and secondly that Covid 19 will continue to exist next year in the absence of a vaccine.

Mr McGrath said the Government will be allocating an additional €3.8 billion in core current expenditure across Departments in 2021. Some €2.1 billion will be held in contingency and will be made available as needed to respond to the challenges posed by Covid-19.

Some €340 million of voted expenditure will be spent on Brexit supports in 2021. This includes an additional allocation for compliance expenditure in 2021. This will apply for work at ports and airports and provides for an additional 500 staff bringing the total provision for approximately 1,500 for operationalising checks ahead of January 1st.

*A further €600 million will be allocated to the capital budget in addition to a planned increase of €1 billion for 2021 under the National Development Plan. Taking into account capital expenditure related to Brexit and Covid measures, this will bring the total Exchequer investment in capital to over €10 billion for the first time, Mr McGrath said.

The Department of Finance is forecasting a loss of 320,000 jobs in 2020. Some 155,000 will be recovered next year.  Budget 2021 forecasts a deficit of €20.5 billion but there is a “high level of uncertainty” about future forecasts.

Mr Donohoe told TDs at the Convention Centre in Dublin that he plans to fully utilise the Rainy Day Fund of €1.5 billion.

Education –

In Higher Education, over €270 million will be spent to support up to 20 higher education building projects. Some 145 school building projects will be delivered, Mr McGrath said. There will be funding of €132 million for the National Broadband Plan.

Minister for Education Norma Foley is to bring down pupil teacher ratios to 25:1 with the creation of 600 new positions.

There will be a new €50 million fund to provide a once-off financial assistance to full-time third-level students. The measure is likely to be worth €250 to each student.

There will also be a €120 million package for reskilling and retraining including an extension of the apprenticeship scheme.

The Minister for Higher Education Simon Harris has also secured €30 million for research including for all-island research.

There will also be changes to post-grad supports and a minor capital works plan for third-level colleges.

Health –

On health, Mr McGrath confirmed an extra €4 billion for the health service. This will provide capacity for 100,000 tests a week, supply PPE where needed and continue into 2021 all of the necessary Covid-19 measures which have been put in place since March.

There will also be an additional 1,146 acute beds; an increase in permanent adult critical care beds from 255 pre-Covid to 321 by end 2021; 1,250 community beds in 2021 which includes over 600 new rehabilitation beds; five million additional homecare hours following on from the 19 million provided in 2020. 

Some €5 million will be dedicated to the development of community-based dementia services and supports.

€50 million is being made available for new drugs and €25 million for Healthy Ireland and the National Drugs Strategy.

The Government also plans to address waiting lists with approximately 100,000 additional inpatient and day care procedures through investment in public hospitals and utilisation of spare capacity in Private Hospitals and via the National Treatment Purchase Fund.

Some €38 million will be out aside and made available to implement new measures under the Sharing the Vision plan.

Included in the new health budget will be about €1.3 billion to pay for testing and tracing for Covid- 19 and to meet the cost of procuring personal protective equipment.

Approximately €100 million is being provided for new disability measures next year. Mr McGrath said there will be up to 16,000 additional posts across the health sector.

Housing –

On housing, the Government is allocating €5.2 billion – an increase of €773 million on 2020.  An extra €500 million will be directed towards capital expenditure and will facilitate the construction of 9,500 new social housing units in 2021. 

A total of 12,750 units will be added to the social housing stock including leased units. There will also be a total of €65 million available to fund deep retrofitting of social housing stock.

Spending of €2.4 billion in 2021 will support an additional 15,000 Housing Assistance Payment tenancies and 800 Rental Accommodation Scheme tenancies. An additional €22 million will be provided to support homelessness programmes including additional beds and the introduction of a Cold Weather initiative.

Mr McGrath said he is allocating an affordability package of €110 million for 2021 to provide for affordable housing and cost rental schemes. “Both the Serviced Sites Fund and the Local Infrastructure Housing Activation Fund will progress the delivery of over 2,000 affordable homes on both private and public land next year,” he pledged.

The Help To Buy scheme will be extended at its current level, which allows up to €30,000 in tax clawbacks on a new home. There is also likely to be a pot of €500 million for new social housing projects.

Minister for Housing Darragh O’Brien’s affordability programme will cost €468 million. It will include €110 million to be split between affordable purchase measures, and scheduled delivery of cost rental in 2021.

The affordable purchase measures will be constituted as a shared equity scheme and will account for €75 million.

The details of this are still being worked out, and will be announced in the coming weeks.

However, it is understood that the Department is in dialouge with the pillar banks to put in matching funding, bringing the total to €150 million. This will also need State aid approval.

Some €35 million is being put aside for cost rental. The remaining €358 million is being split between existing schemes such as the serviced sites fund, the local infrastructure housing activation fund, rebuilding Ireland home loans and the Land Development Agency.

Christmas bonus –

There will be €50 million in once-off funding for extra supports for college students which could see students receive around €250 each. On Welfare, the Government has announced that it is increasing the Living Alone Allowance by €5 to €19.

The Fuel Allowance will be increased €3.50 per week to €28 to compensate those on lower incomes for the additional energy costs they are likely to incur due to carbon tax changes.

The Qualified Child Payment will be increased by a further €5 for over-12s and €2 for under-12s.

The Carer’s Support Grant will be increased by €150 to €1,850 per year. The Parent’s Benefit will be extended  by a further three weeks.

For self-employed recipients of the Pandemic Unemployment Payment (PUP), an earnings disregard will be introduced to allow them to take up intermittent work without losing their benefit. The PUP has been extended, although the top rate of €350 is not being restored.

The planned increase in the pension age to 67 on January 1st 2021 will not proceed. A Pensions Commission will be established. Those who have been on the PUP for four months of more will receive the Christmas Bonus.

To support farmers and rural communities, €1.8 billion will be allocated to the Department of Agriculture, Food and the Marine in 2021 which is an increase of €179 million on the 2020 figure.

Justice –

In Justice, an extra €7.5 million is being provided for the Garda fleet. To support An Garda Síochána in 2021 an additional €147 million will be allocated to the Justice sector, an increase of almost 6 per cent.

Over €27 million will go towards Covid-19 supports with the balance of additional funds providing up to 620 new Garda recruits to add to the predicted end 2020 force number of 14,500.

There will also be recruitment in the region of 500 staff for administrative roles to facilitate the continued redeployment of trained gardaí to frontline policing and funding for the inquest into the Stardust tragedy.

There will also be funding for the implementation of protections for vulnerable witnesses in sexual offence cases on foot of the O’Malley Review. 

Children –

The Department of Children will receive an additional allocation of €120 million which provides: an additional €61 million for Tusla, €25 million for International Protection Seekers Accommodation and €5 million for Youth Services and Organisations.

There will be a €638 million investment in early years for both universal and targeted subsidies under the National Childcare Scheme in 2021. 

There will be some welfare increases that will benefit parents too. An increase for a Qualified Child Payment will be part of Budget2021 – it will be raised by €5 per week for children over 12 and €2 per week for those under 12.

Expenditure measures – 

Mr McGrath has also announced €500 million in additional expenditure measures to  support  businesses  and  communities. 

There will be a further  commercial  rates  waiver  for  the  final  quarter  of  this year at a cost of €300 million.  This is to provide significant relief for businesses, and brings to €900 million the total amount of local authority rates waived in 2020.

In terms of capital funding, the Government announced a €10bn fund for critical projects. These include construction on a range of major road projects such as the N56 in Donegal, the N4 in Sligo, the N5 in Mayo, and the N22 and Dunkettle Interchange in Cork.

The Government will purchase 41 additional InterCity Railcar carriages and sign of contracts for “the largest ever fleet expansion with potential for up to 600 electric carriages as part of DART+.” 

*The Government has also announced a “new multi-annual capital funding for the Shared Island Initiative” of €500 million over 5 years. Mr McGrath said this would “foster new investment and development opportunities on a North / South basis.”

The Land Development Agency will have over €1.2 billion of funding available to it to progress a range of projects already underway to deliver nearly 9,000 affordable housing and cost rental units in the coming years. €210 million is being made available for lending under the Rebuilding Ireland Home Loan Scheme. There will also be an additional €90 million investment in critical water infrastructure projects.

*Funding for the Department of Higher Education will see 10,000 upskilling and reskilling opportunities put in place through SOLAS and Skillnet Ireland. Some 1,500 of these places will be for retrofitting courses and 4,000 new apprentices will be provided under the Apprenticeship Incentivisation Scheme.

For arts, cultural and sporting activities, the Government is providing €50 million in a Live Entertainment Supports package. Arts Council funding will increase to €130 million, which is a €50 million increase on last year’s allocation. 

There will also be an increase of €36 million in funding for Sport Ireland and €7 million for large-scale sports infrastructure as well as €2 million for major sporting events.

There will also be an additional €3.5 million for Teilifís na Gaeilge next year.

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