Reduction in tax relief on pensions signalled


MINISTER FOR Finance Michael Noonan has signalled he will reduce tax relief on pensions in the upcoming budget.

In last year’s budget, Mr Noonan declined to implement a commitment in the troika bailout programme to reduce tax relief on pension contributions from 41 per cent to 20 per cent.

Yesterday he told the Oireachtas Finance Committee the troika would like the Government to bring forward proposals on pensions. “So we are considering that among our options,” he said.

Mr Noonan said a primary consequence of an ageing population was an increased pension bill.

He was responding to a question from Fianna Fáil finance spokesman Michael McGrath, who said the Fiscal Advisory Council should be allowed to take into account future pension liability in its assessments. Mr Noonan rejected the amendment but said he was “signalling” a move on pensions.

He said Minister for Public Expenditure and Reform Brendan Howlin had recently introduced legislation that restructured public service pensions. “We may have more amendments to bring forward on that.”

He said changes would relate to the pensions of public servants retiring in future.

The exchanges took place during discussion on the Fiscal Responsibility Bill, which Mr Noonan described as the “legislative consequence” of the passing of the fiscal stability treaty referendum.

Sinn Féin finance spokesman Pearse Doherty said the proposed law would “bind the hands” of future governments. “It’s a very sad day for democracy.”

Mr Noonan said there was no question of doing anything that the public were not already aware of and the purpose of the treaty had been to introduce new fiscal rules.

“The purpose of the legislation is exactly to bind the hands of the present Government and future governments so far as fiscal rules are concerned, and it was to ensure that future governments don’t go crazy.”

Mr Doherty said the Fiscal Advisory Council had recently provided the Government with 64 pages of detailed analysis and recommendations which had been met with a response of just 185 words from the Department of Finance. He said the council deserved a more adequate response.

Mr Noonan said he could “take that on board”, but said the real response would not be in words used but in policy recommendations that the Government proceeded with. They would be identifiable at budget time. “That will continue to be the real test of whether the Government takes on board the recommendations of the Fiscal Advisory Council or not.”

Labour TD Michael McNamara asked Mr Noonan if future governments could overturn the legislation under discussion. Mr Noonan replied: “They could but they’d have to go back to the people if they want to change the Constitution. Then there’s no problem.”