Vat increase means extra €50 million cut to health services in 2012 – McGrath

Published on: 13 January 2012

The Government’s decision to increase the standard rate of Vat by 2% in last December’s budget will cost the HSE €50 million in 2012, according to a Dáil reply from the Minister for Health to Fianna Fáil’s Finance Spokesperson Michael McGrath. Deputy McGrath estimates that the cumulative impact of the Vat increase across the public sector exceeds €100m in 2012.

Deputy McGrath said: ‘On budget day, Michael Noonan estimated that the Vat increase would bring in an extra €560m in 2012. Based on replies I have received to parliamentary questions, I would estimate that over €100m of that is coming from the State sector. I believe this to be a conservative estimate. This hidden cut will inevitably affect the level of service being delivered to the general public.

“The €50m cost to the HSE arising from the Vat increase is additional to the cuts of €543m announced in the budget. This will mean less money will be available for essential patient services.

“Twelve Government departments provided figures in response to my parliamentary questions on this issue and they confirmed the Vat increase will collectively cost them over €9m. Other public service bodies will also incur substantial extra costs as a result of the increase. For example, the 2% increase will cost Cork County Council €2m in 2012. Based on the Council’s relative size, the overall additional cost to local authorities around the country would exceed €20m.

“Figures have not been made available for a range of other public bodies, including the combined cost of the Vat increase on schools, third level institutions and the wide range of State bodies. I believe if the full cost of the Vat increase to the wider public sector was aggregated, it would exceed €100m.

“Fianna Fáil’s view is that frontloading the Vat increase entirely into 2012 was a mistake. It will inevitably further dampen demand in an already struggling domestic economy. These figures show that the Vat increase has imposed very substantial extra costs on a range of bodies delivering public services. The impact of the Vat increase in 2012 will have a far greater impact than has been acknowledged by Government to date.”

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