Labour vows to scrap USC for low earners

Lower and middle-income earners would see the much-hated universal social charge phased out if Labour are returned to power, Tánaiste Joan Burton will pledge today.

Encouraged by renewed voter support, 10% (+2), the Labour leader will make the re-election promise which party sources say would happen in the lifetime of the next government.

Coalition figures last night said Fine Gael and Labour are “within touching distance” of getting back in after a new poll gave them a joint 38%, close to what party strategists believe is the ‘magic number’ and enough support to form the next government.

Budget measures being considered — including spending on childcare, garda and teacher numbers and tax savings for the self-employed — may boost Government support even more.

Government sources say a cut of 2% to the unpopular USC — which could see some take-home pay rise by up to €1,000 a year — is also a very real possibility for the budget.

Finance Minister Michael Noonan would spend €550m of €750m available for taxation on this. This would leave €200m for separate reliefs for the self-employed and entrepreneurs.

Labour vows to scrap USC for low earners

Michael Noonan

One source said: “It is conceivable to get a 2% cut. On paper, he [the minister] has enough to do it.”

Ms Burton yesterday said the exact USC reduction for next year had yet to be finalised.

“We now have the measures, over a period of time, to reduce that fairly significantly,” she told TV3’s Sunday AM programme.

But Labour sources played down reports that 2% could be cut in the Coalition’s pre-election budget.

“It sounds a little high, it would be a fairly big chunk of the limit available,” said a source.

Ms Burton will set out Labour’s election footing today at the party’s pre-Dáil think-in, being held in Wicklow.

“[There is] potential to phase out USC for lower and middle-income workers as part of a structured plan over a series of budgets, and room to invest more heavily in essential public services, to drive a social, cultural and community renewal,” she will say.

Party sources said the phasing out of USC for those earners would be done during the lifetime of the next government if Labour is returned to power.

Ms Burton is set to kickstart Labour’s pre-election attack on Sinn Féin and claim Gerry Adams’ party is “at the heart” of the latest crisis in the North.

“The party’s response as ever has been to blame everybody else for it,” she is expected to say.

Elsewhere, Coalition sources confirmed a significant childcare support package for the budget is being examined, including a second free pre-school year and afterschool care.

But childcare measures may be promised over a series of budgets. “It looks like the first steps of this will be in the budget. But it’s very costly,” a source said.

Spending on services in the budget, separate from taxation measures, must also account for public pay increases, set for January.

Meanwhile, Fianna Fáil will hold its pre-Dáil meeting in Dublin today. Alternative budget proposals, the general election and the housing crisis will be among issues discussed. Officials from St Vincent de Paul, the fiscal advisory council, and farming and enterprise sectors will meet party TDs and senators.

Micheál Martin is expected to stress funding for services over tax breaks.

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Michael Noonan: We will abolish USC if back in powerMichael Noonan: We will abolish USC if back in power

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