Fianna Fáil: We won’t tolerate nasty surprises in budget

Fianna Fáil has insisted it will not dictate October’s budget, but insists that “no nasty surprises” will be tolerated.

The party, which is facilitating the Fine Gael-Independent minority government, will be looked upon to abstain from the budget votes to allow them pass.

Its finance spokesman, Michael McGrath, said discussions will have to take place between him and Finance Minister Michael Noonan to ensure agreed policies are adhered to.

Speaking last night to the Irish Examiner, Mr McGrath said Fianna Fáil will not be involved in the detailed formation of the budget, but the agreement to allow its passage is conditional on the delivery of policy principles decided earlier this year.

“There haven’t been any discussions yet. I imagine there will be contact in September. But this will be a budget brought forward by Fine Gael and the Independents, not by us,” he said.

“Our agreement to facilitate the passage of the budget stands on the basis that it is consistent with the policy principles agreed, so I don’t expect us to be getting involved in discussions about the nitty gritty detail of the budget.

“I imagine there will be contact to ensure that there are no nasty surprises.”

Mr McGrath confirmed he is opposed to Fine Gael plans to claw back PAYE tax credits for high earners, as part of plans to abolish the universal social charge (USC).

Mr McGrath said he feels such plans to claw back PAYE credits for those earning over €80,000 is “unnecessarily complex” and “convoluted”.

In a sign of the difficulty that the Government will encounter in compiling its budgets, Fianna Fáil said abolishing tax credits for high earners would further complicate the tax system and could be unworkable.

While it had been suggested Mr McGrath would seek to veto elements of the budget, it is understood such measures are unlikely to feature for at least three or four years.

Under its plan, Fine Gael wants to abolish the USC entirely for all income earners, whereas Fianna Fáil’s policy is to only scrap it for income earners under €80,000.

To ensure high earners do not benefit unfairly from such tax cuts, Mr Noonan is proposing the claw-back of some PAYE credits above €80,000.

Fianna Fáil feels such a plan is too complicated.

“I would be of the view removing tax credits above a certain level would introduce an unwanted level of complexity to an already complicated tax system,” Mr McGrath said.

“The focus should be in simplifying the tax system and reducing the burden of income tax but ensuring the system is simple and transparent, so it can be marketed abroad.”

In the Government’s summer economic statement, Mr Noonan said reform of the income tax system — including phasing out USC over five budgets — will be aimed towards middle-income earners and supported by the objective of making work pay. Low and middle-income earners are defined as those on incomes up to €70,000 a year.

The Government also said it is committed to introducing a PRSI scheme for the self-employed, and keeping the country’s corporation tax rate at 12.5%.