Cuts to dreaded USC will obliterate most of Noonan's tax fund
Government plans to drastically cut the impact of the "penal" Universal Social Charge will "obliterate" much of Finance Minister Michael Noonan's €750m tax war chest, it has emerged.
Both Fine Gael and Labour have agreed to prioritise a slashing of the much-hated USC ahead of another cut to income tax rates.
Senior Coalition sources have confirmed to the Irish Independent that a cut of at least 1.5pc to the Universal Social Charge can be expected in October's Budget, but suggestions of a 2pc cut have been dismissed as "too ambitious". This is because the Government intends to raise the entry point at which people begin paying USC from €17,700 in order that 500,000 will no longer have to pay the charge.
"Certainly, Exchequer returns figures are looking very positive at the moment, and when September comes, we can make a fuller assessment. But USC will see a cut of at least 1.5pc and we will ensure 500,000 will be out of the reach of USC come Budget day," said one senior government figure familiar with the situation.
Taoiseach Enda Kenny and Tánaiste Joan Burton are united in their desire to reduce the impact of the USC as much as possible, but sources on both sides of the Coalition stressed much work needs to be done before there is a final sign-off on the cut.
It was suggested last night that whatever money remains in Mr Noonan's election war chest is likely to be directed toward construction-related incentives.
Due to conclude this year, the Home Renovation Incentive (HRI) was one incentive which looks set to be continued for at least one more year, Coalition sources said last night.
The HRI is paid in the form of a tax credit at 13.5pc of how much is spent on the renovation job, which can be set against income tax over two years.
This effectively reduces the rate of VAT to zero on qualifying work, up to a value of €30,000.
Labour Party sources said it is far too early to be speaking about specific interest rates but said the party is determined to relieve the burden on families where possible.
Meanwhile, Ms Burton looks set to annoy some in Fine Gael over her belief that a restoration of the Christmas bonus should take priority over restoring the €47m telephone allowance.
Ms Burton and the Labour Party are keen to increase the Christmas bonus to at least half the value of the weekly social welfare rate, a move which would cost €60m.
Fine Gael TDs are keen to see the €9.50-a-month telephone allowance restored, a move which would reduce bills by €114 a year for over 410,000 pensioners.
But Ms Burton is insisting that a restoration to the Christmas bonus would be preferable as it would benefit more people who need it.
To someone on jobseekers' allowance, a 25pc increase in the Christmas bonus would be worth €47; €57 to a pensioner living by themselves; and €109 to a couple living on the State pension.
Ms Burton is likely to have additional funds at her disposal given the better than expected reduction in Live Register numbers.
Since the last Budget Day, almost 25,000 people have come off the Live Register, which means she has at least €100m more than she thought she would have heading into this year's Budget negotiations.
Last week, Limerick Fine Gael TD Patrick O'Donovan called for the restoration of the telephone allowance.