Tax cuts in budget would be ‘inappropriate’ and ‘irresponsible’, says union chief

The head of the State’s largest public sector trade union has said that reducing tax rates in the forthcoming budget would be both “inappropriate” and “irresponsible” at a time when there is such a pressing need to address issues like housing and public services.

Speaking at the launch of a report by the independent think tank Tasc, The State We Are In: Inequality in Ireland 2023, Fórsa’s Kevin Callinan described the recent controversy prompted by a newspaper article written by three Fine Gael junior ministers calling for a €1,000 tax break for average workers “more spin than substance”.

Mr Callinan said there was a growing consensus that cutting taxes would be “inappropriate in circumstances where we’re hearing that the risk to corporate tax revenue means that we need to be prudent over the long term”.

“Well, if that’s the case, why would we be taking moves to reduce other taxation?” he said.

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“It’s irresponsible because we all know that we need a bigger State.”

The report suggests there was an increase in inequality in Ireland over the period 2020-2021 after a long decline. According to the report, the poorest 20 per cent of households were the hardest hit over the past five years by inflation, with increased rents and fuel prices key factors.

Author of the report, Rob Sweeney, recommends that the Government resists any pressure for tax cuts and invests instead in continued supports for households and the improved provision of services like childcare, with high costs in the sector still acting as a barrier to employment, particularly among women.

Mr Callinan said he agreed that the rising cost of renting had hit the poorest particularly hard and noted that young people had been badly impacted too, something he said had been reflected in a survey by Fórsa of its own membership which generated some 20,000 responses.

Mr Callinan said there is an urgent need to expend money on a range of social issues including housing and childcare and said there was a growing consensus that such spending, rather than tax cuts, should be the priority.

“At the National Economic Dialogue on Monday of last week, the one thing that was really apparent to me was just how much practically everybody in the room agreed, that we shouldn’t be kind of moving to splurge these monies, we should be trying to think through how can we actually come up with medium- to longer- term solutions that bring about more,” Mr Callinan said.

At a conference organised by Industrial Relations News last week, the chief executive of Ibec, Danny McCoy, said he believes the old formula of “industrial peace, modest wage growth and tax cuts,” needs to change to “industrial peace, modest wage growth and tax rises”.

“Anyone who can’t get their head around that is going to be slow to this game, because that’s where this is going to be going,” Mr McCoy said.

At the Tasc report launch, however, Mr Callinan suggested that people were also entitled to feel they should be getting better off in the current economic environment.

“I think we need to keep saying it because it is what people out there feel in a country that has buoyant fiscal revenues and a lot of companies that are making very good profits,” Mr Callinan said.

“It’s not unreasonable that citizens would expect their living standards to rise. And what we’re getting at the moment is one excuse after another [about] why that can’t happen.”

Also speaking at the event, Reamonn Lydon, deputy head of monetary policy at the Central Bank, suggested that it might be premature to draw conclusions about recent trends in inequality given the amount “noise” around the economy.

Mr Lydon said it might take a number of years for the picture to become clear. He said he did not disagree with the assertions made on taxation.