Michael McGrath says Fine Gael Ministers’ call for €1,000 tax break an ‘unusual approach’

A call from Fine Gael Ministers of State for a €1,000 tax break for middle-income workers was described as an “unusual approach” by Minister for Finance Michael McGrath, who said the proposal had not been raised with him personally.

The Fine Gael intervention comes just over 4½ months before budget day, prompting surprise among some in the Coalition, though one Fianna Fáil source said “kite flying is constant and gets earlier every year”.

A senior Government source poured cold water on the plan, pointing out that it would be significantly more expensive than last year’s total tax package.

Fine Gael Ministers of State Jennifer Carroll MacNeill, Martin Heydon and Peter Burke outlined how they want to see tax relief of more than €1,000 for full-time workers on an average wage of €52,000. A spokesman for Taoiseach Leo Varadkar said that he had been aware in advance of the call by the Fine Gael trio.

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The proposal is among a number of ways the three Ministers set out for using billions in budget surpluses expected in the coming years in an article they co-authored for Monday’s Irish Independent.

Some €65 billion in surpluses are forecast up to 2026, and the Ministers for Finance and Public Expenditure, Michael McGrath and Paschal Donohoe, are expected to come under pressure to deliver on budget demands from ministerial colleagues and Government backbenchers.

In recent weeks Mr McGrath outlined his strong support for setting up a new long-term reserve fund in which to invest anticipated large corporation tax receipts. The Fianna Fáil Minister also said there would still be room for a “significant budget package” from recurring taxation.

Mr McGrath was cautious in his response to the Fine Gael proposal for a €1,000 tax break on Monday, saying: “I think it represents an unusual approach because Government works on the basis of a genuine spirit of co-operation – parties are entitled to adopt positions and to make the case publicly and privately.”

He said the proposal had not been raised with him at this point “but of course we will take on board the views of all three parties and all the different calls and demands”.

Mr McGrath said discussions among the Coalition partners on the detail of the budget had yet to begin but when they do they would address issues like tax relief, cost of living, improving social welfare and public services and increasing investment in childcare and education and health.

“We are 4½ months out from a budget so I’m not going to get involved in any auction with any other party in Government,” Mr McGrath said.

He added that he and Mr Donohoe would have a “difficult job of work to do” to prepare the budget, adding: “We are very much aware of the level of expectation that is there; the fact that we are running budget surpluses will lead to more and more calls for increased spending and tax reductions.”

Mr McGrath said the Coaliton was committed to further tax reform, pointing to the programme for government which set out an intention to increase the entry point to the marginal rate of tax and to increase tax credits in line with earnings.

He said he and Mr Donohoe had worked well in partnership on the Government’s three previous budgets, and he fully expected the same spirit of co-operation and trust to inform their discussions this year.

Another senior Fianna Fáil Minister, Darragh O’Brien, said it was “far too early” to speculate on whether or not the proposed €1,000 tax break would be in the budget. He said his party wanted to “make sure fundamentally in everything that we do that those that need most, get most”, listing working families, people with special needs and disabilities and the elderly.

Mr O’Brien also highlighted an intention to bring in measures aimed at encouraging landlords to stay in the private rental market and new ones to enter it.