Leo Varadkar hints at possible tax cuts in Budget 2020

Taoiseach also says there are no plans for a supplementary budget for Brexit

Taoiseach Leo Varadkar has said there are no plans for the Government to issue a supplementary budget in the event of a no-deal Brexit, but he hinted that some form of tax cuts could be announced in next month's budget.

He said that while the budget had not been decided, “we’re looking at a number of things, certainly around income taxes”.

Speaking in Los Angeles on Thursday at the start of a two-day visit to the west coast city, Mr Varadkar was asked about the possibility of a supplementary budget, after the ESRI said that a second budget responding to Brexit in the new year should be considered.

"That's not our plan. Our plan is that the budget on October 8th will be a budget to protect Ireland from no-deal, so if we end up in a no-deal scenario we won't need a supplementary budget next year; however, if there is a deal, if there is an orderly Brexit, things will actually turn out better than projected in the budget."


He defended the decision as prudent. “We have to make a decision here, a decision that is based on what is best for the country.

"What we didn't want was a repeat of what happened 10 years ago, when heading into the financial crisis there was a budget that cut taxes and increased welfare only for the government under Fianna Fáil at the time to come back six months later and take it all away again. We're not going to do that."

On the budget itself, Mr Varadkar hinted that some changes to income tax would be forthcoming.

“This budget will have a minimal tax package – there will be some tax reductions but they won’t be like the last three years. There will be a modest welfare package, but not on the scale of the last three years. But what that means is that we can then use that money – if you like, saving from not having tax cuts, not having substantial welfare increases – to give us the money we need to protect jobs in the event of no-deal.

“We know that there will be further reductions in DIRT tax on people’s savings. That’s already been pencilled in, and we’re also looking at how we might help out on cost-of-living measures. There are lots of different ways to put money back in people’s pockets, pay increases are provided for in the budget – €400 million in pay increases for public servants.”

Tax threshold

But asked about Fine Gael proposals to change the income tax threshold for higher rates he said: "That is Fine Gael policy . . . if re-elected we want to make sure that nobody earning less than €50,000 pays the higher rate of income tax, and no couple earning less than €100,000 pays the higher rate of income tax, but that would be done over a five-year period. But this budget is different. This budget is a budget for Brexit to protect the country from a no-deal if that happens and . . . this particular budget won't have a generous tax package or welfare package."

He continued: “But do bear in mind what we’ve done in the last three budgets – we’ve increased the pension, welfare, cut the USC and reduced income tax. That’s put about €1,500 back in the pockets of the average family and in a five-year term we can do twice as well again.”

Mr Varadkar also said that a no-deal scenario would not lead to a period of austerity similar to what the State experienced during the last economic crisis.

“If we’re in a no-deal scenario it won’t be anything like the economy crisis people experienced 10 years ago. There won’t be a return to austerity but the economy will grow at a slower rate than would have been the case and new jobs will be created at a slower rate than would have been the case but we don’t anticipate a return to recession and certainly not a return to austerity.”

Suzanne Lynch

Suzanne Lynch

Suzanne Lynch, a former Irish Times journalist, was Washington correspondent and, before that, Europe correspondent