Low to middle-income earners may benefit by just €5 a week in next month’s budget due to tight restrictions on the amount of tax cuts that can take place and an internal cabinet row over where reforms should be made.
The likely increase has been outlined by a number of government departments just a fortnight out from the formal announcement of Budget 2017.
Under plans being strongly considered by Finance Minister Michael Noonan and Public Expenditure Minister Paschal Donohoe, the USC rate is likely to be cut by 0.5% for next year.
While it has not been formally agreed which USC categories will be affected, it is expected this reduction will be focussed on the three lowest rates - 1%, 3% and, potentially, 5%.
The move is intended to ensure there are reductions for people on low incomes struggling to pay off their daily expenses.
However, such a reduction will only result in people on €35,000 having €3 more a week and those on €55,000 receiving just €5 more during the same period.
The USC move is likely to be the main concession to low to middle-income earners due to the fact the Government has already agreed to use two thirds of the €1bn fiscal space available next year on public spending improvements.
This means that while €666m will be set aside for health, education and social service developments, among others, just €334m will be used to fund tax cuts.
Among other issues which may form part of the October 11 budget announcement are a proposed €30m fund to help first-time buyers, inheritance tax law changes, pension increases and potential subsidised childcare cost improvements.
However, while some form of pension increase is almost certain to take place due to the fact Fianna Fáil — which Government depends on for support — has specifically called for the move, there are disagreements in cabinet over whether the childcare reforms being sought by Independent minister Katherine Zappone are affordable.
The budget plans are likely to be discussed in further detail by cabinet this week, in addition to separate meetings between Mr Noonan and Mr Donohoe and Fianna Fáil counterparts Michael McGrath and Dara Calleary, with both Fine Gael and Fianna Fáil keen to ensure they are able to press home their own policies.
The negotiations are likely to take on extra significance after the latest Red C poll showed Fianna Fáil has fallen 2% to 27%, its first Red C drop in support since February’s general election.
The poll, published in yesterday’s Sunday Business Post, found that Fine Gael is on 25% (down 1%), Sinn Féin 15% (up 2%), Labour 7 (up 1%), Independent Alliance 4% (down 1%) and unaligned Independents 10% (up 3%).
AAA-PBP is on 6% (up 1%), Social Democrats unchanged on 4% and the Greens 2% (down 2%).
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