Michael Noonan says tax cuts may be paid for by extra levies

Michael Noonan has signalled he intends to give tax cuts with one hand and take extra levies back with the other in the upcoming budget.

The minister for finance indicated he wanted to ease marginal income tax rates, but warned financial pain could be ratcheted-up in other areas.

With six weeks to go until the budget, the minister said the improving tax take meant the planned €2bn adjustment could be achieved with minimal spending cuts, while he would aim to help low and middle income earners.

“Any reliefs we can give will be modest, and they may have to be paid for with tax increases elsewhere.

“I don’t think I’ll have to increase taxes very much in the budget.

“But if we are going to give additional relief beyond the adjustment that we are making, that might require extra taxes.

“We don’t want to put the recovery at risk. But we do have priorities like those on middle and low incomes and emigrants.

“In the agreement when the Government was formed between the two parties, the position is that one of the priorities is middle income people and then low income rate people,” he told RTÉ.

The minister defined middle income earners as those making above €32,800 who are in the higher tax bracket, and indicated he planned to examine USC rates.

Mr Noonan said he wanted to use the October 14 budget to set out economic plans for the next four years as he warned the country was still relying heavily on loans.

“We’re still borrowing €800m a month and we have to get our borrowing down and the way you do that is by reducing the deficit.”

The comments came as Tánaiste Joan Burton also moved to try and dampen expectations ahead of the budget. The Labour leader warned the Government would be unable to reverse cuts in welfare payments.

“We are not going to be able to meet everybody’s pent up expectations all in one budget.”

Pressed on whether welfare cuts made in previous budgets could be reversed, Ms Burton said: “We are not in a position as yet to do that”.

The social welfare minister said the best way to deal with an emerging property bubble was to increase the supply of social and affordable housing.

Sinn Féin’s Pearse Doherty said Mr Noonan’s remarks that AIB may be sold on the open markets marked an admission of defeat on the Government’s attempts to win retrospective recapitalisation on the bank bailout.

“This government has failed to convince any of our EU partners that Ireland deserved a retrospective recapitalisation. The Government let the ball slip through their fingers and now it seems we have confirmation from Minister Noonan that retrospective recapitalisation is dead in the water.”