Battle of the Budget
Tax cuts for welfare? FG ministers warn Leo: It’s time to take care of the taxpayers
‘Willie O’Dea will egg on Regina Doherty’
FINE Gael is gearing up for a major pre-Budget war between those who want to prioritise tax cuts and those who want to concentrate on social welfare increases.
Leo Varadkar has been told by his own party that Paschal Donohoe’s Budget will have to send a powerful message to the ordinary taxpayers that Fine Gael is on their side.
Senior party sources have warned: ‘Leo has to put his stamp on the Budget. More of the same will not work.’
One top-level figure warned: ‘This is a signature Budget for Leo and for Paschal too. The Budget will be the proof or otherwise as to whether Leo is for the people who get up early to go to work in the morning.’
Junior Finance Minister Michael D’Arcy told the Irish Mail on Sunday that Fine Gael has to make a clear statement on tax reform to help middle-income earners.
He said: ‘We have looked after those on low incomes very well. Over 36% of those in work pay no tax. Over 400,000 out of 2m do not pay USC.’ This means that ‘the remaining 64% are paying €21bn in taxes’. He said: ‘We have the unusual circumstance where people pay the higher rate of tax before they even reach the industrial wage. I do not believe someone earning €33,800 a year is wealthy.’
He conceded that there was not a huge amount of money for tax reform but insisted: ‘This will be a signalling Budget, it will indicate where we want to go in Budget 2019, should we get there.’
However, concern is growing within the party that Social Protection Minister Regina Doherty will absorb resources that might otherwise go to tax reform.
One source close to the heart of the Government said: ‘Regina is very forceful, she will be difficult to rein in’. They added Fianna Fáil and Willie O’Dea will be egging her on.’ Senior sources warned: ‘If there is anything to be nervous about it is Regina, there is real potential for trouble there.’
One said she is ‘the walking Budget landmine, she has an unparalleled capacity to get into trouble and this is a sensitive brief. Leo and Paschal will have their hands full containing her but they have to make a decision: are we for taxpayers or for those on welfare?’
The tension comes amid growing expectation that this will be a pre-election Budget. One minister told the MoS: ‘No matter what happens Fianna Fáil are not going to let us get to Budget 2019. This next Budget is the one where we send up the smoke signals about what a Fine Gael Budget will do.’
Against this backdrop Mr Donohoe has only €500m in extra spending and it is proposed that this will be split on a 2:1 basis between spending and tax breaks. But even minimal changes, such as indexing the tax system to inflation, will cost more than €4m. And a minimal increase in widening the Standard Rate Band by €1,500 a year to take more low-paid workers out of the higher tax band will cost €299m.
Meanwhile, a €5-a-week increase across the board in the dole and pension would cost an estimated €350m in one year.