Promises to increase the state pension look set to be stalled after Social Protection Minister Leo Varadkar admitted a rise of €5 a week in next month’s budget would eat up all his funds.
The revelation that a €5 increase in the state pension next year is off the cards throws into doubt the Fine Gael pre-election commitment to a €25 hike in pensions by 2021.
Mr Varadkar’s confirmation that a €5 hike would take up all the Social Protection spending comes as Taoiseach Enda Kenny this week warned the budget must be Brexit-proofed.
There are also further doubts that expected reductions in the Universal Social Charge (USC) will be achieved while the minimum wage looks set to be only increased by 10c next year.
Finance Minister Michael Noonan has said less than €1bn is available for the budget.
This will be divided up with €660m going on new spending measures and €330m going on tax relief, Mr Varadkar explained to TDs and senators at an Oireachtas Social Protection Committee on Wednesday. The former amount though will have to be divided among health, education, housing, the Garda and social protection, and spending at other departments.
But Mr Varadkar also told the committee: “For instance, a €5 increase in the pension could be achieved, but that is pretty much all that could be done. I just need to bear that in mind and to be honest about it. When we divide €660m among health, education, housing, the Garda and social protection, we are not talking about a lot of money, quite frankly, and I need to be honest about that.”
The minister also confirmed that it would cost his department €200m alone next year just to meet the cost of payments for new pensioners and this was before any rate increase.
His confirmation that a €5 pension hike would eat up all his funds effectively takes that increase off the table and will raise questions about how Fine Gael will meet its commitment.
The Fine Gael election manifesto pledge to increase the state pension was part of a ploy to woo the so-called “grey vote” in the election, especially after previous cuts to the telephone allowance and hikes in prescription costs.
Furthermore, senior figures in Fianna Fáil, whose support Fine Gael needs to keep the government in power, have already stressed that they will be demanding “at least a fiver” increase in the budget. Party social protection spokesman Willie O’Dea has said this.
Mr Varadkar’s confirmation also comes after he previously suggested at the MacGill summer school that increases in social welfare rates, including the state pension, could be linked to inflation.
However, this could result in much lower increases than the €25 pledged over five years by Fine Gael, depending on how inflation changes annually.
Taoiseach Enda Kenny said Brexit might not have a huge effect on next month’s budget but that there was a need to be prudent.
Speaking in Oxford at a meeting of the British- Association, Mr Kenny said: “We are confident our economy is resilient and that appropriate fiscal policies are now in place that will help us to adjust to the economic effects of Brexit. We don’t expect that our budget for 2017 will be significantly affected, but it will take account of likely impacts to the extent possible at this early stage. Now is a time for careful economic management and political stability.”
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