The Minister for Finance Mr McCreevy has made limited changes to direct and indirect taxation in today's Budget and announced increases in welfare payments above the expected rate of inflation in 2004.
But the main surprise of Budget 2004 is the extent of the Government's decentralisation plan which see up to 12,000 civil servants leaving Dublin.
In a major policy announcement, eight Government department and the Office of Public Works will be moved out of Dublin with the respective Minister retaining a small secretariat in Dublin. Up to 53 towns will accommodate the departments.
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| Mr McCreevy delivering his speech
in the Dail today |
The only change made to income tax was an increase in the basic PAYE employee tax credit by €240 a month to maintain the Government's target of keeping 90 per cent of minimum wage earners out of the tax net. Mr McCreevy made no adjustment to the upper band of €28,000 where people are liable to the top 42 per cent rate, thereby raising taxes by stealth as the rate of inflation is expected to run at 2.5 per cent next year. Mr McCreevy did not remove the PRSI ceiling as some had expected, but increased the ceiling from €40,420 to €42,160.
With one eye on next year's national wage negotiations, the Minister made few changes to indirect taxes in an attempt to tame inflation. Cigarettes were targeted with a 20 cent rise (25 cent) on a packet of 20 while the price of petrol and diesel will rise by five cent from midnight tonight. VAT on beer and spirits remains unchanged.
Tax relief on the film industry has been extended to 2008 and the Business Expansion Scheme (BES) to 2006. The amounts allowed to be raised under the BES has been raised from €750,000 to €1 million.
The State pension has been increased by €10 to €167.30 and the non contributory pension has been increased to €154.
Child benefit will rise by €6 for first and second children and by €8 for third and subsequent children. All other social welfare payments will increase by €10 per week
One area which will see significant changes is in pensions for new recruits to the public service. The minimum retirement age for new civil servants will be 65 and the compulsory retirement age has been scrapped. For new gardai and prison officers, the minimum retirement age has been raised to 55.
Additional funding will be provided for primary and post-primary school building works, costing €30 million in 2004 .
Total Government expenditure will rise by 7 per cent next year and Mr McCreevy signaled that this was the level of expenditure he intended to keep to for the remainder of this Government. The Minister has also sought to ringfence capital expenditure by announcing the creation of rolling five-year investment envelopes which will allow Department to plan expenditure for the longer term. Capital expenditure will be €5.6 billion accounting for 5 per cent of GNP in 2005.