Tax Relief

Donohoe Says Price range Promise on Tax Breaks and Welfare “Reasonably priced”

Finance Minister Paschal Donohoe has insisted that Fine Gael’s promise to include tax breaks and a social package in the upcoming budget is “affordable”.

He defended the plan, insisting that it could go ahead even if the government tries to cut back on the huge borrowing caused by the pandemic.

Tánaiste Leo Varadkar highlighted his party’s intentions for the budget when Fine Gael met in front of the Dáil to discuss his thoughts.

He said the tax and welfare packages were the “norm” before the threat to public finances from Brexit, and he wanted to see them in every household.

Mr Varadkar promised tax measures in the upcoming budget to help “especially middle-income people” and a social package to offset the effects of the rising cost of living.

Declining to go into the details of the welfare package, he said, “This will all be negotiated by budget day. I’m not going to give any numbers at this point. “

Mr Donohoe was later challenged whether including tax and welfare packages was prudent given the country’s indebtedness.

He referred to plans for a two-budget strategy that aims to end borrowing for everyday needs by 2023.

Steep reduction

Mr Donohoe said any measures announced on Budget Day would be within the parameters set out in the Summer Economic Declaration.

He said that this means “a very large reduction in our borrowing between this year and the next, followed by a further reduction in borrowing the following year”.

He said Fine Gael’s plan for welfare and tax packages “will be affordable and all in the context of reducing borrowing.”

Social Protection Secretary Heather Humphreys said her budget focus will be on the “vulnerable” and she is aware that “there has been no increase in welfare payments in the past two years”.

Meanwhile, Mr Donohoe warned that increasing the wage-related social security (PRSI) rate for the self-employed to fund a delay in raising the state retirement age could hamper efforts to get people back to work after the pandemic.

Fine Gael has spoken out against a planned increase in the PRSI for the self-employed. However, the party has not said how it would fund proposed changes to the pension system that would result in the 66-year increase in the qualifying age not starting until 2028.

The Pension Commission presented its report to Ms Humphreys. It was set up to study the pension system after it became a major issue in the last elections.

The Commission recommends increasing the retirement age in quarterly steps to 67 from 2028 and eventually to 68 by 2039.

It should have risen to 67 since the beginning of this year.

State pension

One proposal by the commission to finance the delayed increase in pension entitlement is to increase the PRSI for the self-employed – from 4 percent to 11 percent.

Mr Donohoe said the issue of pensions is sensitive in the context of the economy and for future generations who depend on maintaining their standard of living in retirement.

He said there were decisions to be made, “but I think you need to put the proposed increase in PRSI in the context of the current state of our economy”.

“We’re trying to get our self-employed back to work … we need to be aware that any sudden change in the taxes they pay could have a really negative impact on our ability to create work.”

Confronted with his failure to outline how Fine Gael would fund the delay in raising the retirement age, he insisted that it was “reasonable” for the party to voice its concerns.

He said the ways in which the sustainability of the social security system could be dealt with would be outlined after examining the commission’s report.

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