Tax break for landlords will ultimately benefit renters, says Varadkar

The Taoiseach has defended the 14 billion euro budget package unveiled by his Government on Tuesday.

Taoiseach Leo Varadkar speaks to a shop worker during a morning canvass of commuters at Mayor Square in Dublin (Brian Lawless/PA) (PA Wire)

The Taoiseach has defended a budget tax break for landlords, insisting the measure will ultimately benefit tenants.

The Irish Government has faced opposition criticism for a tax relief for landlords worth 600 euro per property this year rising to 1,000 euro in 2026.

Ministers also increased the tax credit for renters from 500 euros to 750 euros in Tuesday’s 14 billion euro budget package.

Ireland is experiencing acute housing shortages, with rising homeless rates dominating much of the country’s political discourse.

The Taoiseach, Leo Varadkar, joined other Fine Gael ministers in central Dublin on Wednesday morning to canvass voters following the budget’s unveiling.

Speaking to reporters afterwards, the Fine Gael leader rejected any suggestion the Government was favouring landlords over tenants.

Mr Varadkar highlighted that the rent tax credit would be more valuable next year than the tax relief for landlords.

“The rent credit is now being increased to 750 euros, that’s per renter,” he said. “So if you’re a couple renting, it’s 1500 euros, if you’re three people sharing, it’s 2250 euros.

“So you know, very much in the space of a month’s rent back in people’s pocket. What’s been done for landlords is considerably less than that. It’s 600 euro per property. So it’s considerably less than that.

“But the reason why we’ve done the tax concession for landlords isn’t really for the benefit of landlords, it’s for the benefit of tenants as well and the wider market, because every year that a small landlord stays in the market they get a bigger tax credit.

“But if they sell up that all gets taken back. So the design and the thinking behind it is to say to small landlords who have been leaving the market in big numbers, ‘stay in for the next couple of years’ and that will help with supply and also helps keep rents down.”

One of the challenges facing the coalition as it drew up the budget was addressing a one billion euro plus overspend in the Department of Health.

The health budget is always very difficult to control, just because of rising demand and then medical inflation and lots of other factors. But there has been a massive expansion in the health budget and indeed the number of people working in our health service

Leo Varadkar, Taoiseach

The department has been allocated an extra 800 million euro for 2024 and a reserve of non-core funding includes a one billion euro plus contingency pot that health can draw on to deal with ongoing challenges, such as Covid-19.

Mr Varadkar has said keeping control of health spending is “very difficult” but he indicated more oversight was required on hospital funding, as he said it was not clear what some of the funding going to the hospitals sector was spent on.

“The health budget is always very difficult to control, just because of rising demand and then medical inflation and lots of other factors,” he said.

“But there has been a massive expansion in the health budget and indeed the number of people working in our health service.”

Mr Varadkar added: “There’s been a lot of investment in health. But it’s always going to be a challenge. But that’s something we’re going to work through with Minister (Stephen) Donnelly and also with the HSE over the period ahead.

“And we have set aside that reserve in the budget, roughly an additional billion euros, that health can draw on, but we’re going to want to make sure that that money is properly deployed and patients actually see the benefit of it.”

Mr Varadkar said in some areas of health there was “very good budget control”, such as in the mental health sector.

He added: “But in the hospitals, in particular, there can be a lot of spending and it’s not really clear where the money goes all the time.”

The budget package agreed by the Fianna Fail, Fine Gael and Green Party coalition in Dublin included a 5.27 billion euro increase in public spending.

It also included 4.76 billion euro of non-core funding to respond to exceptional circumstances, such as Covid-19 challenges in health provision and the humanitarian response to the war in Ukraine; 1.16 billion euro on tax measures; a further 444 million euro in temporary tax measures; 1.4 billion euro for one-off cost-of-living supports; and 900 million on energy credits for households.

Mr Varadkar defended the package, insisting that spending more may have been “counter-productive” as it would have fuelled inflation.

“The total budget package here today is 14 billion euros, I think it’s probably the second biggest budget package ever, if not in decades,” he said. “So, it’s a substantial package when you take it all together.”

The Taoiseach added: “I think we would always like to do more in any budget. I can guarantee any minister would have gone into the talks hoping to do more and get more than they did.

“But we do have to have regard to the fact that there are limitations.

“And we don’t want to create a situation whereby the budget is so big that it drives up inflation, because that will be counterproductive.

“And we have to think ahead to consider about the possibility that the economy might not be so strong in a few years’ time.

“Generally, people I’ve met are happy with the budget. And if there’s any criticism, it is that we would like to see a little bit more. And I understand that, and I feel the same way.

“But we have to operate within constraints. We have been through very difficult times economically in Ireland before, and nobody wants to go through that again.

“And that’s why we have to operate within certain constraints.”