Labour clashes with FG over cuts to USC

LABOUR ministers have clashed with their Fine Gael coalition partners in a row over a mooted abolition of the universal social charge.

It is expected that Fine Gael will promise further cuts to the main rate of the USC in the next budget, and that the eventual total abolition of the hated charge would be a central plank of their manifesto.

However, both the Tánaiste and Minister for Public Expenditure said yesterday that the USC should be kept for high earners, and that the gains that high earners could make from any potential cut should be capped.

In the clearest indication of a coalition rift, Public Enterprise Minister Mr Howlin said yesterday: ‘It is clear policy that we are in favour of progressive taxation because we want to fund quality public services. That is a Labour Party core value. If you look at what the impact of the total abolition of USC is, if you are on €25,000 your benefit for the total abolition is €750. If you are on €150,000, your benefit is €16,000.

‘If that is the Fine Gael’s position then that is not one I would agree with.’

And Tánaiste Joan Burton went further, stating that Fine Gael have been ‘extremely keen’ to provide more money for crime prevention, but that such investment would not be possible if there were USC ‘reductions for people earning high amounts of money.’

Ms Burton said: ‘In the agreement I reached with the Taoiseach was to provide for reductions in USC targeted at low and middle income earners. The formula we arrived at was in fact not to prevent people on higher incomes getting some benefit, but to actually cap it.

‘So in the context of the commitment we want to make, which is a continued reform which would be heavily orientated towards people on low and middle incomes, it doesn’t mean people on higher incomes get nothing, but that the gains that they make are capped.’

She said: ‘As Brendan Howlin has just said, that is in the context of having realistic budgets over the lifetime of the next government which not only provide some levels of restorations for some measures like the USC which people on lower and middle incomes found difficult, but actually also provides the room to have the kind of investment for a growing population that we need in areas like education, health and indeed a whole range of issues.’

Singling out Fine Gael’s desire to increase Garda investment, she said: ‘You can’t have (such) levels of investment if you are simply talking about reductions, particularly for people who are earning very high sums of money.’

Earlier yesterday morning, the Tánaiste said that those who earn €100,000 should still be expected to pay the USC.

Fine Gael has already pledged to remove the levy for everybody over the lifetime of the next government. That pledge is expected to be a key element of Fine Gael’s general election manifesto and will be outlined by Taoiseach Enda Kenny in a pre-election message to party members this week.

‘We want to fund quality services’