Ministers won't rule out tax rises, welfare cuts

TAOISEACH Enda Kenny and Tánaiste Eamon Gilmore will come under pressure in the Dáil tomorrow to counter indications from Cabinet members that income tax increases and social welfare cuts may be back on the agenda for December’s budget.

Two Labour Ministers refused to rule out the changes which would mark a U-turn by the Government on its programme for government.

Minister for Communications Pat Rabbitte said he wanted no “red line” areas in discussions.

Minister for Public Expenditure and Reform Brendan Howlin said he would not be “prescriptive” in discussions on the budget for next year.

In their fiscal policy pledges in the programme for government, the Coalition parties said the Government would “maintain the current rates of income taxes, together with bands and credits. We will not increase the top marginal rates of taxes on income.”

The programme for government also states: “We will reduce, cap or abolish property tax reliefs and other tax shelters which benefit very high-income earners. We will also ensure the implementation of a minimum effective tax rate of 30 per cent for very high earners.” On social welfare the Government pledged in its programme: “We will maintain social welfare rates.”

Both tax rises and welfare cuts were trenchantly ruled out by the Government for last year’s budget. However, to fulfil its pledges in the EU-IMF bailout the Government has to make cuts of €3.5 billion next year.

The comments by the two Labour Ministers have raised speculation that both areas are back on the budget agenda.

In an interview with the Sunday Business Post, Mr Howlin said: “What’s been agreed has been agreed, but I’m not going to be prescriptive by saying, ‘We’re not going to touch that and that and that,’ because then my manoeuvrability on anything is down to zero.”

Reacting to the comments last night on RTÉ’s The Week in Politics, Mr Rabbitte said that when discussions started he would like to do so “without any red lines, which is not to be interpreted as a signal that I’m in favour of more taxes on income or that I’m in favour of altering the basic rates of social welfare. But it’s just that the economic situation and the fiscal situation is so difficult.”

Fianna Fáil’s spokesman for public expenditure Seán Fleming called on the Taoiseach and Tánaiste to “flatly contradict” the suggestions and relieve growing public concern in the run-up to the budget. Fianna Fáil would be pushing them to do that, but he said the suggestions and comments by the Ministers indicated a “possible U-turn” on the issue.

While basic social welfare rates have not been cut, other benefits have been affected, including cuts in rent supplement allowances and the domiciliary care allowance which is paid for children who need more care than another child of the equivalent age.

Sinn Féin finance spokesman Pearse Doherty said there was no surprise about crossing the “red line” on social welfare issues because the Government had already done so.

They brought in “€500 million in social welfare cuts and dressed it up by saying there was no primary rate cut”, he said, but they cut child benefit, domiciliary care and rent allowance.

He said Sinn Féin had consistently called for a third tax rate, an extra 7 per cent for those on more than €100,000, and “Labour in opposition supported that”. But he said Government was likely to introduce reductions across bands and tax credits which would affect those on low and middle incomes.