There will be no tax rises in October budget, vows Taoiseach

Taoiseach Enda Kenny has made it clear to Labour there will be no tax rises in the October budget.

Mr Kenny joined forces with Michael Noonan, the finance minister, to sweep away any hope the party had to increase the universal social charge (USC) for top earners.

Refusing to be drawn on calls within Fine Gael to cut taxes in the budget, Mr Kenny said no measures had yet been decided.

“Let me say that it’s part of our programme for government that there would not be any increase in income tax.

“We believe this is fundamental in the context of the creation of jobs and not to put obstacles in the way of jobs being created,” he said after meeting with visiting Japanese prime minister Shinzo Abe.

The comments came as the Cabinet met to begin talks on the October financial statement.

A budget strategy memorandum was circulated and the Cabinet agreed to stick to targets of reducing the deficit to 5.1% next year and 3% the year after.

Mr Kenny’s spokes-person said no changes had been made to the planned €3.1bn adjustment of cuts and tax hikes planned.

Mr Noonan also insisted tax hikes would harm employment prospects.

Labour TDs continue to push for a greater financial payback from people earning above €100,000.

Labour also wants extra cash available, such as the €1bn released by the promissory note deal, to be used to limit spending cuts, rather than going on direct tax cuts.

However, a Labour spokesperson said the party was looking afresh at this year’s budget as it involved “new numbers”.

Fine Gael made it clear in the run-up to the last budget that it would consider a USC rise for top earners a branch of the programme for government pledge on tax.

The IMF said it wanted the Government to reach the troika’s 3% budget deficit target by 2015, with a margin of safety.

In its 10th review of the Irish economy, the IMF said: “Any reassessment of the medium-term consolidation path should await Budget 2014, and focus on safely achieving the medium-term fiscal consolidation targets in a growth-friendly manner, while using interest savings from the promissory note transaction to help build buffers against potential shocks.”

The IMF mission chief, Craig Beaumont, said the IMF would not tell the Government what to do.

“We are flexible on the exact adjustment — that is up to the Government. But we would like to see them meet the target with a reasonable degree of safety.”

The €1bn in savings made through the promissory note deal means the Government is on target to reach a 2.2% budget deficit by 2015.