Programme for government: Carbon tax increases but no hikes in income tax or USC

Fianna Fáil, Fine Gael and the Greens agree draft with Martin set to become next taoiseach

Carbon tax will increase by €7.50 per tonne in every budget until 2029 as the new government deal between Fianna Fáil, Fine Gael and the Greens aims to levy €100 per tonne on carbon by 2030.

This is an increase on the current trajectory of €80 per tonne by 2030. Last year’s budget increased the levy by €6 per tonne in 2020.

The final draft of the programme for government, seen by The Irish Times, confirms Fianna Fáil leader Micheal Martin will become the next taoiseach under an agreement with Leo Varadkar under which they they will rotate the position. Mr Varadkar is set to resume the role in December 2022.

The document will now go before the party memberships for ratification.


On carbon tax, the document says: “Our approach is to increase the carbon tax to 100 euro per tonne by 2030, informed by the findings an ESRI study, to be published by October 2020 on how best to prevent fuel poverty.

“This increase is to be achieved by an annual increase of €7.50 per annum to 2029 and €6.50 in 2030.

”We will legislate to hypothecate all additional carbon tax revenue into a Climate Action Fund raising an estimated €9.5 billion over the next ten years. This Fund will be utilised over that period to:

“1. Ensure that the increases in the carbon tax are progressive by spending €3 billion on targeted social welfare and other initiatives to prevent fuel poverty and ensure a just transition

“2 Provide €5 billion to part fund a socially progressive national retrofitting programme targeting all homes but with a particular emphasis on the Midlands region and on social and low-income tenancies.

“3. Allocate €1.5 billion to a REPS-2 programme to encourage and incentivise farmers to farm in a greener and more sustainable way. This funding will be additional to funding from the Common Agriculture Policy. It will include incentives to plant native forestry and to enhance and support biodiversity.”

Income tax

On income tax and USC, the final document says:

“There will be no increases in income tax or USC rates.”

“In budget 2021, there will be no change to income tax credits or bands. From budget 2022 onwards, in the event that incomes are again rising as the economy recovers, credits and bands will be indexed linked to earnings. This will be done to prevent an increase in the real burden of income tax, to prevent more low-income workers being taken into the tax net because of no changes to the tax system and to ensure there is no increase in the number people having to pay higher income tax and USC rates.”

Other tax changes include:

“The Earned Income Tax Credit (Self-employed) will be equalised with the employee tax credit.

“The 3 per cent USC surcharge applied to self-employed income is unfair and proposals will be considered to ameliorate this over time as resources allow.

“The Home Carer Tax Credit is an effective mechanism to support couples where one decides to home parent rather than working or availing of childcare subsidies and also where one parent stays at home to meet other caring needs. It will be increased to support stay-at-home parents as we increase subsidies for childcare.”

On the deficit, the document says: “At budget 2021, as we have greater clarity on the likely economic impact of the Covid-19 emergency domestically and internationally, we will set out a medium-term roadmap detailing how Ireland will reduce the deficit and return to a broadly balanced budget.

We will utilise taxation measures, as well as expenditure measures, to close the deficit and fund public services, if required. In doing so, we will focus any tax rises on those taxes that tax behaviours with negative externalities, such as carbon tax, sugar tax, and plastics.”

State pension

On the State pension age, the final document says: “65-year-olds who are required to or chose to retire early can receive an ‘Early Retirement Allowance or Pension’ at the same rate as jobseekers benefit without a requirement to sign on, partake in any activation measures or be available for and genuinely seeking work.”

A new “Commissions on Pensions” will be established “to address issues including qualifying age, contribution rates, total contributions and eligibility requirements”.

“Pending the report of the Commission on Pensions and any subsequent Government decisions on its recommendations, the State Pension age will remain at 66 years and the increase to 67 years will be deferred.

“This will allow full consideration by Government of any permanent changes. The Commission will report by June 2021. The Government will take action having regard to the recommendations of the Commission within 6 months.”

Occupied territories

The Greens and Fianna Fáil had pushed for a ban on the importation of goods from occupied territories but this has not been included in the document.

Instead, the document commits to “maintain and build our relationships with both Israel and the Palestinian Authority and remain active on the Middle East Peace Process. Ireland’s longstanding support for a two-state solution to the Israeli-Palestinian conflict will remain an integral aspect of our foreign policy and we will continue to build consensus at EU level to take a more proactive approach in supporting a negotiated two-state solution and lasting peace process.”

It says Ireland will “honour our commitment to recognise the State of Palestine as part of a lasting settlement of the conflict, or in advance of that, when we believe doing so will progress efforts to reach a two-state solution or protect the integrity of Palestinian territory.”

It also says a new government will “continue to work with other Member States to give leadership within the EU to oppose any annexation or plans to apply Israeli sovereignty over territory in the West Bank, which is part mof the occupied Palestinian territory. The Government would regard any such moves as a breach of international law and would consider an appropriate response to them at both national and international level.”

Other measures include: “Work to ensure that all parties respect their obligations under international law and oppose the maintenance and expansion of illegal settlements in the occupied Palestinian territory.

“Reaffirm our commitment to fund the United Nations Relief and Works Agency for Palestine Refugees (UNWRA), supporting key projects in education and energy.”

Functioning of a new government

On the functioning of a new government, the deal says the three parties “understand the very significant challenges involved in ensuring the effective working and impact of a government drawn from three parties with strong separate mandates and a highly diverse Dáil Éireann.

“We enter this Government respecting our differences and agreeing a new approach to working together within government to implement the Programme for Government, which we have set out.

“In order to ensure openness and constructive cooperation within government a number of reforms will be implemented to the ongoing operation of cross-government cooperation, including ensuring an enhanced role for Party Leaders not holding the Office of An Taoiseach. In addition, we are determined to avoid common problems, which arise in coalition governments and have agreed a set of principles about how ongoing work and potential disagreements will be resolved.”

It also says the three leaders will agree “a revised set of departments and ministerial responsibilities prior to the formation of the Government”.

“The objective in these changes will be to ensure that the priorities set out in the Programme for Government can be implemented as effectively as possible.

Following agreement on the division of ministerial roles between the Parties, each Party Leader will be responsible for nominating their own representatives to each role.

“Fine Gael and Fianna Fáil will have an equal number of Government Ministers, six, and the Green Party will appoint three.

“The Chief Whip shall sit at Cabinet as shall two other Ministers of State.

Ministers of State shall be appointed by the Government within one week of the Government being formed and shall be allocated as agreed by the three Party Leaders.”

Rotating Taoiseach

It also confirms Fianna Fáil leader Micheál Martin is set to become the next taoiseach under an agreement with Leo Varadkar under which they they will rotate the position. Mr Varadkar is set to resume the role in December 2022.

On the rotating Taoiseach and appointment of ministers, the document says: “The nomination of the Leader of Fianna Fáil and the ministers proposed by him on that day will be supported by all Parties and TDs who have agreed to the Programme for Government - Our Shared Future.

“The Leader of Fianna Fáil will hold the office of An Taoiseach from that point until December 15th 2022 on which date he will offer his resignation to the President and all Parties and TDs supporting the Government will support the nomination of the Leader of the Fine Gael Party.

“Membership of Government and the roles of ministers will be continued save where agreed in advance by Party Leaders. Each Party acknowledges that the leadership and ministerial nominations of their respective parties is entirely a matter for the Party concerned.”

“The position of An Tánaiste will be held by the Leader of the largest Party not holding the office of An Taoiseach.”

The deal also outlines a new office of the Tánaiste.

“In order to improve coordination and openness within Government the Office of An Tánaiste will be re-established within the Department of An Taoiseach and based in Government Buildings.

“We are conscious of the distinct roles performed by An Taoiseach in representational,

parliamentary, constitutional, European Union and international matters and while respecting these, will ensure that An Tánaiste plays a significantly enhanced role in day-to-day matters.

“The re-established Office of An Tánaiste will be independent of the ministry that the Tánaiste holds. It will be headed by an Assistant Secretary who shall attend the weekly meeting of Government Secretaries General. It shall consist of established and non-established civil servants in line with the Public Service Management Act 1997, who may be appointed from outside of the Department of An Taoiseach and shall be in addition to the current staffing of the Department.”

“An office shall be established within the Department of An Taoiseach, based in Government

Buildings in order to improve the ability of the Green Party Leader to co-ordinate and implement policy within Government.”


A new “Government Coordination Cabinet Committee” will be established. It will “comprise the Leaders of each Party in Government, shall meet each week in advance of Cabinet, and on other occasions when deemed necessary.

“In addition to the Party Leaders, the Secretary General to the Government shall attend save for political discussions, as shall nominated advisers to the Party Leaders. Other ministers, officials and advisers may attend by invitation of the Leaders.”

This weekly meeting will have four standing items: “1) To review the activity of cabinet committees; 2) To review the agenda for that week’s cabinet meeting; 3) To discuss political priorities; and 4) To review implementation of a specified element of the Programme for Government.”

“If there is an issue of concern to any Party, the Government Coordination Cabinet Committee is the forum for its resolution.

“Once every three months there shall be a full-day meeting of the Government Coordination Committee in order to take a longer-term perspective on the performance of the Government and this shall include a more detailed review of actions on priority issues.

“The Government Coordination Cabinet Committee will not be a decision-making body and all relevant decisions will be referred to Cabinet.”

Other commitments

Crucially for the Greens, the parties commit to reducing Ireland’s carbon emissions by 7 per cent each year is also included with very specific language around targets and measurement.

Other commitments under the programme for government include:

* All future capital spending on transport infrastructure will be split 2:1, favouring public transport over roads;

* €360 million will be spent every year on cycling and walking infrastructure;

* There will be a ban on the further exploration for gas in the waters off Ireland and a ban on the importation of fracked gas, which will halt the construction of the Shannon LNG project and other facilities;

* The direct provision system will be abolished within the government’s term and replaced “with a new international protection accommodation policy centred on a not-for-profit approach”;

* A number of referendums are also promised within the lifetime of the next government, including one on the right to housing;

* There will be commissions on housing, tax and social welfare and on the future of the Defence Forces, and a permanent pay review body for the Defence Forces will also be established;

* A new economic stimulus plan for the retail and tourism sectors is expected in July, with a wider national recovery plan following in October;

* The Land Development Agency will develop cost rental housing, as well as affordable purchase homes, affordable rental homes and social housing on State-owned land;

* 50,000 social homes will be provided over the next five years, with an emphasis on new builds;

* A new system of measuring national progress based on “well-being indices” are to be developed to alongside economic indicators.

A key part of the response to the economic downturn caused by the Covid-19 pandemic will be a Recovery Fund which will try to simulate increased demand and employment. It will run from 2020 through to 2022.

The three leaders, Micheál Martin, Leo Varadkar and Eamon Ryan, concluded their meeting shortly after midday and all signed off on the document.

Back to work

Earlier, Mr Varadkar a told reporters in Dublin on Monday the new government deal “has strong economic and jobs package to get people back to work, which is crucially important”.

He said the deficit will be reduced once the “economy returns to jobs and growth”.

“We’ve got a very strong section on tax,” he said, citing a “tax shield” to make sure there was no increase in income tax or USC in the next Budget.

He said the parties were planning a tax package “that could be worth as much as €6 billion” linked to increases in earnings.

As he left Government Buildings following the signing of the deal with other party leaders, Mr Martin said: “There will be a challenge getting the agreement accepted by the parliamentary party and our membership” but he added he was confident it would be accepted.