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Buoyant tax receipts will fund Budget cuts in childcare fees

Ministers rule out emergency measures to tackle rising cost of living


Substantial cuts to monthly childcare fees could take effect before the end of the year. Photo: Stock image

Substantial cuts to monthly childcare fees could take effect before the end of the year. Photo: Stock image

Substantial cuts to monthly childcare fees could take effect before the end of the year. Photo: Stock image

Record employment and buoyant tax receipts will help fund a significant cut in childcare fees and welfare increases of more than €5 per week that could come into effect immediately after the Budget in October.

Ministers are resisting pressure to bring in further measures immediately to help address the cost of living but hope to unveil a larger than previously indicated tax and spending package in the Budget later this year to offset the impact of inflation.

As part of this, substantial cuts to monthly childcare fees – that could take effect before the end of the year – are being considered.

Children’s Minister Roderic O’Gorman wants parents to benefit from a “noticeable” cut in their monthly childcare costs. “Parents need to feel the impact of it,” a Government source said last night.

One Government source said there was now an “emerging agreement” to wait until the Budget to “go at this full-throttle”, although sources in Fine Gael continue to leave open the possibility of an intervention before then, despite Taoiseach Micheál Martin and other senior ministers firmly ruling it out. 

The full scale of the Government’s ability to act will be laid out in the Summer Economic Statement which is due to be published before the end of the month. 

The €500 tax-free bonuses for employees in the private sector is set to be doubled to €1,000 as part of Budget 2023, Tánaiste Leo Varadkar signalled yesterday. 

He said it was unfair that frontline workers were getting €1,000 tax-free bonuses but the limit on tax-free vouchers remained at €500 for workers in the private sector.

“Paschal [Donohoe] is doing some work on that. So if people are getting end-of-year bonuses from a private-sector employer, they can receive €1,000 instead of €500 tax free,” he said.

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He added that there was more room for “manoeuvre” during this Budget because “tax receipts are very healthy, the record levels of employment in the economy and the trade figures [higher] than they ever were before”.

Mr Varadkar said he did not want to see pay increases more than halved due to high rates of tax. “We want to make sure that if people get a pay increase, they don’t find 52pc of that being lost to income tax, USC and PRSI.

“We believe it would be safe to inject some money into the economy on Budget Day to help to compensate people for the high cost of living.”

Some Fine Gael sources are privately insisting that more immediate measures on the cost of living have not been ruled out prior to the Dáil breaking for the summer recess, despite the Taoiseach and senior ministers, including Fine Gael’s Mr Donohoe, ruling it out in recent days.

Speaking in the Dáil, the Taoiseach poured cold water on emergency cost-of-living measures, pointing instead to Budget Day. He said that giving cost-of-living reliefs in a package next week would result only in further demands “before a month is out”.

“It seems to me that every month in this crisis, and it’s very serious, people want an extra €1bn,” Mr Martin said.

“I’ve no doubt that if something was announced next week, before a month is out people will be looking for another package – and that’s the nature of it.”

The Government wanted to alleviate the pressures, but to do so in a comprehensive way, he said.

Mr Martin said he fully accepted the pressures on people, yet €2.4bn in specific measures had been brought in as special measures since the last Budget.

But opposition parties insisted that an emergency budget is needed now – after the Government signalled nothing new for four months.

Sinn Féin leader Mary Lou McDonald warned that people could not wait until the Budget in October.

“The Government cannot just pack up for the summer and leave workers and families in the lurch,” she said.

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