Labour ministers look at cutting tax and universal social charge

Labour Party ministers have considered a number of options for next month's budget, including cutting the higher and lower rate of income tax and the Universal Social Charge (USC).

The Irish Times has learned the options were laid out to the party's ministerial team at a briefing last week.

However, sources said the presentation given by Tánaiste Joan Burton’s new economic adviser, Terry Quinn, only outlined a number of possibilities and did not take a definitive view.

The options included cutting the top rate of income tax from 41 to 40 per cent; cutting the lower rate of tax from 20 to 19 per cent; lowering the 2 per cent rate of the USC to 1 per cent; and the 4 per cent rate to 3 per cent.

Both Ms Burton and Taoiseach Enda Kenny have said the tax structure will be reformed over a number of budgets, including lowering the higher rate and reforming the USC.

Ms Burton also gave a firm indication that the Coalition is walking away from efforts to seek retrospective bank recapitalisation.

Ms Burton, speaking at the opening of the Labour parliamentary party think-in in Wexford, said the positions now being adopted by the Government might not be the same as a number of years ago.

Break the link

Eamon Gilmore

, her predecessor as Labour Party leader, described a June 2012 EU summit outcome that promised to break the link between banking and sovereign debt as a “major game-changer”.

Over the weekend, Minister for Finance Michael Noonan secured the backing of EU finance ministers for Ireland's bid to repay its IMF loans early, in a deal that will generate savings for the exchequer before the end of the year.

Ms Burton was asked if this effectively meant a retrospective bank deal is no longer possible, and she replied: “There is more than one way of skinning a cat, as they say. Would it be exactly what might have been done in June 2012? Possibly not.

"It is all for debate but the critical thing is at each point to look at the strategy that, currently and for the future, maximise the savings to Ireland, relieve the pressure on Ireland, constitute a win-win for for Ireland and Europe in terms of recovery and provide for longer-term stability."

She said tracker mortgages remained a significant problem for the banking sector, and said banks and financial institutions “at a European level” are “highly creative in creating financial structures which allow burdens to shift.”