Tuesday 24 April 2018

Varadkar defies EU Commission rules, plans cuts to USC for 'squeezed middle'

  • Budget will have a 'particular focus' on reducing income taxes 
  • USC cut to defy EU Commission
  • Taoiseach will allow ministers to spend savings within departments
Taoiseach Leo Varadkar. Photo: PA
Taoiseach Leo Varadkar. Photo: PA
Philip Ryan

Philip Ryan

Taoiseach Leo Varadkar plans to unveil cuts to the Universal Social Charge aimed at the working middle class in the next Budget in defiance of stark warnings from the European Commission about cutting taxes, the Sunday Independent can reveal.

But Government ministers fear that any additional money may be wiped out by the "perceived and real risk" that waste companies will dramatically increase bin collection charges for a "significant number of households".

Mr Varadkar told the Sunday Independent that his first Budget would have a "particular focus" on reducing income taxes, with a significant emphasis on cutting USC.

The Taoiseach also revealed that he would allow ministers to spend savings found within their departments rather than control the additional funding centrally.

The move is aimed at expanding the amount of financial resources available for tax cuts and spending within the strict European Union budgetary rules.

"Rather than just bidding for a small sliver of the available fiscal space in the next Budget, ministers should think about what might be reallocated within their own budgets," Mr Varadkar said.

However, the Sunday Independent can reveal that there are serious concerns at the heart of Government over the introduction of pay-by-weight bin charges.

Ministers discussed the new system at length behind closed doors at last week's Cabinet meeting where fears were expressed over the issue becoming another water charges controversy.

In briefing documents, ministers were warned that there was a "perceived and real risk" of domestic waste companies dramatically increasing charges for a "significant number of households" once the new charging regime was introduced.

The Cabinet briefing seems to be at odds with the Taoiseach insisting in the Dail last week that people should not be "panicked and fearful" about the introduction of the new charging system.

Last year, bin companies voluntarily imposed flat-rate charges after public outrage forced the Government to delay the introduction of pay-by-weight charges. The price freeze ended yesterday but has been extended until September.

The Cabinet was told last Tuesday that bin companies were now expected to significantly increase fees because collection charges had remained unchanged for a year while business costs, such as for fuel and insurance, had risen.

Read more: 'I didn't mean to leave Trump hanging for 90 seconds' - Leo 

Dublin households, which benefited from cut-price rates from companies seeking to build business, are expected to see their charges rise in the coming months.

In addition, ministers were told waivers for low-income households were likely to be abolished by waste companies.

Some local authorities struck deals when bin collections were privatised which entitled some existing customers to waivers. However, most of these contractual arrangements have now expired.

The Cabinet was also warned of a "lack of competition" for domestic waste collection in some parts of the country as it prepared to radically change the charging system for bins.

A statement prepared for ministers by the Competition and Consumer Commission (CCPC) said it had concerns about competition in areas where there was "little, if any, choice of waste collector".

The watchdog urged the Government to introduce a waste company regulator to monitor charges, as has also been proposed by Fianna Fail.

It can also be revealed that Public Expenditure and Finance Minister Paschal Donohoe warned Communications Minister Denis Naughten against committing public funding to a €75-a-year bin charge subsidy for 90,000 sick and elderly people.

Mr Donohoe said there was "no public commitment" to fund a subsidy for households disposing of incontinence wear.

The subvention payment, which was eventually secured by Mr Naughten, will cost up to €6.75m a year.

Mr Donohoe also raised concerns about the €9m cost of a new waste management enforcement scheme for local authorities.

There are also concerns among ministers that the verdict in the Jobstown trial will encourage left-wing parties to become militant in their protests against new bin charges.

Solidarity TD Paul Murphy yesterday said he was waiting to see the Government's policy on bin charges before forming "tactics and a strategy to defeat them".

As concerns rise in Government over the impact of bin charges, Mr Varadkar said his "number one priority" for the Budget was "not to repeat the mistakes of the past".

"That means achieving a balanced Budget this year and continuing to reduce debt. After that, the 2:1 split applies between additional spending, which includes welfare and public services, and tax relief, with a particular focus on income taxes including USC," Mr Varadkar told the Sunday Independent.

"I have also set out my priority that we need to allocate more resources for infrastructure and capital spending, because we need to increase the economy's capacity to grow and meet the needs of our young and growing population.

"At the same time, we need to increase capital spending in a planned and measured way, rather than doing it too quickly which could drive up the cost of building, and would mean getting less from more."

Fianna Fail Social Protection spokesman Willie O'Dea said: "The Taoiseach has raised the possibility of funding tax cuts by cutting expenditure elsewhere or raising indirect taxes. Whatever juggling with figures he may try, he can be assured that I will not be supporting him if it involves denying increases for pensioners or for people on disability or carers' allowances," he said.

The EU Commission last week warned against abolishing USC as it sees the controversial charges as a progressive tax.

Mr Varadkar, meanwhile, urged his ministers to find "hidden fiscal space" in their departments and increase spending outside the strict EU spending rules.

Sunday Independent

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