Coalition urged to reveal plans for tax hikes

Ministers have been accused of preparing for election pledge-busting income tax hikes and welfare cuts as a battle erupted within the Coalition over whether top earners should bear more of the brunt of budget cuts.

Transport Minister Leo Varadkar warned that the Government did not know “where we will be” at the December budget as, said Labour’s Pat Rabbitte, the situation was so difficult “no red lines” could be drawn.

The gloomy interventions were in marked contrast to pledges at the same point in the budget cycle last year that income tax and headline welfare payments would be protected.

Fianna Fáil’s public expenditure reform spokesman Seán Fleming said the Coalition appeared to be softening up the way for a major U-turn and insisted Taoiseach Enda Kenny needed to come clean with people about whether the Programme for Government pledges on tax and welfare still stood.

The ministerial move came as pressure from the troika for a cut in theminimum wage and slashing of welfare payments increased with the release of a new IMF report urging a radical change in policy.

Signalling clashes within the Coalition over where to deliver more financial pain, Labour Party chairman Colm Keaveney warned that the Government needed to have a “tax argument” to ensure the burden fell on those in the higher income tax bracket.

A senior Fine Gael source hit back, saying that it would be counter-productive to “disproportionately target” those in the upper tax band.

Communications Minister Pat Rabbitte said he could not rule anything in or out of December’s €3.5bn tax- and-cut budget. “It is just that the economic situation and the fiscal situation is so difficult, and the task is so major to comply with the strictures on us by the only lender we have in terms of furnishing money to the State to provide social services, that I think we have to put our collective heads together and see what is the fair way to try and bring in a budget in December,” he told RTÉ.

Mr Keaveney said the budget would be a major test of the abilities of Labour ministers to protect the working poor and those on welfare from extra cuts. “You can’t protect services without an argument on taxation,” he said.

“It will indicate the capacity of the Labour cabinet ministers to ensure that the next budget is fair and that those who can carry more of a burden do carry more, while those at the lower end of the income scale are protected,” he said.

Mr Varadkar said the €1.25bn demanded by the troika in tax hikes could be met by levies such as that on property. “It isn’t necessary to introduce income tax increases as well, but nobody can predict the future and we don’t know where we are going to be at the end of the year yet,” he said.