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Monday 5 December 2016

The bottom line for families? We'll have a little more to spend

households

Smiling father with banknotes sitting at table, family staying nearby
Smiling father with banknotes sitting at table, family staying nearby

There may be ten weeks left until Christmas, but Santa Noonan decided to dress up in a red suit and drop presents down the chimney early. Metaphorically, of course, which is something of a relief.

The Budget was definitely family-friendly, and consumer friendly and everyone will have a little bit more to spend in 2016.

There is, astonishingly, over €92bn tucked away in savings accounts in banks, post offices and prize bonds, and while you'd imagine Mr Noonan would want it sloshing about in the economy, he did nothing to add an incentive to do so.

A major top-line benefit for families is the reduction in all levels of the hated Universal Social Charge.

Low income earners won't start paying it on the first €13,000, while the percentages are down overall. This is great news for parents on tight budgets and may encourage more spending.

For family household budgets there were few changes in the 'old reliables'. Smokers will find themselves paying 50c extra a pack which appears to be the only tax increase measure announced. Drinkers or car drivers won't pay any more.

The biggest single element helping low-income families is the increase in the minimum wage from €8.65 to €9.15 per hour.

This is a way off the living wage some groups called for, but it's going to help raise household incomes for poorer families.

There was a sneaky red herring though for all consumers. While the stamp duty on debit cards was abolished (€5 a year), there was a transaction fee of 12c slapped on ATM cash withdrawals which will be capped at €5 per year.

complicated

So in reality, by withdrawing cash just 42 times, or less than once a week, you'll pay €5 anyway.

For people who like to deal in cash then, because it stops them over-spending, there's no change. However, the move may encourage the elderly to hoard cash, which is obviously not a good idea. The transactions fee is a silly move then, designed to move us to a cashless society, but it has simply complicated our lives instead.

The charge is in addition to the existing transaction fees charged by banks, so people will be confused.

The minister also increased the limit on 'contactless' debit cards (the ones you wave at a terminal to make small purchases), from €15 to €30. Some banks, such as AIB, had already done this, so that's no big deal.

What is a big deal though, is that when these banks begin to charge for transactions made in this way, it will be at huge cost.

At the moment, they're free to AIB customers, and 1c for BOI. Technically, they can be increased at any time.

Elsewhere, self-employed workers will benefit from a new €550 tax credit, allowing them to spend a little more.

PAYE workers get €1,650 so it's obviously far behind, but this is welcome nonetheless to those who feel hard done by as they create their own job, and perhaps others with it.

All in all, consumers will be better off. They might celebrate by having a meal in a restaurant, aided by the retention of the low 9pc VAT rate in that industry.

Householders might even feel a little better about spending their money in 2016.

If they can spend their savings too, they'll have made Mr Noonan a happy finance minister indeed.

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