Cowen caves in on Budget 1pc income levy
Taoiseach Brian Cowen is poised to cave in on the two most contentious aspects of the Budget -- the over-70s medical card and the 1pc income levy.
After an unprecedented level of outrage within Fianna Fail about the over-70s medical cards, Mr Cowen yesterday confirmed a major climbdown on the issue. He said the plan as announced last Tuesday would not go ahead.
And deepening the damage to the Government's credibility, it emerged that the Cabinet would tomorrow discuss changes to the 1pc income levy. This follows lobbying from the trade unions and could possibly include exempting the low paid from the tax.
Last night, the fact that two of the Budget's most potentially unpopular measures were likely to be overhauled raised serious questions abut the Government's ability to hang tough on other harsh proposals.
Such is the level of tension and uncertainty in the ranks that Mr Cowen yesterday felt compelled to postpone his trip to China to devote his energies to quelling the internal backlash over the medical card crisis.
FF councillors, and even PD councillors, joined in the chorus of opposition to the over-70s card move. Several Fianna Fail TDs called for a re-examination of the plan.
Government sources last night would not confirm that the 1pc levy would be amended. But significantly, they were not denying it.
However, ahead of a Fine Gael motion on the medical cards issue in the Dail tomorrow, FF's rebel TDs appeared to be back on side -- apart from Joe Behan who quit the party on Friday to become an independent.
Mr Cowen appeared to have bought himself time, though, by announcing an abandonment of the plan as outlined in the Budget.
The first step towards starting up negotiations with the doctors' union, the Irish Medical Organisation, to cut the exorbitant fees paid to GPs for treating the over-70s began last night.
"Contacts have been made with the IMO with a view to exploring the options within the framework the Government has set," a spokesman said.
"All the Taoiseach can say at this point, though, is there is going to be a means test and the automatic right to a medical card for all over-70s is gone, but the income thresholds won't be the same as was set out last week.
"The present position, as we enunciated it, is not the ultimate proposal," he said.
Mr Cowen said the plan did not have the "wider public acceptance it would need to have" and a new proposal would be put together before January 1. And he said he thought savings could be found elsewhere within the health sector to ensure more over-70s retained their medical cards.
"We will seek to find a solution that still seeks to respect the public finances. We have to find a solution that is acceptable," he said.
The controversial means test will, however, still go ahead, the Taoiseach said.
"Yes, it will be a means-tested scheme. This particular scheme is not sustainable in its present format," he said.
Mr Cowen also said descriptions of him as "Brian the Butcher" over the cuts made in last week's Budget were "a bit OTT".
Rather than heading to China last night, Mr Cowen will now travel on Tuesday after spending the next two days talking to his own party backbenchers and working on the renegotiation process.
In signs of a second dramatic u-turn being on the cards, Mr Cowen also said he would bring the concerns of the Irish Congress of Trade Unions to the cabinet meeting on Tuesday. ICTU complained that the 0.5pc extra pay rise for the low paid was being wiped out by the 1pc income levy, particularly for minimum wage workers, who were kept out of the tax net in recent years.
But Finance Minister Brian Lenihan went further as he said the detail of the levy had yet to be worked out in legislation and hinted at an exemption for some.
"The principle of the levy is that it is on all income but there are issues of practicalities in collecting levies from all income.
"Income up to half the industrial wage was not levied under the previous levy, and of course in the context of the Finance Act the edges of this can be looked at, but that is all. That is not a fundamental issue," he said on RTE's 'The Week In Politics'.
The opposition pointed out that this was entirely different to what the minister said on Budget day, when he indicated the levy of 1pc was applying to everyone, regardless of their income.
FG leader Enda Kenny was unconvinced by Mr Cowen's move on the medical cards as he said the Taoiseach did not appreciate the level of "hurt, confusion and anxiety" being caused by the decision and he should reverse it in full.
"It is obvious to me that the Taoiseach is unwilling to say that he got this issue all wrong and simply apologise to the elderly of the country," he said.
And Labour Party leader Eamon Gilmore said the clear message from Mr Cowen was that the Government intended to proceed with its "mean and nasty plan" to scrap the automatic entitlement of over-70s to a medical card from January 1.
"While some tinkering around with income limits may be sufficient to satisfy some of the more gullible government backbenchers, it won't satisfy the public who simply want to see this plan scrapped," he added.