Bruton insists cutting the tax burden on families is the main priority
Burton argues for defence of welfare spending on both equity and utility grounds
The Taoiseach, Enda Kenny, and the Minister for Social Protection, Joan Burton, at the launch of an independent evaluation of JobBridge , the national internship scheme, last month. Photograph: Eric Luke
Over the past week some senior Ministers started to throw shapes about the thrust of next year’s budget. In crude terms Fine Gael is emphasising the need to avoid any further income tax increases, while Labour is more focused on the need to protect public spending at current levels in order to protect services.
Of course it’s not as simple as that. Most Fine Gael TDs are as uncomfortable as their Labour colleagues about defending sensitive spending cuts, while Labour TDs don’t relish imposing higher taxes on ordinary families. Still, the fault line between the two parties relates to the emphasis on tax or spending.
Joan Burton kicked off the public debate at the Tom Johnson summer school last weekend with a strong argument for maintaining welfare spending at its current levels. She based her case not only on the grounds of equity but also on the positive economic impact of putting money into the hands of people who were most likely to spend it in the local economy
Just for good measure she suggested that the minimum wage of €8.65 an hour should be increased as a way of incentivising people on welfare to return to the labour market. That was a red rag to small and medium business, an important element of Fine Gael’s support base.
Minister for Enterprise and Employment Richard Bruton was out of the traps a few days later to argue that cutting the tax burden on ordinary families was the most urgent budget priority in order to stimulate job creation.
He had some strong arguments to back up his case. We now have a higher marginal tax rate of between 52 per cent and 55 per cent, which is higher than most of our competitors, but even more importantly the high rate of tax kicks in at a much lower level than in most other developed countries.
In Ireland a single person starts paying the higher tax rate at €32,800, while the average industrial wage is €36,000. There is eerily reminiscent of the 1980s, when the drive to get the deficit under control saw the tax burden on ordinary families raised to breaking point.
The political consequence of high income tax in the 1980s was the birth of the Progressive Democrats, which effectively kept Fine Gael out of office for a quarter of a century, apart from 2½ years of John Bruton’s rainbow coalition.
While rumours of a new party once again aimed at Fine Gael’s flank have been in the air for the past two years, so far nothing has happened. Nonetheless there is concern in the party that the private sector, middle-income taxpayers who are bearing the brunt of the budget adjustment are becoming disillusioned with the Government.
“There is a big cohort of people who are in jobs but are paying far more tax than they did a few years ago and are being hit with a whole range of things like higher VHI charges, the property tax and other stealth taxes and are just finding it hard to make ends meet. We have to do something for them,” said one strategist.