Budget 2025: Planned USC cut will boost low and middle incomes by hundreds of euro

A rift has emerged over funding being allocated to disabilities services and childcare, which has been described as 'laughable'

The universal social charge (USC) is likely to be cut by one percentage point, from 4% to 3%, as part of the cost-of-living package in Budget 2025. Stock picture: Denis Minihane 

Low- and middle-income earners are to benefit from a cut to the universal social charge, from 4% to 3%, as part of next week’s budget, which would see hundreds of euro on average per year returned to their pay packets. 

The cost-of-living package, which will be on top of the main Budget 2025 package, is now likely to stand at between €1.5bn and €1.6bn. This will include one €250 energy credit, paid to households before the end of the year. Inheritance tax is expected to see the threshold increase to €400,000.

Negotiations on budget measures are now expected to go down to the wire after the three Government leaders met on Thursday night to discuss the parameters of a bumper €8.3bn package, which will include around €6.9bn on spending and €1.4bn on taxation measures.

As part of the income tax package that was discussed with party leaders on Thursday evening, it is understood that a proposal was tabled by Finance Minister Jack Chambers to reduce USC from 4% to 3% on incomes between €25k to €70k. 

This builds on the reduction of 0.5% made last year by then Finance Minister Michael McGrath and is seen as a priority by Fianna Fáil to target low and middle income earners.

It would be one of the biggest USC cuts in many years and the largest reduction by this Government. This change is likely to feature in addition to other changes to credits and bands.

Next Tuesday's budget announcement will see see tax cuts for workers, once-off cost-of-living payments, social welfare increases including €15 more on pensions and investment to recruit thousands of teachers, healthcare workers and gardaí.

Finance Minister Jack Chambers has already indicated that workers will be €1,000 better off as a result of cost-of-living measures and tax changes.

Rift over disabilities and childcare funding

Meanwhile, a rift has emerged over the level of budget funding being allocated to disabilities services and childcare, which has been described as "laughable".

Sources described the amount being proposed by public expenditure minister Paschal Donohoe as "poles apart" from what is required to fund residential care, respite services, assessments of need for children and other essential supports for those with disabilities.

However, Children's Minister Roderic O'Gorman and Minister of State in his Department Anne Rabbitte were left "surprised" and "frustrated" during a meeting with Mr Donohoe this week.

"I don't know where all this money that is swimming about is going because it's not coming our way," one source said.

It is understood Mr Donohoe told his counterparts that he has set aside between €50m and €60m for new measures for the entire Department of Children.

The funding, which would have to cover new spending across childcare, immigration and disabilities, was dubbed as "laughable" given the fact that €74m for new measures was provided to disabilities alone last year.

"Our current ask is multiples of that," a source said. "It's just not a credible offer."

Another source said the amount requested for disabilities services as well as to support Tusla, childcare workers and youth projects had been carefully costed ahead of meetings with Mr Donohoe.

"We are not pulling a number out of the sky, we have it backed up," they added.

As coalition minister met today, Thursday, autism campaigner Cara Darmody (14) was speaking to supporters outside Leinster House during the rally she called for disability rights. Picture: Sam Boal/Collins  

In July, Ms Rabbitte announced the HSE would be asked to develop a disability specific multi-annual capital strategy to identify the short and medium term infrastructure needs for disability services.

A dispute over funding could lead to tensions within government, with disability services continually highlighted by campaigners including 14-year-old campaigner Cara Darmody who told a protest on Thursday that Ireland is now an “international embarrassment” on child disability issues, and said the Government has “let children with disabilities down”.

A third source source close to the meeting on disability funding moved to downplay any disagreement, stating that there is "still a long way to go" adding "we will see where we land".

They pointed to the volume of demands within the Department as an indicator that discussions would never have been straightforward.

Some feel it will require an intervention from the three Government leaders, given the significant gap between the amount sought and the level of funding offered.

It is expected that budget meetings will continue across the weekend.