Finance Minister Michael Noonan has ruled out any dramatic cuts to USC in next month’s budget and instead said funds will largely go on increasing teacher, nurse and garda numbers.
His comments will be viewed as a U-turn by the lead government party after Fine Gael pledged in its general election manifesto to cut USC by 1% to help “squeezed” middle-income earners. While Fine Gael specifically promised this cut next year, the Programme for Government and separate deals with Fianna Fáil make more general pledges on when or how to cut the tax.
Last night, Mr Noonan also dismissed expectations that a full inquiry will be launched quickly by the Government into Nama’s Northern property portfolio sale.
On the budget, he said €1bn was still available to spend on a 2:1 ratio between services and tax cuts.
“There isn’t an awful lot for tax relief, so while we will fulfill our commitments it will be by way of making a strong start which we will continue over three budgets,” he said.
The €1bn is part of a bigger spend of up to €1.8bn, he said, with the extra going on public sector pay and demographic changes. However, reductions in the USC will be limited.
“If only a third of the resources are available for tax deductions, what can be delivered is small enough,” said Mr Noonan.
The Government was no longer committed to the Fine Gael manifesto, he said.
A 1% cut would cost over €300m. With €330m to spend on tax cuts, the Government may instead decide on a half percent cut or increase the entry level for USC.
With limited revenue- raising planned, Mr Noonan’s options are restricted. Instead, he hinted the Budget would play to Fianna Fáil’s demands to reinvest in public services.
Mr Noonan said: “[People] can expect significant improvements in public services and that seems to be the message of the electorate in the election.
“So lots of extra teachers, extra nurses, garda. They’ll have some reductions in the taxes regarded as most penal, and that will include USC.”
However, USC changes would not be dramatic, he said.
Elsewhere, he said the Government was unlikely to agree to an inquiry into Nama’s Project Eagle until after a report by the state’s financial watchdog is debated by TDs in the weeks ahead. He said the Cabinet would discuss the comptroller and auditor general (C&AG) report tomorrow. Nama, though, is set to reject claims it lost hundreds of millions of euro in the Northern loan sale.
“Some of what has been said about it is incorrect,” he said. “There’s nothing in it that suggests there’s anything illegal, anything improper or any irregularities in the way that Nama behaved.”
The Public Accounts Committee will examine the C&AG report, which will take several weeks, before the Government responds to any calls for an inquiry.
“I wouldn’t rule out an inquiry after that, but let’s see what comes out of it,” said Mr Noonan. “I also know the suggestions in the report that extra money might have been got are going to be rebutted very strongly.”
Meanwhile, Fine Gael members at yesterday’s pre-Dáil think-in at Newbridge, Co Kildare, heard how party headquarters had a “fortress mentality” and did not engage enough with the grassroots members.
Details of two reports commissioned to analyse the party’s disastrous election campaign were outlined.
Academic Marion Coy said there were “failures in vision, empathy, planning, tactical positioning, communication, campaigning, and responsiveness” during the party election campaign.
Taoiseach Enda Kenny yesterday deflected calls for him to step down by saying he had found his “mojo” over the summer.
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