Older people and one-parent families under budgetary pressures Social Analysis Áine Ryan HUNDREDS of older people from around the country are set to meet at 11am in a Dublin hotel today (Tuesday) to protest about aspects of last week’s Budget. Organised by Age Action, the organisation has also called on its various groups throughout Mayo to lobby their TDs and councillors about the ‘retrograde’ aspects of the Budget that will inevitably lead to ‘many older people struggling over the next 12 months’.
While the introduction of means-testing for eligibility for the medical card has been condemned and has ignited a national outrage, Age Action has also strongly criticised the minimal fuel allowance and State pension increases.
Project Officer for Mayo, Mr James Reddiough, told The Mayo News that the county’s large rural population – no longer eligible for broad community services through the medical card – will now be forced to travel to hospital.
“The over-70s’ medical card plays a key role in helping many older people remain living in their own homes. The guaranteed access it provided for holders to a GP meant that their health and well-being was monitored and protected at community level, thereby taking pressure off the acute hospitals and nursing homes,” said Mr Reddiough.
He said this was the key reason it was introduced back in 2001 and that now many elderly would have to be hospitalised or forced into residential care instead of remaining in their own communities. While he welcomed Mary Harney’s decision on Thursday to increase the income threshold for the medical card, he warned that much more had to be done to avoid causing untold hardship to older people.
However, Mr Reddiough welcomed the decision to give a €400 annual grant to those who did not qualify for the medical card, but noted that when doctors’ fees and the cost of medication was included, it would cover less than four visits to a GP in the year. He also said that a €2 increase in the fuel allowance and €7 in the State pension were not sufficient in light of a soaring cost of living.
Meanwhile, the catch-cry of the Money Advice and Budgeting Service (MABS) is to seek advice early and avoid further borrowing if Budget 2009 has led to increased financial strain. MABS is set to be subsumed under the Citizen’s Information Board under the new budgetary terms.
MABS client base has increased by 30 per cent in the last couple of years, with a clear trend showing that women are more readily willing ‘to face up to financial problems’ than men.
The most frequent reason for approaching MABS for advice is a sudden change in financial circumstances due to unemployment, illness or a relationship breakdown.
“Our advice to people is to come to us early rather than late. Trying to borrow Peter to pay Paul or borrowing your way out of the debt does not work,” a MABS spokesman told The Mayo News.
He also said ‘there has been a significant increase in people using the service due to mortgage difficulties’.
“If people find they are on a tight budget already and feel that the one per cent Income Levy (introduced by Budget 2009) will interfere with their micro-management, they should react early and seek advice,” he also said.
Interestingly, neither the elderly nor foreign nationals comprise a significant client category for the service whose main users are those at the family-formation stage, with one-parent families, and those already on Family Income Support supplement, being majority users.
According to Mr Tom Navin, President of the Westport Conference of the St Vincent de Paul, there has been a startling and huge increase in calls for help even before the announcement of the Budget.
“I can tell you we have experienced a huge increase of calls to the St Vincent de Paul Society since August. These calls are from right across the community, with heating oil and fuel going to be a big problem. We have a sub-committee who will meet every case and assess them on their merits and we are always as generous as we can,” said Mr Navin.
He stressed that the group uses food-vouchers, as opposed to monies, for those finding it difficult to make ends meet. He also observed that he expects ‘a very busy winter’ but that fortunately there is great support for the conference in Westport.
Ups and downs for individuals and businesses TAXATION ANALYSIS Paul Gill “RATHER, it provides an opportunity for us all to pull together and play our part according to our means so that we can secure the gains which have been the achievement of the men and women of this country. It is, a Cheann Comhairle, no less than a call to patriotic action.”
This is a quote from Tuesday’s Budget speech by Minister Lenihan and is one designed to instill a sense of purpose in all of us as we face the financial impact of a bruising Budget. All that was missing was the playing of ‘Ireland’s Call’ as the speech was delivered!
Personal tax The imposition of the headline income levy came as no surprise to most. Set at one per cent of gross income (two per cent over €100,000), this will impact on all individuals with the exception of those in receipt of social welfare income only. It seems that it will also impact otherwise exempt sources of income such as income from patents, woodlands and artists etc, but it will not apply to Irish deposit interest.
Personal tax credits have been frozen at 2008 levels with a modest increase in the standard rate band of €1,000 (€2,000 for married couples with two incomes).
Ignoring social welfare improvements, there are very few examples where individuals or married couples are better off as a result of these changes. The extent of the reduction in disposable income varies depending on individual circumstances.
There is some good news for first-time buyers (new buyers and those who bought in the last four years) as the rate at which mortgage interest qualifies for tax relief has been increased from 20 per cent to 25 per cent for a number of years. The gain turns to pain for those of us with mortgages falling outside of the criteria noted above as our rate of tax relief falls from 20 per cent to 15 per cent.
From 2009, medical expenses relief will be standard-rated (20 per cent for all taxpayers as opposed to 41 per cent for top-rate taxpayers in 2007 and 2008).
Tax on deposit interest earned (DIRT) has been increased from 20 per cent to 23 per cent. Life assurance and investment funds have had the exit-tax applicable to them increased from 23 per cent to 26 per cent.
Landlords and owners of second homes will face a levy of €200 per annum per dwelling from 2009 and this will be levied by local authorities.
Business tax The reduction in the rate of stamp duty applying to commercial property (including non-residential land) from nine per cent to six per cent is very welcome and long overdue.
The reduction in stamp duty is offset by an increase in the capital gains tax (CGT) rate from 20 per cent to 22 per cent. The payment dates for CGT are also being accelerated in 2009 with tax due on disposals from January to November due by mid-December, with tax due on disposals made in December due by October 31 in the following year. The extremely tight deadline for disposals to November in each year makes the consideration of the timing of any disposals important as, in many cases, the funds may not be available to discharge the tax arising.
Standard rate VAT has been increased by 0.5 per cent to 21.5 per cent from December 1, 2008. While the increase may seem small, it affects a wide range of goods and services (including adult clothing, professional services, electrical goods, petrol etc) and is ultimately paid for by the final consumer and VAT-exempt entities (financial institutions, insurance brokers, doctors, dentists etc). The change also necessitates adjustments in accounting systems and invoicing.
At first glance there is a welcome introduction of a tax exemption for new start-up companies in 2009 which exempts them from corporation tax and capital gains tax (where tax is under €40,000 per annum) for a three-year period. This measure applies only to companies and only to those companies commencing to trade in 2009. Subject to seeing the actual legislation, it may well be a less generous exemption than it first appears given that many start-ups incur losses initially and that the exemption applies to corporation tax which is levied only after salaries (subject to PAYE/PRSI and new income levy) have been extracted.
The rate at which companies can claim a tax credit for research and development expenditure has been increased from 20 per cent to 25 per cent. This is also a welcome change and one which was expected as part of our strategy to encourage Ireland’s knowledge economy in the face of the inevitable decline in Irish manufacturing.
This was certainly a very tough Budget on the taxation side, but one which seems to have deferred the expenditure cuts which will be needed to address the enormous deficit facing this country.
Will you answer Ireland’s call? The reality is that you have no choice unless you take the boat (and avoid the airport exit tax!).
Note: Detailed tax measures will be contained in Finance Bill 2009 due to be published in November 2008.
Paul Gill runs Paul Gill & Co, Chartered Accountants and Registered Taxation Consultants, Castlebar (094 9060000).
Liability in respect of the contents of this article is fully disclaimed. Professional advice should be sought in relation to all business and taxation matters.
Budget reaction on the streets of Westport Rachel Sheridan and Michelle Higgins, Transition Year, Sacred Heart School, Westport June Bourke “It’s a severe budget, especially on people on low income, the vulnerable people in society. I come from a farming background and there was not one positive in this budget for them, they are the backbone of many communities and there was not a word about them.
“At the moment, there are a lot of people contemplating emigration and I don’t see anything in this budget that is going to create jobs. Also, I think the petrol increase is severe, especially for young people who are starting out with their first car. They simply won’t be able to afford to run a car anymore.”
Niall O’Sullivan “I didn’t think it was a fair budget. I think there was a lot of waste in the public sector that wasn’t really accounted for. The public sector also got a six per cent increase and no one else is getting an increase, other people are actually getting laid off. The average person is once again having to take the hit, those on the minimum wage even have to take a hit. The increase in petrol is very extreme, it will hit everyone, not just delivery men or taxi drivers.”
Maureen Cusask “I think it is going to affect the middle class, big time. We’re getting caught on every single thing. I’m not impressed at all with education, it seems like we are getting closer and closer to bringing back college fees and eventually it will end up that only the rich will be able to go to third level. It’s hard to take now because if we had proper management at the beginning of the boom period we would not have to be worrying as much as we are now.”
Harry Quigley “There is a lot of uncertainty out there at the moment. They say they are taking the medical cards away from the over-70s but they have not mentioned any specifics about the means testing. We are in a difficult situation but it seems to be a fair enough budget, but I still don’t think the very well-off were hit. There are still a lot of builders and land developers out there still making lots of money, they did not get at them. It’s hard to tell where we stand at the moment, a lot will depend on the world recession.”
Marie Mortimer “The medical card being taken away from the elderly is the most thing that I am thinking about. I don’t think it’s fair at all. A lot of these people have worked hard all their lives and they deserve better. Things are bad at the moment economy wise, it is effecting everybody, and the Government will have a lot of work to do.”
Paddy Gallagher “My friend Michael Kilcoyne said it on Mid-West Radio today, he made a few very interesting points, especially about the cutbacks in health and the effect it will have on the elderly. Those who used to be in VHI gave it up when they were 70 because they received the medical card but now they find themselves in limbo. I think Lenihan has shown a level of stupidity – anybody that says that everybody should take a hit is talking rubbish because not everyone got their fair share of the Celtic Tiger – there are billionaires out there who don’t pay a penny in tax.”
Sinead Lambert “It was a tough budget but it was a 50/50 situation, in the end it probably wasn’t as tough as some people thought. Once again, the easy option was taken as the big boys were not penalised for anything but the lower and middle classes have to pay a one per cent levy on their earnings. There does not seem enough here to get us out the recession. A lot of the changes do not seem to have been thought through, especially taking away the medical card from the over-70s.”
