Taoiseach defends plans for tax cuts in Budget

Leo Varadkar says those who ‘pay for everything’ should see some improvements

Taoiseach Leo Varadkar said: “When an economy is growing, we should balance the books and pay down our debt.” Photograph: Dara Mac Donaill /The Irish Times

Taoiseach Leo Varadkar said: “When an economy is growing, we should balance the books and pay down our debt.” Photograph: Dara Mac Donaill /The Irish Times

 

Taoiseach Leo Varadkar has again committed his Government to tax cuts for middle-income earners in the Budget, despite Opposition claims that spare resources should be spent on improving public services.

Mr Varadkar dismissed Labour leader Brendan Howlin’s claims that there will be nothing in Budget 2018 for low-paid workers, and said that those who “pay for everything” should also see some improvements, echoing his statements in the Fine Gael leadership campaign about looking after “people who get up early in the morning”.

Mr Varadkar insisted that those on low salaries would not be ignored, and said that the 30 per cent of workers on the lowest incomes were already outside the tax net.

He said that for employees who did not earn enough to pay tax or the USC (universal social charge) “we will improve their lives by improving social insurance benefits by reducing the costs of childcare and other things”.

And “for those who do pay tax and USC, yes, we will reduce their tax and USC so they can have more money in their pockets”.

Balance the books

The Taoiseach also said that for the first time in 10 years there would be a budget that would balance the books.

“This may not be a politically popular thing to do, but it is the most important thing to do because when an economy is growing, we should balance the books and pay down our debt,” Mr Varadkar added.

Mr Howlin, who called for an “honest debate” about budget choices, described the row between Fine Gael and Fianna Fáil over tax choices as a “phoney war”.

On the Dáil’s first day back after the summer recess the Wexford TD said the Taoiseach’s clear preference was to increase the income threshold above which employees moved to the marginal tax rate.

The move would help someone earning €40,000 a sum of €4 a week but “only for the richest half of the working population”.

He added that the Fianna Fáil proposal to reduce the 5 per cent rate of USC would “benefit more people but only to the extent of €2 a week”.

The €200 million involved for these options should be used instead to make a real difference in the provision of services.

“Reducing college fees by €1,000 would cost €74 million, cutting class size in both primary and secondary schools would cost only €22 million and raising the wages of all those who work in the child care sector to a living wage would cost €63 million, and eliminating waiting lists for home care packages would cost €18 million.”

‘Phoney’ debate

The Taoiseach said that if there was a “phoney” debate it was that budgetary policy was solely a trade off between tax reductions and spending increases.

He added that it was “phoney” to assume that “spending increases always result in better services”.

The Government would balance the books for the first budget in a decade and would increase spending on public services and infrastructure, estimated at 4.5 per cent or between €1.5 billion and €1.8 billion next year.

He said they would also find some space for tax relief. He said it was right for those on middle incomes “who very often believe they pay for everything and get very little in return should get something in the budget”.

The Minister for Finance Paschal Donohoe is continuing budget meetings with his fellow ministers, and is understood to have met Fianna Fáil and the Independent Alliance on Wednesday. The Budget will be delivered on October 10th.