Fianna Fáil to move away from tax cuts if economy slows

Fianna Fáil will direct any available funding towards maintaining public services instead of implementing tax cuts if the economy does not grow at a rate that will provide sufficient money for the next government.

Michael McGrath, the party’s finance spokesman, and Sean Fleming, the public expenditure spokesman, made the commitment at the launch of Fianna Fáil’s economic plan for the election.

If growth continues as expected, Fianna Fáil will split the available money between public spending and tax cuts on a two-thirds to one-third basis.

This envisages the economy growing in line with Department of Finance expectations and that €8.6 billon will be available to spend, the so-called “fiscal space”, over the lifetime of the next government.

Fianna Fáil will only commit to spending €8.3 billion of the €8.6 billion.

The loosening of EU budgetary rules means an additional €1.2 to €1.5 billion will be available and Mr McGrath said this will be set aside as a buffer against economic shocks.

If the economy slows down, Fianna Fáil’s “priority will be to protect vital frontline services ahead of tax cuts”, Mr McGrath said, adding Fine Gael would instead favour tax cuts for the wealthy in such a scenario.

“Choices will have to be made,” he said.

The Cork South Central TD called Fine Gael’s plan to abolish the Universal Social Charge (USC) “a runaway tax cut” that would see people earning €200,000 gain €7,000 per year.

Five years

Fianna Fáil’s USC proposals would abolish USC for those earning less than €80,000 within five years. The 8 per cent USC rate would continue to apply to income over €80,000, which means the maximum someone would benefit by would be €4,000.

In its first budget, the party would abolish the USC rate that applies on income up to €12,012, which would cost €237 million out of over €500 million available for Budget 2017.

In contrast, Fine Gael has said it will cut the main 5.5 per cent rate, which applies up to €70,044, by 1 per cent in its first budget.

Fianna Fáil’s abolition of the 3 per cent rate of USC, which applies up to €18,668, would be phased in over two budgets and the main 5.5 per cent rate would be abolished within five years. The entry level to the 5.5 per cent rate would also be raised to €80,044.

Fianna Fáil’s total tax package would cost €2.92 billion and also includes proposals to cut Capital Gains Tax, ensure the self-employed are treated equally and reducing employer’s PRSI for new firms.

‘Black hole’

Mr McGrath also said Fine Gael has a €900 million “black hole” in their “long term economic plan”, comprised of what he described as vague commitments, such as €250 million in tax compliance measures.

“This is championship hurling now. When you are setting out the basis of your economic plans for the next five years, then your numbers have to be fully costed,” he said.

“Fine Gael have not costed their proposals and there is a massive black hole.”

Mr McGrath previously said Fianna Fáil should not rule out going into coalition as a junior party, effectively leaving open the possibility of a Fine Gael-Fianna Fáil coalition.

While he stood by that position on Monday, he said “that is not the issue” facing the electorate.

Mr McGrath and Mr Fleming said the choice is between a Fine Gael-led government or a Fianna Fáil-led one.