Budget defies cautious predictions
Minister for Finance Brian Cowen today defied expectations of a tight budget by delivering a range of concessions to house buyers, pensioners and environmentalists.
Mr Cowen pledged during an hour-long speech to the Dáil to keep taxes low, to protect the environment and to keep infrastructural investment on track.
He increased motor taxation rates by 9.5% for cars with an engine size under 2.5 litres and 11% for vehicles above that capacity from February 2008.
But Mr Cowen also announced an overhaul of Vehicle Registration Tax, linking it to a vehicle’s CO2 emissions rather than engine size from July 1 next year.
“I am bringing forward today a series of changes that constitute the most fundamental reform of VRT since its inception in 1993,” he said.
The minister raised the Old Age Pension rate by €12 a week to €212 in line with pledges in the programme for government.
A number of changes in the controversial stamp duty regime on house purchases will aim to restore confidence in the stagnant property market, he claimed.
Mr Cowen said his budget was compiled against a challenging backdrop of moderating growth, turbulent international markets and uncertain global outlook.
“Rather than adopting a conservative cautious stance I believe we must respond to the challenge by taking determined action and pushing ahead with renewed vigour,” he told the Dáil.
A recent slowdown in Ireland's housing market dominated political debate in the run-up to today's Budget.
The issue has had a major impact on economic activity and Government revenue.
In a bid to bolster the property market, Mr Cowen today announced that stamp duty on homes will be exempt up to €125,000, the next €875,000 will be taxed at 7% and the balance at 9%.
The mortgage interest relief ceiling was also increased by up to €20,000 for first-time buyers.
Casting aside the gloomy predictions of a downturn, Mr Cowen told the Dáil: “We must not lose sight of the fact that the fundamentals of the economy remain good – a point often lost by some.
“In a changed environment of more moderate growth, this Government will manage the resources available so that growth will be sustained into the future.”
Mr Cowen predicted economic growth of 3% during 2008 with inflation rate at 2.4% and jobs to increase by 24,000.
Total spending on public services is increasing by €62m or 8.6% next year.
In a surprise move, Mr Cowen significantly reduced charges on ATM and credit cards to promote enterprise and a cashless society.
A 30 cent increase was slapped on a packet of 20 cigarettes but there were no increases on alcohol, petrol or diesel.
Tax reliefs for film-making were extended until 2012.
Mr Cowen also announced extra allocations for science, technology and innovation.
Opposition finance spokesman Richard Bruton said gains generated by the Celtic Tiger boom had not been properly invested by the Government.
He dismissed Mr Cowen as a “back-seat passenger” in the Finance Department who was not in charge of driving fiscal policy.
