Leo Varadkar: Tax cuts for middle earners in next budget

The budget will provide further tax relief for middle-income earners but also ensure the public finances are ready for any economic turmoil ahead, the Taoiseach has said.

Leo Varadkar also confirmed revenue-raising measures were being considered to increase the €800m extra available next year to spend on services and tax cuts.

His comments came as the Government prepares to begin negotiations with Fianna Fáil in advance of Budget 2019.

Housing and health will be priority issues for the opposition party along with pay equality for public sector workers. Fine Gael, however, still want tax cuts.

There is also continuing disagreement about whether negotiations on renewing the confidence and support pact between the two parties commences before or after the October 9 budget announcements.

At Virginia Agriculture Show in Cavan, Mr Varadkar said every budget demand could not be met and the first priority was to balance the books and reduce debt.

.@campaignforleo says Independent Alliance idea of a ‘Granny Grant’ is “in the mix for the budget” but there is also a need to consider best ways to prioritise spending on childcare #Budget2019 see @irishexaminer for more #iestaff pic.twitter.com/fzpqIwKuwn

— Juno McEnroe (@Junomaco) August 22, 2018

“If we are heading into any economic turmoil in the years ahead because of Brexit or anything else, the best way to prepare is to make sure our public finances are in order.”

There will also be housing and health packages in the budget as well as further tax cuts, he confirmed.

“The second is to make sure that there will be additional funding for infrastructure, public services, like housing, healthcare and education which there will be. And also to make sure there is a tax and welfare package that puts a little bit of money into everyone’s pocket.”

A key feature of the budget is expected to include raising the entry point at which earners pay the higher 40% tax rate. It is currently €34,500.

Fianna Fáil though, however, is also pushing for a €100m affordable homes package out of the estimated €800m in extra funds for services and tax cuts.

Mr Varadkar confirmed that extra revenue-raising measures, similar to the new commercial stamp duty and sugar tax introduced this year, would be considered.

“So if we do have any revenue increasing measures in the next budget, they will be done for good public policy reasons. Wanting to calibrate the economy towards doing the things we want it to do, or wanting to improve public health.”

“That money would then be used to reduce other taxes, particularly to reduce taxes on income.”

A key target in the budget would be reducing taxes paid by middle-income earners.

“We’ve taken the vast majority of low paid workers out of the income tax net altogether in the last couple of years, and we want to now focus on middle incomes and taxpayers, making sure they don’t pay the highest rate of income tax, as they do now on very modest incomes.”

Mr Varadkar also confirmed proposals for a €1,000 ‘granny grant’ from the coalition partners will be considered.

“It will be in the mix for the budget. What we need to consider of course is if we do have extra money for welfare, if we have extra money for childcare, what’s the best way to deploy that.”

Grandparents who help out with childcare would receive a €1,000 annual payment under plans put forward by Independent ministers in budget negotiations.

The alliance say the grant could go even to aunts or uncles. Some estimates suggest it would cost the exchequer hundreds of millions of euro and could not be monitored.