Monday 14 October 2019

Taoiseach facing Budget backlash over tax cut pledge

O'Dea questions €1,600 TD pay rise as pensioners set to lose out

Finance Minister Paschal Donohoe. Photo: Gerry Mooney
Finance Minister Paschal Donohoe. Photo: Gerry Mooney
Hugh O'Connell

Hugh O'Connell

Taoiseach Leo Varadkar is facing a backlash from his own ministers and Fianna Fáil for saying there will be "some reductions" in tax in next week's Budget announcement.

The Sunday Independent has learned that some Fine Gael and independent ministers in Cabinet are unhappy that the Taoiseach put tax cuts back on the table while speaking in Los Angeles last week.

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The comments stood in contrast to what they are being repeatedly told by Finance Minister Paschal Donohoe in bilateral budget talks: that Brexit means there is little money for new spending measures or tax cuts.

It comes as Fianna Fail's social protection spokesman Willie O'Dea has again hit out at the Government and his own party for failing to push for a €5 increase in the weekly State pension and other welfare payments.

Writing for this newspaper, Mr O'Dea has questioned why TDs should get a €1,600 pay increase this year, but pensioners, carers and other vulnerable members of society cannot have their weekly welfare payments increased by €5 from March of next year - as has been the case in the last three Budgets.

Mr O'Dea writes: "As in previous years I am encountering enormous push back from ministers and their minions accusing me of populism. They say we cannot afford it. My argument is how can we afford not to give these increases if we want to have a fair society?"

But the former Cabinet minister's demand for a €5 across the board increase in welfare payments is not being pushed by Fianna Fail's Budget negotiators, Michael McGrath and Barry Cowen, in talks with Mr Donohoe.

A senior Fianna Fail source said the party is focused on economic sectors that will be worst affected by Brexit including agriculture, small businesses and tourism.

One Fianna Fail frontbench TD privately criticised Mr O'Dea's comparison between welfare increases and TDs' pay rises - which are linked to the pay deal for all public servants - as "Shinner amateur hour stuff".

Meanwhile, Mr Varadkar's comments in LA last week have unnerved some in his own Government. Speaking to reporters he said there will be minimal tax package with "some reductions".

His remarks were viewed as putting tax cuts back on the table despite repeated signals from Mr Donohoe that there would be little to none with a no-deal Brexit increasingly possible.

"The public accepted there weren't going to be tax cuts, there was no expectation of tax cuts. I don't see where it came from because it's not in line with any of the discussions we have had," a Fine Gael Cabinet minister said. "It's not in line with what he's said in Ireland."

Independent Alliance ministers, including Finian McGrath and John Halligan, are also understood to be annoyed at Brexit being used by Mr Donohoe to avoid spending increases in key areas, while the Taoiseach has raised the possibility of tax cuts.

"A lot of ministers are not happy with the Taoiseach's comment about the tax cuts because we're all fighting for public services," an Alliance minister said.

A senior Fianna Fail source said tax cuts "don't really make sense" if there is a hard Brexit, the senior Fianna Fail said. "Tax cuts for upper earners never far from his mind… it could be the Hollywood air."

Fianna Fail MEP Billy Kelleher said of Mr Varadkar's comments on tax: "He's playing to the gallery, he's playing to an audience, but they're not even listening anymore, he's said it too often but not able to deliver it because of the public finances.

"There's challenges around the corner. We have to buffer ourselves against the challenges of Brexit. The idea they could buy next election with tax cuts is wearing very thin and hollow."

Another Fine Gael minister said they got the impression there was a split between Mr Varadkar and Mr Donohoe over the tax cuts issue.

But Mr Donohoe told the Sunday Independent last night: "The Taoiseach and I are absolutely agreed on budgetary approach and strategy. We are fully aligned on all elements of the budget and I will be working to conclude all preparations for Budget 2020 this week."

A spokesman for the Taoiseach said Mr Varadkar and Mr Donohoe are "entirely in agreement" with regard to the Budget and that both have referred to a "modest package including the possibility of minimal changes to income taxation".

The spokesman added: "Matters for discussion between Minister for Finance and various ministers regarding the Budget are confidential by their nature. The Government is clear that next Budget will be focused on climate change and a no-deal Brexit."

A well-placed source with knowledge of the Budget talks said that there will be changes to the lower entry points for Universal Social Charge to take account of the increase in the minimum wage to €10.10 - which is due to happen on January 1.

"There will be a small tweaking of USC at lower entry point to ensure we make up for that - it's very minor."

Sunday Independent

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