Leo Varadkar promises tax cuts for workers in first budgetary plans signal

Taoiseach Leo Varadkar has given his first signal about budgetary plans, promising that up to 2m workers will get money back in tax cuts.

He also hoped waste or unnecessary spending would be identified and cut to increase the budget options.

The indications from the Fine Gael leader will trigger speculation about his plans for next year’s spending, as well as how much more taxpayers will take home in pay.

However, the Government is likely to be hamstrung in its ability to reward “working families”, with only an estimated €100m available without fresh revenue-raising measures.

Speaking yesterday at the national economic dialogue meeting of employers and trade unions at Dublin Castle, Mr Varadkar said “absolutely no decisions” had yet been made on the budget.

However, he said: “I am strongly of the view that working families do need a break and that people who contribute to the coffers of the State work very hard, [and that people] who pay their taxes should benefit in some way from the recovery.

“So, obviously, most of the ‘fiscal space’ that is available will go into additional spending, but it is important that we provide some provision to increase the take-home pay and the money in the pockets of the two million people who go to work every day and pay the taxes that allow us to pay for everything else.”

An estimated €550m in extra money is available to the Government for spending next year, but potentially €200m will go towards restoring pay for the public service. The remainder will split on a 2:1 ratio between spending on services and tax measures. This means, potentially, that Mr Varadkar and Finance Minister Paschal Donohoe may only have as little as €100m to spread around in tax cuts for the estimated 2m workers.

The Fine Gael government has pledged to phase out the Universal Social Charge (USC), but Mr Varadkar, before becoming Taoiseach, said he wanted to move away from this approach and instead merge the USC with other taxes.

He admitted that any rewards for workers from October’s budget could be limited. He also did not rule out using revenue-raising measures, which would increase the spending power beyond the estimated €350m available between services and tax.

“It is always the case, in almost every budget, that there is revenue-raising measures. In the last budget, there were increases in [the duty on] cigarettes.”

Mr Varadkar also pointed to the expenditure review, which will be completed over the summer. He said this could point to hidden ‘fiscal space’, which could open up extra funding measures for the budget.

“Are we sure all existing spending programmes really represent best use of resources?” said Mr Varadkar. “If 1% or 2% of that could be reallocated, we would have another billion [euro]. This is the hidden ‘fiscal space’. It is something we need to examine.”

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