Labour under fire over €280 pension cuts plan
Proposal to remove universal charge exemption 'intolerable'
LABOUR has come under fire for a proposal to take €280 a year from 300,000 pensioners in the coming Budget.
An extract from draft research carried out for Labour highlights the fact that the current tax system "does not apply to everyone".
"This particularly applies to the Universal Social Charge (USC) which, despite its name, is not universal," it says.
"Contributory state pensions – costing €5.3bn in 2012 – which are not means-tested are fully exempt by law from the USC at a cost of €330m."
Currently, those receiving the €230-a-week state contributory pension are exempt by law from the USC. But removing this exemption would see them hit with an annual tax bill of €277 – a reduction of just over €5 per week in their pension.
Any extension of the USC would be highly controversial, given the furious backlash from pensioners when the previous government tried to take away their medical cards in 2008.
Many people receiving the state contributory pension also have a second pension, which is liable for the USC and income tax.
Fianna Fail social protection spokes-man Willie O'Dea said pensioners had already been hit with cuts to their fuel allowance, free telephone allowance and free electricity or gas allowance.
"They have been hit in so many ways that it's intolerable to think the Government would hit them again," he said.
Labour is seeking new ways of raising extra tax revenue in the Budget, having had its previous attempt to raise the USC for people earning more than €100,000 rejected by Fine Gael last year.
The research is being carried out for the party's budgetary working group by former senior civil servant Donal de Butleir.
Another of the suggestions is to increase the temporary VAT rate for the tourism and hospitality sector. It was cut from 13.5pc to 9pc two years ago and is due to expire at the end of this year.
However, Labour TDs yesterday told the Irish Independent they had not yet been briefed on the research, and it had not cropped up at the in-house policy committee.
A Labour source said there were three ways to reduce the impact of the Budget – cut less, reduce taxes or spend more money on infrastructure.
However, Fine Gael has moved to dampen hopes of a pain-free Budget in October. Junior Finance Minister Brian Hayes said significant tax cuts were "unlikely" because there was a need to get €3bn in extra tax revenue and cut spending.
Transport Minister Leo Varadkar criticised fellow ministers Richard Bruton and Joan Burton for "kite-flying".
"It would be better if we talked to each other before flying kites (about tax cuts and minimum wage increases) in the media," he told News-talk's 'Sunday Show'.
There is scope for the Government to reduce its target of taking €3.1bn in extra tax and cuts.
Finance Minister Michael Noonan will review the figures in September. If there is a 1pc rise in the tax take and a 1pc decrease in spending, he could reduce the figure by €1bn.
Sinn Fein finance spokesman Pearse Doherty, meanwhile, accused the Government of utterly failing the Irish people, at his party's annual Wolfe Tone Commemoration in Kildare.
"They have failed to tackle emigration, unemployment, the banks and the scandal of mortgage distress," he said.