Finance Minister Michael McGrath says he won’t be ‘bullied’ by Fine Gael over Budget plans amid Coalition row

The minister has hit back after three Fine Gael ministers outlined their plans for a €1,000 tax cut in the Irish Independent.

He said there will be “lots of kites flown” and “lots of articles written” in the months coming up to October’s Budget.

His Fianna Fáil colleagues have this week been hitting back at Fine Gael, with politicians describing the tax cut as “nuts” and “populist”.

When asked if he’ll be “bullied” by Fine Gael over the Budget, the finance minister said: “Certaintly not.”

“Anybody who knows me well enough knows that I can be as tough as anybody else when it comes to negotiations. I will alays be conciliatory and polite, but I can be as firm as I need to be and I will be,” he said.

“I will be designing the tax package and it will be done following consultation with all of our colleagues across government.

“It’s fine to have a national debate, a political debate, but it will come down to choices in the end and there will be lots of ideas floated, lots of kites flown, lots of articles written in the next number of months.”

The minister with control over the State’s purse strings said his focus will not be “just” on middle income earners, a pledge which has been often pushed by Fine Gael.

He said there will be “vigorous debate” over possible Budget measures in the coming months.

“Rather than honing in on any individual measure at this point, I think the priority has to be on how much will be in the overall Budget package and then consider all of the needs and demands that will be there.”

The amount of money the State is able to spend on the Budget will be outlined in the upcoming Summer Economic Statement, which will be published in the first few weeks of July.

The Budget will include income tax cuts, further reductions to the cost of childcare as well as increases in the pension and welfare rates, according to Minister McGrath.

While he refused to be drawn on the amount the weekly pension will rise by, he said it is forecasted next year’s inflation rate will be at around 2.5pc,

He said he is “confident” the “burden of income tax” will be reduced on middle as well as low income workers, but said he will “not allow” windfall receipts to be used to fund “permanent tax reductions”.

Minister McGrath also said housing will be a “top priority” and said he has already committed measures to “bring stability” to the rental market.

He is set to meet his “full tax team” today in the Department of Finance to go over a “full suite” of Budgetary proposals.

Earlier today, Junior FInance Minister Jennifer Carroll O’Neill defended the Fine Gael ministers’ call for a €1,000 a year tax cut for workers. She said is party policy and is backed by Taoiseach Leo Varadkar.

The initial call was made in an op-ed she co-wrote with two of her colleagues and published on Independent.ie, saying last year’s €1.2bn tax package “needs to go further”.

The op-ed with Junior Farm Safety Minister Martin Heydon and EU Affairs Minister Peter Burke has caused a coalition rift.

Fianna Fáil TDs and ministers described it as “populist”, “uncosted” and “nuts”, coming five months ahead of the next budget.

Fianna Fáil was reportedly caught by surprise by the request for more tax relief, with Finance Minister Michael McGrath describing the move as an “unusual approach”.

“Different political parties take different views on what to do,” Ms Carroll MacNeill told the Irish Independent.

“It’s clear that in the last budget we provided a very significant tax package: €1.2bn. [The new] measure would cost €1.5bn, in fairness.

“Last year there was an important change, where we widened the bands. We think that needs to go further.

“That has always been the Fine Gael position. There isn’t anything new there.

“Tax changes, tax reductions, people keeping more money in their pocket has been Fine Gael’s work going into the formation of the programme for government and has been our approach to the budget.

“It’s hardly a surprise to anybody that Fine Gael believes that you should be able to take more of that money back in your pocket, particularly on the average income, and that you shouldn’t reach the higher threshold quite so quickly.”

When asked whether the Taoiseach was aware of the op-ed, Ms Carroll MacNeill said, “Oh yeah.”

Calls have been coming in thick and fast from interest groups for a slice of the Government's expected €10bn surplus this year. That figure is expected to rise next year, with an estimated €65bn set to pour in to State coffers up to 2026.

Mr McGrath has said he does not want to use the surplus, which is largely based on what he considers windfall corporation tax receipts, to fund permanent spending increases such as tax breaks.

He has said some of the money could be used for capital spending increases in areas such as housing.

The Department of Finance recently published an ideas paper for a new sovereign wealth fund to bank the bulk of the that surplus to pay for future pensions.