Forget big tax cuts in Budget, warns McGrath
FF more concerned with investment in public services
Fianna Fail's finance spokesman Michael McGrath has moved to dampen expectations of massive tax cuts in October's Budget and insisted his party is more concerned with investing in public services.
Mr McGrath, who will play a central role for Fianna Fail in budget negotiations, said he will be seeking to influence the Government's budget policy in the direction of "greater investment in public services".
Fianna Fail and Fine Gael agreed in their 'confidence and supply' agreement that two thirds of next year's €1bn budget fund will be spent on investment, with the remaining third focused on tax cuts.
The agreement commits to reducing the Universal Social Charge (USC) on a "fair basis with an emphasis on low and middle income earners".
However, Fine Gael has committed to abolishing USC over the lifetime of the Government if economic circumstances allow.
Speaking to the Sunday Independent, Mr McGrath warned that there will not be a lot of room for manoeuvre on the USC due to a range of commitments on other areas of tax policy.
He pointed to the extension of the PAYE credits for the self-employed, improving the capital gains tax regime for entrepreneurs, and inheritance tax.
"The agreement provides for a split of at least 2:1 in favour of public spending, so you are talking about €300m available for the tax side, which isn't a whole lot when you look at all the commitments that are there," he said. "There may be some scope to bring in additional revenue from a sugar tax, but there isn't going to be enormous scope," he added.
He said the Government will have to be "cautious" in the face of Britain's forthcoming withdrawal from the EU, and said budget decisions should only be made when all the available economic data is reviewed.
"All of the economic forecasts need to be updated in light of the Brexit vote, and it is likely the revisions will be negative, but what the impact of that will be on future budgets is unclear at this point in time," he said.
Despite Fianna Fail clashing with Fine Gael in recent weeks over demands to increase the old age pension by €5, Mr McGrath said he "sees no reason" why the budget will not pass through the Dail.
However, he predicted there will be tensions with Fine Gael and warned that his party will not accept any "nasty surprises" in the budget.
"It's a new departure for all of us but we are committed to the agreement we have entered in to facilitate the budget being passed. But it is on condition that policy principles are agreed and I'm sure Fine Gael will expect Fianna Fail to want to have a stamp on certain elements of the budget," he said.
"Inevitably there will be tensions because there will be items that we will want to have included in the public interest but those will flow from the agreement we have entered into so there shouldn't be any surprises from our side.
"As a party we will be reaching an agreement amongst ourselves about what the key priorities and the key identifiable Fianna Fail measures we would like to see in the budget," he added.
The Cork South Central TD also poured cold water on the Government's much-lauded Oireachtas Budgetary Committee, saying he does not believe members will be able to reach consensus ahead of the budget.
The committee was heralded by the Government as a major reform of the budgetary process, which would makes budgets more open and transparent.
However, Mr McGrath said it is unlikely there will be consensus on the final report due to the disparate views of the politicians sitting on the committee.
"I think it will be difficult to reach agreement on specific items because everyone is coming to the table with their own ideas and their own ideology, their own party positions," he said.
"We will have to wait and see. I am not certain what level of detail the committee intends to go through by way of recommendations," he added.
The committee will meet at least twice a week from the start of September.