Workers will escape tax hikes if troika cuts new deal

WORKERS will only be spared income tax hikes in the budget if the Government can cut a new deal with the EU/IMF, the Taoiseach last night insisted.

Enda Kenny said he was determined to uphold his election pledge not to increase pay levies, but needs approval from the EU/ECB/IMF troika to make up the €250 million hole this would leave in national coffers.

“We are committed to no increase in income tax and no decrease in the headline rates in social welfare,” he said.

“The previous government, in its memo of understanding, signed off on a situation where it agreed there would be €250m extra in income tax taken from the taxpayer for each of the next three years. We now have to renegotiate that with the IMF/EU and do that on the basis of alternatives, as we regard an increase in income tax as a restriction on the incentive to work in the first place,” Mr Kenny said at the end of Fine Gael’s pre-Dáil parliamentary party gathering yesterday.

The meeting was dominated by the economy as Finance Minister Michael Noonan attempted to downplay fears of another “budget from hell” this December. Mr Noonan said it would be tough, but markedly less harsh than the previous one.

“The 2012 budget will be about two-thirds as difficult as the 2011 budget, but, of course, a lot of the reasonably easy options have been taken already, so we’re down to rather difficult policy decisions,” he said.

Mr Noonan promised people would be less taken by surprise at this year’s budget, as he will publish a three-year plan in October setting out the blueprint for rebuilding the economy. “Anybody with a reasonably good knowledge of what’s going on will have a very good idea of what’s up ahead after that comes up,” he said.

Mr Noonan was speaking as the IMF gave Ireland an approving assessment, stating that the country is on track to meet its targets this year as it continues to impose the harsh medicine of the emergency bailout deal.

However, it again downgraded economic growth projections from 0.6% to 0.4% for 2011.

While social welfare rates would not be cut, Mr Kenny said “serious” savings in its budget would be met via a tough anti-fraud crackdown.

The Taoiseach said the Government was committed to cutting the deficit to 8.6% next year — meaning that the budget will contain tax and cut measures coming in at between €3.6 billion and €4bn.

The search for revenue saw Transport Minister Leo Varadkar declare that the Government was prepared to consider selling its 25% stake in Aer Lingus if share prices improved.

The airline’s bitter rival Ryanair insisted it would only bid for such shares if the Government welcomed the move.