Monday 19 August 2019

Coalition split on USC as FG picks economic policy team

Tanaiste Joan Burton launches College Awareness Week 2016 with students (l to r) Claudia Hergh, Pierre Yimbug, Paul Fox and Beth Wolfe at DIT Grangegorman, Dublin
Tanaiste Joan Burton launches College Awareness Week 2016 with students (l to r) Claudia Hergh, Pierre Yimbug, Paul Fox and Beth Wolfe at DIT Grangegorman, Dublin

Kevin Doyle, Niall O'Connor and Sarah Collins

The Coalition parties are split over how to cut the Universal Social Charge if they are re-elected to government.

Fine Gael has reiterated that it will abolish the much-hated charge, but the Labour Party wants the tax to still apply to incomes over €100,000.

The two ministers in the Department of Finance laid out their stalls yesterday, with Michael Noonan insisting Fine Gael will stick to its pledge to scrap the USC.

And the Irish Independent has learned that Taoiseach Enda Kenny has appointed his own Fine Gael 'Troika' to devise a plan for its abolition.

However, Public Expenditure Minister, Brendan Howlin, said Labour would retain the tax for high earners.

"If you look at what the impact of the total abolition of USC is, if you're on €25,000 - your benefit from a total abolition is €750. If you're on €150,000, your benefit is €16,000. Now, if that's the Fine Gael position, it's not one that I would agree with," he said.

Tánaiste Joan Burton also appeared to take a swipe at her Coalition partners, saying she was "very flattered" they had copied a Labour proposal to reduce USC, albeit that she wanted cuts to be aimed at low- and middle-income families.

The USC brings in nearly €4bn, meaning it will have to be phased out over a number of years. In Budget 2015 the Government indicated that the maximum room for tax cuts next year would be €0.5bn, although sources say that figure is "conservative".

The Government is currently running a budget deficit but according to Department of Finance estimates, the budget would be balanced by 2017, freeing up money to fund tax cuts.

"In our projections beyond two years, we see that we're running surpluses, so we'll have more money than is necessary for the day-to-day running of the country," Mr Noonan said.

"And what we will do with that is we will fulfil the commitments that we are making now because the tax burden on personal taxes is very high."

Later this week the Taoiseach will write to Fine Gael supporters informing them that he has asked Mr Noonan, Jobs Minister Richard Bruton and junior minister Simon Harris to formulate the party's economic vision for the next decade.

Sources say this economic team will do the "heavy lifting" on policy that will then be transferred into the manifesto, which is being overseen by Agriculture Minister Simon Coveney.

"It's an indication that the Taoiseach intends to lean on the three ministers in a major way during the election," said a source. "He will have them front and centre on economic issues, which is where Fine Gael wants to fight the election. Their job is policy development and how to best sell the message."

The source added that Fine Gael wants to be extra-cautious about costing its election commitments because it expects to be "calling opponents irresponsible" for their promises during the campaign.

Speaking as he attended a meeting of eurozone finance ministers in Brussels yesterday, Mr Noonan said he wants the economy "to grow even stronger, and we want it to create jobs - and we know that high personal taxes put a brake on the potential growth of the economy and on job creation".

Mr Noonan pledged to "maintain a tight control of expenditure" after the European Commission said Ireland might overstep EU spending ceilings next year.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Also in this section