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How families will be no better off

We reveal how savings are gobbled by bill hikes, By Bill Tyson.

Hikes in childcare and in car, house and health cover will gobble up most of the benefits of Budget 2017.

A stark increase of 28% in car insurance in the year to August has already added €543 to the bill of a two-income family, Central Statistics Office figures show.

Health insurance jumped 6.7% over the same period-racking up another €190 on to their household bill.

But the pain is going to get Wworse, says health insurance expert Dermot Goode of total healthcover.ie.

"We're back in the cycle of regular price increases without a shadow of a doubt. Families could face 10%-12% increases from 2017 onwards."

And a double-digit hike in house insurance totted up to around €44. There was good news with petrol and mortgage rates coming down by around €700 for a 'squeezed middle" family on €80,000 jointly.

The average price of petrol was 127.5 cents per litre in August, which is 11% less than it was 12 months ago, according to the Automobile Association.

"For a typical motorist a 'Band B' medium car that works out at a saving of €196.80 annually. However, they will still pay €1,554 for their year's fuel, with tax making up more than 60% of this figure," the association said.

Mortgage rates are still too high, said Simon Moynihan of comparison site Bonkers.ie.

"But a lot of banks are bringing down rates where people can show their loan-to-value ratio has reduced."

When all the gains and losses are totalled up, householders at this level of income were still worse off by €315.70 this year compared to 2015. And that will gobble up most if not all of any gains doled out in the Budget today.

Speculation had centred on a cut of around half a percentage point in three USC rates. If this occurs, it would knock around €400 off the tax bill of our middle-income family of home-owners, leaving a family only €87 a year better off.

However, even a Budget boost of that level would not do much to ease the of tenants bearing the brunt of the housing crisis.

Rent went up 11%, according to Daft.ie's latest figures, adding a crushing €1,392 to the cost of a three bed semi per year.

CSO figures show overall consumer fell 0.1% in the year to August. But many commentators and even economists dispute whether this is an accurate reflection what many families are going through.

"People are not going to be jumping for joy (over the Budget)," said economist Alan McQuaid of Merrion Stockbrokers. "You're probably going to break even at best... and maybe end up worse off over the course of the year." He also said: "I don't see insurance coming down anytime soon."

Childcare costs rose in the year by 2.2%. But with creche prices sky high, even that is a significant hit for families. A squeezed middle family of three children benefits from having one child in free pre-school childcare. But even so such a family still saw childcare costs rise by €273 this year compared to last.

The new childcare measures will ease some of that pain although we do not know yet the precise details.

'It certainly doesn't feel like things are getting better," said Laura Erskime of Mummypages.ie.

"Very high childcare costs are going up incrementally every year in addition to every other cost and premium and we have the addition of water charges.

“Yet our salaries don't reflect that. Our mums are stretched. Now that austerity is over there is pressure for families to re-engage, to go on holidays for example, and mums household incomes haven't caught up with that expectation.

'Our mums are telling us they are family planning around childcare costs and even waiting for one child to enter primary before having another child. Some are only having one child because they can't afford another."

No matter how great any rise in childcare supports, it will be outweighed by the biggest stealth tax of them all: the failure to link tax bands and credits to inflation or wage increases. This costs middle income families hundreds of euros a year as they get wage increases to account for inflation that puts more of their income in a higher tax bracket and makes credits less valuable.

Indexing the taxation system would cost around €800 Million a year. And not doing so costs taxpayers the equivalent amount in extra stealth tax, according to think tank Public Policy.ie.

Mere indexation of the income tax system would cost about €4 billion [over five years]. It is clear therefore that the level of taxation will increase over the period’, said tax experts Donal de Buitleir of PublicPolicy.ie.

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