Budget 2021 still hasn't addressed unfairness of universal benefits

Personal Finance columnist Jill Kerby gave her views on Budget 2021, albeit post the official announcement last Tuesday, but her views still stand...

So, how was Budget 2021 for you? An early deadline means that I can only speculate and guess about what giveaways – and takeaways - the Minister for Finance has revealed for ordinary taxpayers.

This Budget, we have been told for weeks, was going to concentrate on keeping businesses afloat and assisting the hundreds of thousands of people who are still unemployed. Anyone expecting a €5 hike in their pension or social welfare payment, or a cut in their income tax, USC rate or PRSI contribution, should probably have looked away weeks ago.

However, that doesn’t mean that government ministers haven’t done their best to remind their favourite electoral cohort – pensioners – that they were not forgotten. Sort of.

The beleaguered health minister Stephen Donnelly couldn’t suppress his delight last week when he jubilantly announced that he had secured funding for a promise that had already made in last year’s budget to extend the medical card income limit for over 70s from next month.

The new gross income limit will be €550 a week, up from €500 (or €1,050 a week for couples.) This means that another c57,000 over-70s, who earn up to €28,600 and €54,600 per annum respectively will not have to pay for or make any contribution towards their public health care.

The cost of extending more free medical cards to pensioners last year was already reckoned to be about €30 million when it was announced in October 2019. This is now a drop in the ocean of the extra €640 million of emergency HSE funding that has been approved just for the coming winter. So vast are the pandemic medical costs to the state that many extra millions will be added to the €18.3 billion that was budgeted for 2020. (See www.whereyourmoneygoes.gov.ie for a breakdown for every government department in 2021.)

The soaring deficit spending makes me wonder if there is any point in even wondering if a country with a c38% youth unemployment rate, a 16% collapse in domestic GDP, a national debt nearly five times what it was at the start of 2008 and no immigration circuit breaker, should still be providing any universal, untaxed health and social welfare benefits?

Will a single Dáil deputy during the upcoming post-Budget debate ask why pensioners, who can afford high-cost private health insurance and own their own cars, are not taxed on the value of their universal GP or medical card or free bus pass, the TV licence or fuel allowances when these benefits are not automatically available to terminal cancer patients? Or that wealthy parents – let’s pitch their income at a generous €200,000 a year, or nearly four times the average wage – should also be liable to income tax on their annual, per child benefit of €1,680?

The government has promised us that there would be no increase in personal income tax in the budget, but has it accurately read the national mood?

According to a survey conducted by Taxback.com, 60% of Irish taxpayers would favour cuts to public spending over increased taxes if faced with the prospect of a tough Budget.

The survey asked over 2,100 taxpayers nationwide which measures they would support in Budget 2021. One in five (20%) said they thought social welfare benefits should be cut, though they didn’t say which ones. Nearly half (46%) said there should be a wealth tax on people with higher (undisclosed) earnings.

Only one per cent said there should be a rise in the local property tax (property being the single largest source of household wealth in Ireland) or motor tax (two per cent) or the two other big sources of wealth - private pensions (three per cent), or private savings (five per cent).

If government leaks leading up to the Budget were accurate, existing social welfare payments may be staying where they are for the next year, but the number of people claiming them will certainly rise. Anyone on a PUP payment worth between €203 and the maximum €300, for example, already qualifies for the GP-only card, which has an earnings ceiling of €304, but not a full medical card which has an earning ceiling of €184.

Income ceilings for GP and medical cards are lower for single people who live with family and are slightly higher for single people, who live alone but are age d66 and over. See all the rates and exemptions at www.citizensinformation.ie

It may be old news that Minister Donnelly has rehashed but, for those older people genuinely struggling to make ends meet on a state pension, they will certainly benefit from the 50 cent reduction of their prescription costs. Every household that participates in the Drugs Payment Scheme will save €120 a year as a result of that threshold dropping by €10 to €114 a month.

That’s better than nothing, but missing yet another opportunity to use this latest crisis to tackle the unfairness of untaxed, universal benefits may come back to haunt them.

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