Donohoe goes on budget manoeuvres

At this time of year, most people around Leinster House can’t wait to see the back of each other. After the long, hard slog of the political year, fatigue gums up the minds and bodies, and the looming recess is all anyone is really thinking about.

Yet Cabinet members will see even more of each other this week and meet for the second time in as many days today.

Paschal Donohoe, the Minister for Finance, is expected to lead a discussion on next week’s Summer Economic Statement, which will set the parameters of the October budget.

Donohoe was somewhat on budgetary manoeuvres when he took his first question session as Minister for Finance yesterday. He gave the firmest indication yet that the USC will soon be merged with PRSI to fulfil the Taoiseach’s Fine Gael leadership campaign promise to create a new system of Social Insurance.

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Such a move is probably far too complicated to be completed over one year, given the sheer complexity of both the USC and PRSI systems.

Donohoe's Dail statement pricked the ears of Cantillon on our business desk, too.

The Minister has already ordered his officials to carry out a study of how this merger could be done, and Fianna Fail has given the idea a tentative welcome.

In truth, the blunt election promise to abolish the USC was dead after last year’s general election campaign. The language on the USC softened from then on in, with the emphasis on gradual reduction.

But Varadkar’s idea of moving toward a more contributory social insurance system has not come out of a clear blue sky. The same Fine Gael manifesto that promised to abolish the USC also proposed that people should begin paying PRSI at €13,000 rather than €18,000 to fund additional pension leave and wider dental benefits.

A potential future sticking point could come if the Independents and Fianna Fail complain that moving away from USC reductions breaches their agreements with Fine Gael.

When talking about this issue, Donohoe has been careful to stick to the language of both the confidence-and-supply deal and the Programme for Government.

Both he and Varadkar have repeatedly committed to reducing income taxes and, should USC-related trouble arise in future, are likely to point out that it doesn’t matter what tax on work is called; what matters is that you reduce it.