The Department of Finance’s example families, often used by newspapers to illustrate the effects of the budget, regularly provide insightful narratives. Two specific “families” in this year’s brochure piqued my curiosity. Their financial journey provides significant insights into the budget and, to a large extent, the imminent decisions.
Let’s initially delve into the situation of Kevin and Audrey, dependent on Audrey’s €54,000 salary as a nurse, and Niamh and Brendan, both employed, with a combined income of €115,000. The department’s calculations reveal that the first duo, earning less, enjoy an “overall benefit” of €1,615 from the budget. Comparatively, the more affluent pair receives €2,283. However, these figures include one-time payments given primarily this year and enduring tax and welfare shifts due next year, making it somewhat analogous to combining apples and oranges.
There are several crucial observations. The benefits are majorly impacted by the family’s number of children. Kevin and Audrey fair better with their two children (Joshua and Olivia) than Niamh and Brendan, with their one child (Kasey), even after adding energy credits. Thus, the family with two children gets €810 in one-time payments, compared to €530 for the other.
However, these immediate benefits are fleeting, and younger families might soon question the Government’s genuine strategy.
Interestingly, there’s no cap on the child benefit generosity regardless of the family size. For example, a middle-income family with zero children might only receive €250 in energy credits from the cost-of-living package, but a family with four children can potentially receive €1,370 with the inclusion of two double payments. Therefore, the 2025 Budget strongly favours children.
The real winners of the budget are families of five earning more than €70,000.
The impending week will reveal the duality of two budgets summed into one from a financial perspective.
At present, Ireland stands at a crossroads regarding its association with multinational corporations.
Meanwhile, individuals over 65 are financially better off and influencing political decisions, while the younger generations face increasing difficulties.
The principle aspect that defines precisely the distribution of resources in the budget is connected to the modifications in the universal social charge (USC), primarily to the reduction in the base rate that affects income varying from around €25,000 to €70,000, from a 4 per cent to a 3 per cent ratio. To experience the full advantage of this, you unsurprisingly should be earning a minimum of €70,000. Incorporate changes to income tax and PRSI, higher-earning couples could see a profit of €1,753 from the ongoing budget amendments – excluding one-time changes – whilst those with lower income would benefit by €805. Despite the temptation of short-term funds, these ongoing modifications are of higher importance for future stability.
The 2025 Budget: Implications for the Irish public and businesses.
There are several nuances, and certain families with lesser income might reap the benefits of improved working-family payments. Generally speaking, the combination of temporary and ongoing modifications suggests that this budget is advantaging wealthier families with children, with a larger number proving more lucrative. They will gain from an immediate increase in child benefits along with tax and USC modifications on the long run. In many cases, the total benefit for bigger families could reach around €3,000.
A distinctive aspect is the decision to give double child benefit in November and December – the notable “double-double”. This is targeted towards the sizable community of middle-aged voters, or rather, financially challenged families, with an inclination towards an imminent general election.
By next year, the present fiscal boost will vanish, leaving younger families pondering the true intentions of the Government or, more specifically, the proposal it will present to voters. There has been an incremental support for childcare corporations and parents in recent years. However, there remain serious queries about the future of this sector, which weren’t addressed during budget day. As the population continues to grow, there still remains an undersupply in school places. Costs related to universities have experienced another drop, but on a temporary basis.
It is certain that in 2025, numerous households will feel financial pressure as the recent wave of one-time cash injections cease.
Housing prices are significantly high with an extreme scarcity making the rents sky-high. Additional funds in billions have been proposed for investment, however, concerns over their application still persist. Budget forecasts call the Taoiseach’s claim that almost 40,000 new houses would be completed this year, into question, as officials do not foresee any increment from last year’s completion of roughly 33,000 homes.
Renters would appreciate the increased tax credit, nevertheless, those who procured their homes at elevated mortgage rates in the past years would understandably be appalled by the predictable decision to extend the mortgage interest relief, initially introduced as a singular occurrence last year, for one more year, costing €40 million. This aids those who made their purchases prior to 2008 at tracker rates but does not contribute anything to individuals who purchased in the last year or two with similar borrowing costs paid by the tracker holders currently. The basis of the relief is the rise in repayments, not their magnitude. This, coupled with the surge in inheritance tax thresholds, highlights the immense political influence of the tracker generation.
In the meantime, younger voters are being enticed with money before Christmas. The Economic and Social Research Institute’s post-budget examination indicates some of the difficulties the government has brewed for its successors. Single payments have offered temporary support to households and was a suitable tactic when issues arose unexpectedly such as the rise in energy prices in 2022. The decision to not recur these payments next year would put many households at a disadvantage. Some households will start feeling the financial strain in 2025 when the latest wave of one-time cash depletes.
However, these are not targeted and researchers at the institute emphasise that the money spent on universal cash payments could have instead funded a newly proposed second-tier child benefit scheme for a year, rescuing 40,000 children from poverty. In other words, one-time payments are not a sustainable strategy in the long term.
The potential pitfalls of our financial future could soon become a reality. Projections for long-term fiscal plans indicate a significant deterioration of the Treasury’s cash status — a pivotal factor in budget generosity — beginning noticeably from 2026 onwards. This is partially attributed to the pledge to annually invest €6 billion or more into two newly-established national funds designated for future expenditures and investments, implying the situation might not be as challenging as it appears. However, observing whether this commitment to money conservation, rather than present-time expenditure, withstands the inevitable pressure of narrower budget balances in the forthcoming years will be intriguing. As we venture into the next fiscal year, there will be a renewed demand for monetary backing from households. If funds are available, it will be practically impossible for politicians to resist these appeals.