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Tuesday 16 September 2014

Cabinet at odds over plan to take property tax straight from dole

Fiach Kelly and Michael Brennan

Published 28/11/2012 | 05:00

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MINISTERS are at war over proposals to make social welfare recipients liable for the property tax – and take it straight from payments like the dole.

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And some cabinet members are now fearful they will be bounced by Finance Minister Michael Noonan into tax proposals without debate on Budget day.

Social Protection Minister Joan Burton is insisting "under no circumstances" will people on welfare have to give the property tax straight from their payments.

Sources also say she does "not accept" the concept that people on welfare will have to pay the tax. The Irish Independent understands deducting the tax directly from welfare payments is one of the recommendations in the Thornhill Report, given to the Government on property tax.

"No, that is not accepted," a source close to Ms Burton said.

"It's a no-go as far as she's concerned."

Sources also warned that such a proposal would open Labour up to further attacks on its left at a time when the party is steadily losing support. In particular, it is feared it could lead to floods of damaging court challenges to the tax.

Ms Burton first detailed her concerns in a letter to Environment Minister Phil Hogan when he was considering the Thornhill Report in the summer, and she said taking the tax from welfare payments could lead to "a farcical system".

"She has repeated these concerns but they appear to have fallen on deaf ears," a source added.

Mr Hogan has refused to rule out people on welfare paying the tax, while Transport Minister Leo Varadkar and junior finance minister Brian Hayes said everyone must make some contribution to the property tax.

Hardship

Mr Noonan is designing the tax, which will be one of the centrepieces of next week's Budget. Welfare recipients were obliged to pay the €100 household charge, but those in local authority housing were not.

However, the property tax will be much higher, and could cause further financial hardship and "drive people back to the community welfare officer", it is claimed.

In her letter to Mr Hogan, seen by the Irish Independent, Ms Burton said it could lead to "a farcical system whereby the payment of this range of system charges would simply result in additional demands on the funding of the social welfare system".

This would cause "a circular movement of funds around the Exchequer and the multiplication of administrative overheads and information maintenance requirements, with all resulting costs arising in both the programme and administrative budgets of the social welfare system".

Deducting from source "cannot be implemented" and is "not feasible" from a policy or logistical point of view, she added. However, it is now said to be "doable but tricky".

Public Spending Minister Brendan Howlin is to bring proposals on €2.1bn of spending cuts to Cabinet today, but it is unclear if Mr Noonan is bringing his tax plans.

This is now causing serious worry around Cabinet, and comes after grumblings about how the Budget has been kept "drum tight" by the Economic Management Council, which comprises Mr Howlin, Mr Noonan, Tanaiste Eamon Gilmore and Taoiseach Enda Kenny.

A source said there were concerns "we will have no opportunity to discuss it" and that "it will not have been politically proofed by Cabinet".

Rank-and-file TDs are also concerned the secrecy surrounding the Budget will cause major trouble after the €3.5bn cuts-and-taxes plan has been announced on December 5.

Meanwhile, Joan Burton has promised Labour backbenchers that her social welfare cutbacks will be more targeted on a small number of schemes.

Last year, she had to implement more than 25 separate social welfare cutbacks, which included cuts to child-benefit payments, disability payments, lone-parent schemes and community employment schemes.

She told Labour backbenchers in a private briefing that the current €540m of social-welfare cutbacks in next week's Budget would be focused on a smaller number of schemes – with sources putting it at between 10 and 20 schemes.

But Labour backbenchers are still bracing themselves for the impact of the social welfare cutbacks – which will be higher this year at €540m compared to €475m last year.

Ms Burton repeated her public pledge that there would be no cuts to core social rates – which are defined as weekly payments such as jobseekers and the state pension but excludes child benefit.

Labour sources said child benefit is not going to be means tested or taxed, but they are still expecting cuts in payment rates.

She also promised – as reported earlier this week in the Irish Independent – that the number of places on the Tus and Rural Social Schemes would be expanded to cater for more unemployed people.

Irish Independent

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