Summary of 2009 Budget Measures - Policy Changes

Contents

Section I - Taxation Measures


Income Tax Changes.

Other Income Tax

PRSI Changes

VAT

Excises

Farmer Taxation

Corporation Tax

Capital Allowances

Stamp Duty

Capital Gains Tax

Tax on Savings

Pensions

Taxation in Relation to Cars

Charge on Non-Principal Private Residences


Section II - Expenditure Measures


Social & Family Affairs

Health & Children Group

Education & Science

Justice Group

Environment, Heritage & Local Government

Defence Group

Community, Rural & Gaeltacht Affairs Group

Communications, Energy & Natural Resources

Foreign Affairs Group

Transport

Agriculture, Fisheries & Food

Enterprise, Trade & Employment Group

Finance Group

Arts, Sport & Tourism

Taoiseach’s Group

Multi-Annual Capital Envelopes 2009-2013

Rationalisation of State Agencies

Decentralisation



SECTION I - TAXATION MEASURES

INCOME TAX CHANGES

Personal Tax Package
The main elements, including associated costs, of the personal tax package, which take effect from 1 January 2009, are as follows:

Changes to Income Tax

Full Year Cost
€m

New Standard Rate Bands from 1 January 2009:

Current Proposed
Single €35,400 €36,400
Married One Income €44,400 €45,400
Married Two Incomes €70,800 €72,800

*With a maximum transferability between spouses of €44,400 in 2008 and €45,400 in 2009

200
Income Levy Full Year Yield
€m
Income levy of 1% on income up to €100,100 (€1,925 per week) and of 2% on income in excess of €100,100 (this levy excludes social welfare payments, contributory and non-contributory pensions) 1,180
Total (yield) 980
Further details of the tax elements of the package are set out in Annex A

Income Levy

A new income levy is being introduced that will apply at the rate of 1% to gross income up to €100,100 per annum or €1,925 per week. A rate of 2% will apply to income in excess of that amount.

The levy is paid on gross income, before deductions for capital allowances or contributions to pensions.

The levy does not apply to social welfare payments including contributory and non-contributory social welfare pensions.

This measure is expected to yield €815 million in 2009 and €1,180m in a full year

OTHER INCOME TAX

Mortgage Interest Relief

The current rate of mortgage interest relief is being increased from 1 January 2009 for first-time buyers from 20% to 25% in year 1 and year 2 and to 22.5% in years 3, 4 and 5. The additional relief will be available to new first-time buyers and first-time buyers who have bought a house in the last 4 years.

The rate of mortgage interest relief for non-first-time buyers is being reduced from 20% to 15% from 1 January 2009.

It is estimated that this measure will be broadly revenue neutral.

Health Expenses Relief

Health Expenses relief will be granted at the standard rate only from 1 January 2009, with the exception of nursing home expenses which will be standard rated from 1 January 2010.

This measure is expected to yield €120 million in 2010 and €150m in a full year.

Levy on car parking facilities provided to employees by their employers

A flat rate levy of €200 per annum will be charged on employees whose employer provides them with car parking facilities. The levy will be confined to employer provided car parking facilities situated in the main urban centres.

The estimated yield from this measure is €5 million in 2009 and €10 million in a full year.

Cycle to work scheme

From 1 January 2009, the provision of bicycles and associated safety equipment by employers to employees who agree to use the bicycles to cycle to work will be treated as a tax exempt benefit-in-kind. The exemption may only apply once in any five year period in respect of any employee. There will be a limit on the value of such purchases of €1,000 for each employee. The scheme may also be implemented via salary sacrifice arrangements, whereby an employee agrees to forego part of his/her salary to cover the costs associated with the purchase of the bicycle and associated safety equipment. Where such salary sacrifice arrangements are implemented, they must be completed over a maximum period of twelve months.

The estimated cost of this scheme is €0.2 million in 2009 and €0.4 million in a full year.

Increase in the Specified Rates for Preferential Home Loans and Other Loans

An employee in receipt of a preferential loan is charged income tax on the difference between the interest actually paid and the amount which would have been payable at the “specified” rates of interest for the loans. To reflect changes in interest rates, the specified rate in respect of loans (other than home loans) is being increased from 13% to 15%. These changes will take effect from 1 January 2009.

The expected yield from this measure is €1.5 million in 2009 and €2 million in a full year.

Tax relief for the donations of heritage items

The tax relief in respect of the donation of heritage items to approved State institutions is being limited to 80% of the market value of the heritage item donated.

The tax relief in respect of the donation of heritage property to the Irish Heritage Trust is being limited to 80% of the market value of the heritage property donated.

The ceiling on the aggregate value of donations qualifying for each of these schemes in any one year will remain at €6 million.

Change in basis of Benefit-in-Kind (BIK) charge for company cars to relate it to the cars’ level of CO2 emissions

The Finance Bill will contain provisions to change the basis of the BIK charge on company cars to relate it to the cars’ level of CO2 emissions.

It is estimated that this measure will be broadly revenue neutral.

PRSI CHANGES

Employee PRSI annual ceiling

As from 1 January 2009, the PRSI contribution ceiling will increase from €50,700 to €52,000.

VAT

Increase in standard VAT rate from 21 per cent to 21.5 per cent.

The standard rate of VAT will be increased from 21 to 21.5 per cent with effect from 1 December 2008. This increase will apply to all goods and services which are currently subject to VAT at 21 per cent.

This measure is estimated to yield €208 million in 2009 and €227 million in a full year.

EXCISES

Increase in Mineral Oil Tax on Petrol

The mineral oil tax on petrol will be increased by 8 cent per litre (including VAT) with effect from midnight on 14 October 2008.

This measure is estimated to yield €22 million in 2008, and €166 million in 2009.

Tobacco Excise

The Excise Duty on a packet of 20 cigarettes is being increased by 50 cent (including VAT) with a pro-rata increase on other tobacco products, with effect from midnight on 14 October 2008.

This measure is estimated to yield €16 million in 2008 and €105 million in 2009.

Alcohol Excise

Excise Duty on a standard bottle of wine is being increased by 50 cent (including VAT) with effect from midnight on 14 October 2008. Pro-rata increases are also being applied to other wine, and certain other fermented and intermediate products.

This measure is estimated to yield €5 million in 2008 and €31 million in 2009.

A reduced rate of excise duty, at 50% of the full appropriate excise duty rate for beer and cider, will be introduced for low alcohol beer and cider (beer and cider products with an alcohol by volume content of 2.8% or less), with effect from midnight on 14 October 2008.

This measure is expected to cost the exchequer €2 million in 2009 and €3 million in a full year.

Excise Licences

A range of alcohol-related licensing fees, including off-licences, but excluding pub licences, are being increased to €500 in each case. These increases will apply from the appropriate annual renewal dates in 2009.

This measure is estimated to yield €2 million in 2009 and €2.2 million in a full year.

Betting duty

The betting duty rate will be increased from 1% to 2% with effect from 1 January 2009.

This measure is estimated to yield €30 million in 2009 and €40 million in a full year.

Air Travel Tax

An air travel tax applying to all departures from Irish airports will come into force on Monday 30 March 2009. The general rate applying will be €10 per passenger with a lower rate of €2 for shorter air journeys (those under 300 kms).

An indicative schedule listing the destinations from particular Irish airports to which the lower rate will apply is set out below. Other destinations from Irish airports in excess of 300kms will attract the €10 rate.

The Finance Bill will provide that the tax will be payable by the appropriate airport authority to the Revenue Commissioners in respect of passengers departing from Irish airports on and from 30 March 2009. In effect the airport authority will collect the tax from the airlines.

The air travel tax will not apply to

- passengers under two years

- disabled passengers and assisting persons

- aircraft with less than 20 passenger seats

- transit passengers

- members of the crew

- air services to and from Irish offshore islands

- aircraft departing airports that in the previous calendar year had less than 10,000

departing passengers.

This measure is estimated to yield €95 million in 2009 and €150 million in a full year.

Destinations to which the lower Air Travel Tax of €2 will apply(a)

From To

Dublin

Blackpool; Cardiff; Cork; Donegal; Derry; Galway; Glasgow; Glasgow (Prestwick); Isle of Man; Knock; Kerry; Liverpool; Manchester; Shannon; Sligo

Cork

Dublin; Newquay

Kerry

Dublin

Shannon

Dublin

Sligo

Dublin

Donegal

Dublin; Glasgow

Waterford

Galway

Galway

Dublin; Waterford

Knock

Dublin

(a) This list is for illustrative purposes and only includes scheduled air services. Chartered flights will be subject to the air travel tax with the lower rate also applying to destinations no further than 300kms from the departure point.

FARMER TAXATION

Farmers flat rate addition

The farmer’s flat rate addition is being maintained at 5.2% for 2009. The flat rate is designed to recoup non-VAT registered farmers for the VAT they incur on their inputs.

Extension of Stamp Duty Relief for Young Trained Farmers

Stamp duty relief is available for farmers acquiring land, who are aged under 35 and have specific agricultural training. The relief is due to terminate on 31 December 2008. This relief is now being extended for 4 years and the relief will apply in respect of instruments executed no later than 31 December 2012.

The cost of this relief in 2009 is estimated at €53 million.

Extension of Stamp Duty Relief for Farm Consolidation

Stamp duty relief is available to a farmer consolidating his/her holding. The relief is due to terminate on 30 June 2009 and this termination date will be extended to 30 June 2011.

The cost of this relief is not significant.

Farmers Stock Relief

Provision is being made to renew the 25% general farming stock relief and the special 100% stock relief for Young Trained Farmers for a further 2 years to 31 December 2010.

The cost of these measures is estimated at €2 million in 2009 and in a full year.

Farm Pollution Control Relief

Provision is being made to extend the 31 December 2008 deadline of the scheme of capital allowances for expenditure on certain pollution control measures relief to 31 December 2010.

The cost of this measure is estimated at €10 million in 2009 and in a full year

CORPORATION TAX

Tax Credit scheme for Research and Development Expenditure

The current 20% rate of tax credit for incremental expenditure undertaken by a company on qualifying research and development (R&D) is being increased to 25%. This will apply to accounting periods commencing on or after 1 January 2009.

The cost of this change is estimated to be €20 million in 2009 and in a full year.

Preliminary Tax payment dates for Large Companies

Companies with a corporation tax liability of more than €200,000 in their previous accounting period are obliged to pay preliminary corporation tax, amounting to 90% of the liability for the current accounting period, one month before the end of the current accounting period (and not later than the 21st of the relevant month). The current single payment for large companies’ preliminary corporation tax will be split into two instalments. This will apply to accounting periods commencing on or after Budget day, 14 October 2008.

The first instalment will be payable in the sixth month of the accounting period (e.g. 21 June for a company with calendar year accounts) and the amount payable will be 50% of corporation tax liability in the preceding accounting period or 45% of corporation tax liability for the current accounting period.

The second instalment will be payable (as at present) in the eleventh month of the accounting period (e.g. 21 November for a company with calendar year accounts) and the amount payable will bring the total preliminary tax paid to 90% of corporation tax liability for the current accounting period.

This measure will result in an estimated cash flow yield of €350 million in 2009.

3 Year Tax exemption for Start-up Companies

New start-up companies which commence trading in 2009 will be exempt from tax, including capital gains, in each of the first three years to the extent that their tax liability in the year does not exceed €40,000.

This measure is being examined to ensure it is in compliance with EU rules on State-Aid. Further details of this incentive will be contained in the Finance Bill.

This measure is not expected to have a cost in 2009 but will have an estimated cost of €10 million in 2010 and a further €10 million in 2011.

CAPITAL ALLOWANCES

Capital Allowances Scheme for certain energy-efficient equipment

The tax incentive (introduced in Budget and Finance Act 2008) which provides for capital allowances of 100% of expenditure incurred by companies in the year the equipment is purchased is being extended from three categories to seven categories. The new categories to be included in this scheme are:
  • Data server related systems and large energy saving office equipment associated with Information & Communications Technology.

  • Efficient heating/electricity provision equipment and control systems.

  • Efficient electrical and control equipment associated with Process & Heating Ventilation and Air-conditioning systems.

  • Alternative fuel vehicles.

The cost of this change is estimated to be €1 million in 2009 and €5 million in a full year.

Capital Allowances for newly constructed commercial buildings

Where newly constructed commercial buildings are used before being sold and the sale does not take place within one year of first use, the purchaser gets the value of available capital allowances on expenditure on a more restrictive basis. This makes the purchase of the building a less attractive option. Accordingly, the one year time limit for disposal is being extended to two years.

The cost of this change is estimated to be €1 million in 2009 and in a full year.

Seveso-listed industrial facilities

A new ring-fenced tax incentive scheme will be introduced to facilitate the removal and relocation of Seveso-listed industrial facilities which hinder the residential and commercial regeneration of Docklands in urban brownfield areas. The EU Seveso Directive (96/82/EC) seeks to protect public safety by placing land-use restrictions on new residential and commercial development near locations where potentially dangerous activities are undertaken. Further details will be outlined in the Finance Bill.

This scheme is subject to clearance by the European Commission from an EU State-Aids perspective.

The cost of this measure is not expected to be significant in 2009 and full year costs will depend on take-up.

STAMP DUTY

Stamp Duty on Commercial Property

The current Stamp Duty applicable to non-residential property is being changed in respect of Instruments executed on or after 15 October 2008. The top rate of duty is being reduced from 9% to 6% and the new rates are:
Aggregate Consideration Rate of Duty
Up to €10,000 Exempt
€10,001 to €20,000 1%
€20,001 to €30,000 2%
€30,001 to €40,000 3%
€40,001 to €70,000 4%
€70,001 to €80,000 5%
Over €80,000 6%

The cost of this measure is estimated at €20 million in 2008 and €180 million in 2009 and in a full year.

Financial Cards

Changes are being made to the Stamp Duties applicable to ATM and Debit cards. The rate changes are summarised as follows:

Description Current New
ATM cards €5 €2.50
Debit cards €5 €2.50
Combined ATM/Debit cards €10 €5

The changes for ATM and Debit cards will take effect for the year ending 31 December 2008, the duty for which is normally collected from bank customers by financial institutions in early 2009.

These changes are expected to cost €12 million in 2008 and will cost €14 million in a full year.

Bills of Exchange (including Cheques)

The Stamp Duty rate on Bills of Exchange is being increased from 30 cent to 50 cent in respect of Bills of Exchange drawn on, or after, 15 October 2008. In the case of cheques, the increase will apply in respect of cheques supplied by financial institutions to customers on, or after, 15 October 2008.

This is estimated to yield €2 million in 2008 with €12 million in 2009 and in a full year.

CAPITAL GAINS TAX

Change in Payment Dates

The payment date in respect of disposals in the period January to November is being changed to mid-December and the tax on disposals in December will now be due on the following 31 October (the existing pay and file date).

It is estimated that this change will result in an estimated cash flow yield of €200 million in 2009.

Change in Rate of Tax

The rate of capital gains tax is being increased to 22% from 20% in respect of disposals made from midnight on 14 October 2008.

This measure is estimated to yield an additional €160 million in 2009 and in a full year.

TAX ON SAVINGS

Deposit Interest Retention Tax and Taxes on Life Assurance Policies and Investment Funds

The rates of retention tax that applies to deposit interest, together with the rates of tax that apply to (a) life assurance policies and (b) investment funds, are being increased by 3 percentage points to 23% and 26% respectively. The increased rates will apply to payments, including deemed payments, made on or after 1 January 2009. Full details in relation to Deposit Interest Retention Tax will be included in the Finance Bill.

This measure is expected to yield €85 million in 2009 and in a full year.

PENSIONS

Contribution limit

The annual earnings limit for determining maximum tax-relievable contributions for pension purposes is being set at €150,000 for 2009 as compared with the 2008 limit of €275,239.

Indexation of maximum allowable pension funds

The adjustment, in line with an earnings index, of the maximum allowable thresholds for pension funds on retirement (the Standard and Personal Fund Thresholds) will not be made for 2009.

These measures will result in a yield of €45 million in 2009 and €100 million in a full year.

TAXATION IN RELATION TO CARS

New Motor Tax Rates and Fees for Trade Licence Plates

In order to support funding for local authorities, the Budget provides for increases in motor tax rates and fees for trade licence plates. The proposed increases are 4% for cars below 2.5 litres and CO2 bands A to D, and 5 % for cars above the 2.5 litre threshold and CO2 bands E, F and G. Goods and all other vehicles will also increase by 4% with no increase for electric vehicles. Trade plate licences will also increase by 4%.

The new rates will apply to motor tax discs and trade licences taken out for periods beginning on or after 1 January 2009.

The proceeds of motor tax are paid directly into the Local Government Fund. This Fund, which was established under the Local Government Act 1998, is ring-fenced for local government. The motor tax paid into the Fund is supplemented on an annual basis by an Exchequer contribution. The Fund is used primarily to finance local and regional roads and the general purpose needs of local authorities.

Details of the new rates are set out in Annex E.

This measure is estimated to yield about €40 million in a full year.

CHARGE ON NON-PRINCIPAL PRIVATE RESIDENCES

The Government hasdecided to broaden the revenue base of local authorities. This will be achieved by the introduction of a charge on all non-principal private residences. The charge will be levied and collected by local authorities, and will be used to support the provision of local services.

The new charge will be set at €200 per dwelling, and will come into effect in 2009. It will be payable by the owners of private rented accommodation, holiday homes and other non-principal residences but will not be applied to new dwellings as yet unsold. The Minister for the Environment, Heritage & Local Government will bring forward legislation at an early date to give effect to these arrangements.

This measure is estimated to yield a minimum of €40 million in a full year.


SECTION II - EXPENDITURE MEASURES

Note: The expenditure information provided below should be read in conjunction with the detailed Estimates of Expenditure for 2009 set out in Section G of this volume. Additional expenditure information is included in Section E of this volume.

SOCIAL & FAMILY AFFAIRS

(See also Annex C, where the changes in maximum weekly rates of payment are shown.)

Gross Expenditure for Social & Family Affairs, comprising the Vote and the Social Insurance Fund, is €19,570 million in 2009. This will be €1,513 million higher than the forecast outturn position for 2008.

The 2009 estimates provide for adjustments to certain schemes to secure net savings of €124.9 million in 2009 (and which were reflected in the pre-Budget White Paper Estimates of Receipts and Expenditure) and a Budget Day expenditure package which will cost €515 million in 2009 and in a full year.

The main changes to social welfare rates and schemes are as follows:-

Older People

Maximum weekly personal rates for all State Pension (Contributory), State Pension (Transition), State Pension (Non-Contributory) and related pensions will increase by €7 per week from the first week of January 2009 and proportionate increases will apply for pensioners on reduced rates of payment.

Maximum Qualified Adult Allowances (QAAs) associated with these schemes will increase by €6.30 per week where the qualified adult is aged 66 or over and by €4.70 or €4.60 per week as appropriate where the qualified adult is aged under 66 from January 2009. Proportionate increases will apply in respect of people on reduced rates of payment.

The rate of the National Fuel Scheme will increase by €2 to €20 per week, from January 2009.

The duration of payment of the National Fuel Scheme will increase by two weeks to thirty-two weeks commencing from April 2009.

These measures will cost €196.2 million in 2009 and in a full year.

People of Working Age

The maximum personal rate for all other weekly schemes will increase by €6.50 per week from the first week in January and proportionate increases will apply in respect of people on reduced rates of payment.

Associated maximum Qualified Adult Allowances (QAAs) will increase by €4.30 per week (€4.60 per week in the case of the Invalidity Pension scheme where the qualified adult is aged under 66) from January 2009, with proportionate increases in respect of people on reduced rates of payment.

There will also be an increase of €8.50 per week in the minimum rate of Maternity Benefit and Adoptive Benefit from January 2009.

There are a number of changes* to schemes that support people of working age as set out below:-

  • In respect of new claimants, the required underlying number of paid contributions is being increased from 52 to 104 for entitlement to Jobseeker’s Benefit, Illness Benefit and Health & Safety Benefit;

  • In respect of new claimants, 13 paid contributions will, inter alia, be required in the relevant tax year etc. for entitlement to Jobseeker’s Benefit (in line with the relevant requirement that currently applies for Illness Benefit);

  • In respect of new claimants, higher earnings thresholds for graduated rates of Jobseeker’s Benefit, Illness Benefit and Health and Safety Benefit will apply;

  • In respect of claimants of less than six months on Budget day and in respect of all new claimants from Budget day, the maximum duration of Jobseeker’s Benefit will now be 12 months (from 15 months) where the person has, inter alia, 260 or more paid social insurance contributions

  • In respect of claimants of less than three months on Budget day and in respect of all new claimants from Budget day, the maximum duration of Jobseekers Benefit will now be 9 months (from 12 months) where the person has, inter alia, less than 260 paid contributions;

  • In respect of new claimants, the duration of entitlement to Illness Benefit will be limited to two years;

  • In respect of new claimants, the minimum age threshold for entitlement to Disability Allowance will be 18 years and the maximum age for payment of the Domiciliary Care Allowance will increase to the same age;

  • The contribution to rent supplement is being increased from €13 per week to €18 per week.

These measures will have a net cost of €164.9 million in 2009 and €107.5 million in 2010.

Children

Maximum qualified child increase payments will receive a general increase of €2 to €26 per week, from January 2009. Proportionate increases will apply where persons are in receipt of a reduced child dependant allowance payment.

Family Income Supplement income thresholds will increase by €10 per week in respect of each child, from January 2009.

In respect of existing and future qualifying children for Child Benefit aged 18, a half rate payment will be made from January 2009, and from January 2010 entitlement for Child Benefit will cease once the child has attained the age of 18 years. To compensate relevant social welfare and low income families for this change, there will be a further special increase in the qualified child payment in respect of children aged 18 (to bring the total maximum rate for a qualifying child aged 18 to €41 per week) and further special compensatory measures will also be applied where appropriate to the Family Income Supplement and Back to School Clothing and Footwear Allowance schemes. These special measures will cease in January 2011*.

The additional income disregard for the Back to School Clothing and Footwear Allowance payment will increase by €50 to €150, effective from June 2009.

These measures will have a net cost of €28.5 million in 2009 and a net saving of €11.1m in 2010.

Service Developments

Additional funding is being provided to the Family Support Agency for the provision of further support to parenting.

These measures will cost €0.5 million in 2009 and in a full year.

The detailed 2009 Estimate for this Department, including in respect of the Social Insurance Fund, is set out at page G.79.

HEALTH & CHILDREN GROUP

Gross Expenditure for the Health and Children Group, which includes the Department of Health and Children, the Health Service Executive (HSE) and the Office of the Minister for Children and Youth Affairs is €16,335 million in 2009, an increase of €180.7 million (€329 million on Current offset by a reduction of €148.3 million on Capital) compared with the 2008 forecast outturn. The underlying gross increase is €384.7 million when account is taken of the Long-term Care Repayment Scheme. The key policy measures and adjustments associated with these resources in 2009 and later years are as follows:-

  • €55 million is being provided to implement the Fair Deal scheme to provide a more equitable system of residential care for very dependent elderly people;

  • €10 million is being provided to fund 125 additional therapy posts in the disability and mental health services, targeted at children of school going age;

  • €15 million is being allocated to the Cancer Control Programme;

  • €33 million is being allocated to meet the full year cost of service developments commenced in 2008;

  • eligibility for the Domiciliary Care Allowance is being extended from 16 to 18 year-olds at a cost of €1.4 million in 2009 and €5.5 million in a full year;

  • a range of administrative (€115 million) and other operational efficiencies (€270 million) will be made in the HSE and agencies, to release resources for allocation to key frontline health and personal social services in 2009;

  • certain charges are being increased to ensure that the funding of public health services is placed on a balanced and more sustainable basis (€100 million) into the future:-

    • in line with the policy of full economic charging for such services there will be a 20% increase in private and semi-private bed charges in public hospitals;

    • the A&E charge is being increased from €66 to €100 for non medical card holders who attend A&E departments without a letter from their GP, while the public hospital statutory in-patient charge is being increased from €66 to €75;

    • Long Stay Charges will increase by €31.44 a week for Class 1 and by €23.58 a week for Class 2. The increase of 26% is in line with the increases since 2005 in the State Pension (Non-Contributory) pre-budget and will restore the original relationship between the charges and the pension;

  • the Drug Payment Scheme (DPS) Threshold is being increased from €90 to €100 per month which will lead to savings of €15 million in drug costs;

  • automatic entitlement to a medical card is being ended for over 70s. An annual cash grant of €400 will be paid to people over 70 who don’t qualify for a medical card or a GP Visit Card under normal criteria and whose gross weekly income is up to €650 for a single person or €1300 for a married couple. This will save €100 million;

  • the Early Childcare Supplement will be paid monthly instead of quarterly and eligibility is being changed to reduce the period for which children qualify for the payment from 0-6 years to 0-5 years and 6 months;

  • the Exchequer capital allocation in 2009 will be €540 million and will enable priority services such as cancer care, A&E services to continue to be developed. As part of the re-prioritisation and re-targeting of capital investment towards the productive capacity of the economy, health capital is being reduced by €148 million on the 2008 forecast outturn figure.

The detailed 2009 Estimates for these bodies are set out at page G.82 (Department of Health & Children), G.84 (Health Service Executive) and G.86 (Office of the Minister for Children).

EDUCATION & SCIENCE

Gross Expenditure for this Department is €9,628 million, an increase of €308 million (€229 million Current and €79 million Capital) relative to the 2008 forecast outturn. The key policy measures and adjustments associated with these resources in 2009 and later years are as follows:-

  • capital expenditure of €889 million is being made available, an increase of €79 million over the 2008 projected outturn. €581 million is provided to continue the significant investment being made in the school building programme. In addition, €265 million, an increase of 44%, is provided for infrastructural investment for higher education, including additional capital funding for strategic research as part of the Strategy for Science Technology & Innovation;

  • capitation funding for primary and post-primary schools is to be increased by €20 million over the 2008 levels;

  • an additional €10 million is being provided to fund a package of measures in the area of Special Education, as an interim measure to continue to enhance the service provided in this area pending the full implementation of the EPSEN Act. This will include the extension of coverage by the National Educational Psychological Service to all primary and post-primary schools by the end of 2009;

  • the Staffing Schedule (the number of students on which classroom appointments are based) at both Primary and Post-Primary level is being increased by one point, and by one further point in fee-paying schools, and restrictions will be introduced relating to substitution cover and other teacherallocations, including English language support and certain posts in schools that have lost disadvantage status - details to be announced by the Minister for Education & Science;

  • a number of grants, mainly school related, are being abolished or scaled back realising savings of €26.6m. per annum;

  • third level funding allocations allow for increases in the studentservices charge in 2009/10 to up to €1,500 in individual institutions;

  • increase in post-primary school transport charges to €300 annual fee.

The detailed 2009 Estimate for this Department is set out at page G.56.

JUSTICE GROUP

Gross Expenditure for this Group of Votes, which includes the Department of Justice, Equality & Law Reform, An Garda Síochána and the Prisons and Courts Services, is €2,629.7 million in 2009, a decrease of €75.8 million (€76.3 million Current and an extra €0.5 million in capital) relative to the 2008 forecast outturn.

While the overall level of funding has been reduced, the Group of Votes will still be delivering on its key services:-

  • capital expenditure of €156 million is being made available to fund the ongoing Courts and Prisons building programmes, a new State Pathology laboratory and the Garda National Digital Radio project;

  • on the current side, funding is continuing to be provided for all existing programmes including services relating to equality, disability, asylum, probation, legal aid and an additional €10 million for the provision of speed cameras.

The detailed 2009 Estimates for these bodies are set out at pages G.45 to G.51.

ENVIRONMENT, HERITAGE & LOCAL GOVERNMENT

Gross Expenditure for this Vote in 2009 is €3,114 million, a decrease of €62.6 million (€12.3 million increase on Current and €74.8 million decrease on Capital) relative to the 2008 forecast outturn. The key policy measures and adjustments associated with these resources in 2009 and later years are as follows:-

  • under the housing programmes, while there has been a decrease on the 2008 provision, very significant funding continues to be provided for both Capital and Current housing programmes:

  • additional funding of €10 million is provided in 2009 for the Voluntary and Co-operative housing sector under the Capital Loans and Subsidies Scheme

  • a further €3 million is provided for the provision of homeless accommodation

  • there has been a decrease of 30% in the affordable housing provision for 2009. In line with movements in housing market affordability the level of subsidies for affordable housing purchases is being scaled down

  • a further €39.5 million has been provided under the Rental Accommodation Scheme to meet carryover and new commitments in 2009 (reflecting the transfer from the Department of Social & Family Affairs of a further group of households previously in receipt of Supplementary Welfare Allowance);

  • Water Services Investment Programme has been provided with an increased provision of €89 million (+19%) to continue infrastructural support for social and economic development;

  • the reduction of 63% in funding the landfill remediation programme in 2009 will require local authorities to re-profile necessary works over a longer period with the most urgent works being prioritised;

  • funding for Urban Regeneration in 2009 has decreased by 95%. This reflects the completion in early 2008 of the final funding allocations for urban renewal grants under the two Regional Operation Programmes (2000-06). The introduction of a new programme in 2010 will be examined in 2009 subject to the availability of resources.

The detailed 2009 Estimate for this Department is set out at page G.53.

DEFENCE GROUP

Gross Expenditure for the Defence Group in 2009 is €1,061 million, a decrease of €27.1 million (€22 million Current and €5.1 million Capital) on the 2008 forecast outturn.

The current saving reflects the fact that most of the costs associated with the setting up of the EU military operation in Chad were incurred in 2008. The saving is partially offset by an increase of €18 million on the Army Pensions Vote arising inter alia from revised superannuation arrangements for Defence Forces personnel.

The detailed 2009 Estimates for this Group are set out at pages G.76 (Department of Defence) and G.78 (Army Pensions).

COMMUNITY, RURAL & GAELTACHT AFFAIRS GROUP

Gross Expenditure for this Group of Votes, which includes the Department of Community, Rural & Gaeltacht Affairs and the Charitable Donations and Bequests Office, is €523.6 million in 2009, a decrease of €22.7 million (€14.9 million Current and €7.8 million Capital) relative to the 2008 forecast outturn. The key policy measures and adjustments associated with these resources in 2009 are as follows:-

  • capital expenditure under the LEADER Rural Economy Development Programme 2007-2013 is being increased from €16 million to €27 million in 2009. Thiswillfacilitate significantinvestment in rural communities throughout the country;

  • increased provision from the Dormant Account Fund of €8 million for Initiatives Tackling Economic & Social Disadvantage; this will facilitate the continued rollout of projects in RAPID areas;

  • current funding of €50.4m is being made available in 2009 to meet the costs of the Rural Social Scheme. This scheme provides a supplementary income for low-income farming and fishing families while delivering useful services to the local communities;

  • Ciste na Gaeilge is to receive an allocation of €8.71 million (+62%) in 2009, to promote the Irish language outside the Gaeltacht, while €3 million is included to support the work of Comhaltas Ceoltóirí Éireann in the preservation and promotion of Irish traditional music;

  • an overall decrease of €22.7 million in 2009 is secured across a number of schemes and programmes in the Vote Group. The ending of the Programme for Peace and Reconciliation II in 2008 delivers a saving of €9.9 million. There is also a saving of €7 million from the completion of the 2000 - 2006 LEADER programme, while a further saving of €7.2 million accrues from the Islands - Infrastructure allocation where a number of projects are nearing completion;

  • savings are also being secured through improved efficiencies and a longer phasing of some planned expenditure measures.

The detailed 2009 Estimates for these bodies are set out at pages G.60 (Department of Community, Rural & Gaeltacht Affairs) and G.52 (Charitable Donations & Bequests).

COMMUNICATIONS, ENERGY & NATURAL RESOURCES

Gross Expenditure for this Vote in 2009 is €500.6 million, a decrease of €9.3 million (€5.2 million Current and €4.1 million Capital) relative to the 2008 forecast outturn. The key policy measures and adjustments associated with these resources in 2009 and later years are as follows:-

  • capital funding of €71 million is being made available to fund sustainable energy and energy research programmes, continuing the priority given to these areas last year and allowing for the expansion of some programmes;

  • funding for the Home Energy Saving scheme run by Sustainable Energy Ireland (SEI), and piloted since 2008, is being increased from €5 million in 2008 to €20 million in 2009; €5 million will also be provided for the Warmer Homes Scheme;

  • the provision for the Greener Homes Scheme run by SEI has been scaled back from €27 million to €12 million reflecting the maturing of the market;

  • capital funding of €45 million is being provided for communications infrastructure; inter alia this will facilitate rollout of the National Broadband Scheme to ensure broadband availability in currently unserved rural areas within the timeframe 2009 to 2011, leading to increased social and economic inclusion and enhanced regional competitiveness;

  • on current spending, the Salmon conservation scheme is winding down in 2009, giving a reduction in €11.3 million compared with 2008. There is also a reduction of €0.4 million on the Fisheries Boards funding.

The detailed 2009 Estimate for this Department is set out at page G.64.

FOREIGN AFFAIRS GROUP

Gross Expenditure for the Foreign Affairs Group is €1,007 million in 2009, a reduction of €32.2 million (€24.7 million on Current and €7.5 million on Capital) relative to the 2008 forecast outturn. The allocation of €754 million to Vote 29 (International Co-Operation), coupled with an additional estimated allocation of €137 million from the EU Budget (Development Cooperation) and other Government Departments will bring Ireland’s total allocation in respect of Overseas Development Assistance (ODA) to €891 million for 2009, or 0.56% of projected GNP in 2009.

The detailed 2009 Estimates for this Group are set out at pages G.62 (Department of Foreign Affairs) and G.63 (International Co-operation).

TRANSPORT

Gross Expenditure for the Department of Transport in 2009 is €3,613 million, a decrease of €160 million (€6 million Current and €154 million Capital) relative to the 2008 forecast outturn. The key policy measures and adjustments associated with these resources in 2009 and later years are as follows:-

  • capital expenditure of over €900 million is allocated to fund public transport infrastructure. This is about €70 million less than the amount made available in 2008, but it is sufficient for progress on a wide range of projects, including:

  • Luas extensions to Cherrywood, Docklands and Citywest

  • improved bus priority measures in Dublin and the regional cities

  • the completion of the Midleton rail line and phase 1 of the Western Rail Corridor from Ennis to Athenry

  • the construction of the Kildare Route project and phase 1 of the Navan rail line

  • the continuation of Iarnród Éireann’s railway safety programme

  • the start of the Dublin city centre rail re-signalling programme

  • continued roll-out of new railcars on the intercity routes

  • planning and enabling works on Metro North, and

  • planning works for the DART Interconnector;

  • in addition, €338 million of current expenditure is provided for the operation of public transport services throughout the country. This is €6 million more than the 2008 provision.

  • capital expenditure of over €1.4 billion is being made available to the National Roads Authority. This allocation is €157 million less than in 2008, and while progress on some projects will necessarily have to slow down, key national routes will be delivered as planned, specifically:

  • the major inter urban roads connecting Dublin with the regional cities of Waterford, Galway, Limerick and Cork by end-2010;

  • the M50 upgrade;

there will also be progress on other key national routes, including the Atlantic Road Corridor;

  • over €600 million is being made available to local authorities throughout the country for the upgrade and maintenance of regional and local roads;

  • capital expenditure of €10 million is provided for additional carbon reduction measures to target climate change initiatives in the transport sector;

  • as a start to the Government’s commitment to part-fund a dual carriageway road within Northern Ireland transforming access to the North West of the island, a capital provision of €13.5 million is being made available in 2009 towards the planning works for this project;

  • provision for Regional Airports is reduced by €13 million to €11 million in 2009. Annual provision for capital investment in the regional airports is decided according to estimates of likely drawdowns in the year for specific projects. This can vary from year to year;

  • overall, the reduced capital allocation for transport will require some rescheduling of projects. Such decisions will be taken by the Department of Transport and its agencies on a project-by-project basis, taking account of their assessment of priorities within the revised expenditure envelope;

  • the impact of the reduced current allocation is being spread across a number of areas and principally involves reduced expenditure on road maintenance.

The detailed 2009 Estimate for this Department is set out at page G.67.

AGRICULTURE, FISHERIES & FOOD

Gross Expenditure for Agriculture, Fisheries and Food for 2009 is €1,803 million, a reduction of €242.4 million (€14.1 million Current and €228.2 million Capital) on the 2008 forecast outturn. The 2008 forecast outturn includes a once off addition of €195 million provided by means of a Supplementary Estimate to meet liabilities arising from the Farm Waste Management Scheme.

The reduction in funding in 2009 combined with an increase in expenditure arising from commitments under certain schemes require some difficult policy decisions in order to remain within the resources available. Reductions have been applied in a strategic, targeted manner in order to maintain the productive capacity of the sector and to protect the less well-off. The estimate includes substantial funding under a wide range of headings, including:-

  • €159 million for Agricultural Research, Education and Training, including €122 million for Teagasc, to encourage innovation at farm and industry level;

  • €632.2 million for the Land Mobility, Compensatory Allowances in Disadvantaged Areas and Rural Environmental Protection Schemes under the Rural Development Programme; the provision for REPS is increased to €355 million;

  • €127.7 million for measures to support Forestry and the Bio-energy sector;

  • a further €125 million for the Farm Waste Management Scheme which will bring total expenditure under the scheme in 2009 to over €615 million;

  • €117.7 million to support the fisheries sector, including research.

The main area where reductions have been applied is in payments under the Scheme of Compensatory Allowances in Disadvantaged Areas. Adjustments are also being introduced to the Breeding and Welfare Scheme for Suckler Cows while entry to the Early Retirement and Young Farmer Installation Scheme is suspended. There are also reductions in Grants-in-Aid of between 8% and 9% for Teagasc, An Bord Bia, the Marine Institute, Bord Iascaigh Mhara and the Sea Fisheries Protection Authority and a reduced provision for certain capital investment schemes.

The detailed 2009 Estimates for this Department is set out at page G.66.

ENTERPRISE, TRADE & EMPLOYMENT GROUP

Gross Expenditure for this Group of Votes, which includes the Department of Enterprise, Trade and Employment and the National Training Fund, in 2009 is €1,951 million, a decrease of €11 million (€23 million decrease in Current; €12 million increase in Capital) relative to the 2008 forecast outturn. The key policy measures and adjustments associated with these resources in 2009 and later years are as follows:-

  • capital expenditure of €309 million, an increase of €15.4 million over the 2008 forecast outturn, is being made available to continue the implementation of the Strategy for Science, Technology and Innovation (SSTI) as part of the Government’s commitment to promoting a competitive, knowledge-based economy. This provision will, inter alia, continue to support the work of Enterprise Ireland (€127 million capital) in driving innovation and R&D in companies, and will maintain the commitment to world class research through the capital allocation of €179 million to Science Foundation Ireland;

  • support for the major enterprise development agencies will continue in 2009 with €90 million capital expenditure allocated to IDA Ireland to attract foreign direct investment and a further €48.4 million capital allocated to Enterprise Ireland for the indigenous sector. Maintenance of a significant allocation to the enterprise sector reflects the importance of maintaining and attracting foreign mobile investment and a strong commitment to increasing exports by indigenous companies;

  • despite a cut of €11 million (1%) in current expenditure, over €1 billion in current expenditure has been provided for FÁS in 2009, reflecting the important role of this agency in addressing current labour market conditions. In particular, resources will be deployed within the FÁS allocation to assist those who have recently become unemployed.

The detailed 2009 Estimate for this Department, including in respect of the National Training Fund, is set out at page G.70.

FINANCE GROUP

Gross Expenditure for the Finance Group of Votes (which includes the Department of Finance, the Office of the Revenue Commissioners, the Office of the Comptroller & Auditor General, as well as the President’s Establishment and several other Offices) is €1,494 million in 2009, a decrease of €97 million (€8.2 million Current and €88.8 million Capital) relative to the 2008 forecast outturn. The key policy measures and adjustments associated with these resources in 2009 and later years are as follows:-

  • a decrease of €82.5 million against the 2008 forecast outturn on Capital on the Vote for the Office of Public Works, mainly on the non-decentralisation elements of the Office’s programme;

  • on the Finance Vote, reductions of €3.7 million for the Centre for Management and Organisation Development arising from a more focussed approach to e-government and €6.1 million on North-South Programmes, as a result of the changeover to new Programme cycles;

  • reductions of €9.8 million on the Vote for the Office of the Revenue Commissioners, mostly on office machinery and related services;

  • these decreases are partly offset by increases of €9.9 million on the Superannuation and Retired Allowances Vote.

The detailed 2009 Estimates for the relevant Departments and Offices are set out at pages G.25 to G.44.

ARTS, SPORT & TOURISM

Gross Expenditure for this Group of Votes, which includes the National Gallery, is €562.8 million in 2009, a decrease of €145.4 million (€18.9 million Current and €126.6 million Capital) compared with the 2008 forecast outturn.

In relation to current expenditure, the allocation provided will allow for the continuation of most of the current programmes in the areas of tourism promotion, sport and the arts. However, the allocation for the Sports Council and the Arts Council will require a re-prioritising of programmes.

The reduction in capital expenditure reflects the fact that the 2008 allocation included €93 million for the Lansdowne Stadium which almost completes the agreed State funding. Work on the project is well advanced and the new stadium is due to open in mid-2010.

There will also be reductions in funding for a range of cultural and sporting projects. In particular, a reduction is being made in the allocation for the Horse and Greyhound Racing Fund to €69.7 million in 2009, from €76.3 million in 2008. The arrangements are being ended whereby the annual payment to the Fund is automatically calculated by reference to the previous year’s betting duty or the contribution to the Fund in the year 2000 as adjusted for inflation.

The detailed 2009 Estimates for this Department and for the National Gallery are set out at pages G.74 and G.69 respectively.

TAOISEACH’S GROUP

Gross Expenditure for this Group, which includes the Department of the Taoiseach and a number of other Votes (including the Central Statistics Office and various legal offices), will be €195.7 million in 2009, an increase of €3.9 million on the 2008 forecast outturn. All of the increase is Current expenditure. There are efficiency reductions across the various areas of the Vote Group, offset by an additional €7 million for the CSO in 2009 to enable enhanced preparatory work to be undertaken for CENSUS 2011 and for the Household Budget Survey.

The detailed 2009 Estimate for the relevant Department and Agencies are set out at pages G.26 to G.40.

MULTI-ANNUAL CAPITAL ENVELOPES 2009-2013

The Multi-Annual Capital Envelopes for each Ministerial Group for the period 2009-2013 have been updated in the light of the 2009 Budget expenditure allocations and are set out in Table 1 of the Summary Public Capital Programme (PCP) at page G.93 of this volume. The Summary PCP also provides details of capital expenditure across each Vote group, on a programme-by-programme basis, for 2008 and 2009, while the subhead allocations for each Vote are set out in full in the Budget Estimates.

The Government announced last July that a comprehensive review of all existing capital expenditure proposals would be carried out. The purpose of the review was to prioritise the more limited available resources on targeted investment in core economic infrastructure to provide a basis for sound and sustained recovery from the current economic downturn. This review has resulted in further savings of over €900 million in addition to the savings of €310 million identified by the Government last July.

Nonetheless, notwithstanding the need for budgetary adjustments, the Multi-Annual Capital Investment Framework still provides for capital expenditure to be maintained at 5.8% of GNP or higher in each of the next five years, with a cumulative capital spend over the period in excess of €52 billion (over €43.5 billion of which will be Exchequer funded with over €8.6 billion to be funded by PPPs). This sustained commitment to capital investment over the medium term will facilitate those investments under the NDP which are necessary for our future prosperity and which will position Ireland to take advantage of an eventual global economic upswing.

On this basis, total capital investment, factoring in PPPs and investments financed by user charges, will represent a very significant proportion of GNP by international standards, as summarised in the table below.

Expenditure under the Multi-Annual Capital Investment Framework 2009-2013

year

2009

2010

2011

2012*

2013*

Exchequer capital, €m

8,231

8,297

8,193

9,672

9,159

Exchequer capital, % of GNP

5.2%

5%

4.7%

5.3%

4.7%

PPP (incl. user charges), €m

957

1,783

2,139

2,387

2,173

Total (Exchequer + PPP), €m

9,188

10,080

10,331

12,059

11,333

Total, % of GNP

5.8%

6.1%

6%

6.6%

5.8%

Totals may vary slightly due to rounding.
* 2012 and 2013 figures use technical projections for GNP, rather than formal forecasts.
RATIONALISATION OF STATE AGENCIES

In the light of the Efficiency Review announced in last year’s Budget, and following on from the publication of the OECD Review of the Irish Public Service, the Government agreed in July to the Minister for Finance’s proposal for a process of rationalisation of State agencies. The Department of Finance has been engaged in discussions with other Departments to progress this initiative.

The rationalisation of State Agencies, which involves amalgamating bodies, reassigning legislative and administrative functions, and discontinuing bodies in some cases, is a complex and sensitive exercise. Consequently, the Government’s approach to this issue has been informed by a set of central guiding principles:-

  • a particular emphasis is placed on the key relationship between the citizen and the State in the delivery of quality public services. Agencies are designed first and foremost to respond to the needs of citizens in this regard.

  • Government Departments are the primary locus of public policy formulation and advice for Ministers; these functions should be integrated within Departments and not unnecessarily devolved to outside agencies.

  • conversely, it is usually appropriate to have separate agencies carrying out particular functions where specialist skills and expertise are required.

  • streamlining of roles and operations should be maximised by eliminating duplication and overlap of functions between agencies, amalgamating bodies with cognate roles, and sharing back-office services with other agencies and with parent Departments.

  • the interests of those people employed in the various agencies should be taken into account in considering and implementing specific agency rationalisation proposals.

  • finally, the on-going relevance of agencies should be continually re-assessed by examining whether the goal for which they were originally established has been achieved (or has been found to be unachievable) and whether the objective remains relevant today having regard to developments in society and changes in Government priorities.

Arising from these considerations, the Government has decided to proceed with 30 rationalisation proposals that will reduce the number of bodies by 41, streamline functions in 3 areas and rationalise the army barracks structure bringing it more into line with operational requirements and permitting economies of scale.

The specific proposals for this first round of rationalisation proposals are set out in Annex D.

DECENTRALISATION

The Government has reviewed the decentralisation programme and has identified priority elements which should proceed at this time. Over 2,500 posts have already been located outside of Dublin. These posts together with the priority elements being announced today will bring a total of approximately 6,000 civil and public service jobs to 40 locations around the country (Annex F refers).

In prioritising the projects which are going ahead, the Government has taken account of the human resource aspects of the programme, commitments already made, the costs involved and the business readiness of organisations to move. A capital envelope for decentralisation projects of €72m in 2009 and €90m in 2010 has been provided.

Decisions on the balance of the programme are being deferred pending a review in 2011 in light of budgetary developments – full details of the projects being deferred are outlined in Table B of Annex F. In coming to this decision the Government has had regard to the report of the Decentralisation Implementation Group (DIG) on the State Agency aspects of the programme together with the views of the Decentralisation Sub-Group of the SMI Implementation Group of Secretaries General