skip to main content

Government committed to safety in public finances, says Donohoe

Paschal Donohoe said that he and the Minister for Finance are 'on the same page'
Paschal Donohoe said that he and the Minister for Finance are 'on the same page'

Minister for Public Expenditure has said that potential cuts to the Universal Social Charge (USC) in the Budget will be a decision for Minister for Finance Michael McGrath to make.

Pascal Donohoe said that he and Mr McGrath are "on the same page" and are committed to safety in public finances.

The Minister said that reductions to the USC have been made in the past.

The comments come as both the Tánaiste Micheál Martin and Finance Minister Michael McGrath confirmed today that reducing the USC is under examination ahead of the Budget.

Minister McGrath told reporters in Tipperary that income tax will be the "largest and most important" part of Budget 2024 tax proposals, but there's a need to achieve "... the fairest and most equitable distribution of the benefit of the tax reductions."

He said he was particularly focused on assisting people on "low and middle incomes" adding: "I'm examining a range of options at the moment, across the income tax and USC codes, to see what best achieves that."

However, Minister McGrath warned that tax envelope for the budget was €1.1bn and this would "only go so far".

He said the key issue during the cost of living crisis is to ensure that workers do not pay a higher rate of tax just because they get a wage increase from employers.

Meanwhile, Minister Paschal Donohoe said the Government is in a position to invest in tax changes and invest in better public services because the public finances are in surplus.

The Minister also said the Government has acted upon the "broad thrust" of what the Irish Fiscal Advisory Council has recommended on Budget 2024.

"We are aiming to grow Government expenditure by 6.2%, bringing overall expenditure to €91.2 billion. But as the Taoiseach has also said, and I've said on countless occasions, the broad thrust of what the fiscal advisory council have recommended, we've acted upon," he told Morning Ireland.

He said the Fiscal Advisory Council has said we should be running surpluses, and we should not be feeding an increase in corporate tax receipts into day-to-day Government spending or lower taxes.

"That's why we believe we're going to be able to run a surplus of €10 billion for this year because we don't want to spend money we might not have tomorrow on day-to-day spending. And we're aiming to increase that surplus again next year," he stated.

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

He added that it is his job, along with Minister McGrath, to integrate that broad view of our public finances alongside all of the competing demands faced every day that are legitimate and in many cases are backed up by really good argument.

On the recent Exchequer figures, Mr Donohoe has said August 2022 there was a very large additional increase in corporate tax, which is one of the reasons why August of this year looked very different to a year ago.

"I think it's still worth noting that corporate tax revenue overall for this year is still up. It's up by around 7% versus a year ago. And as Minister McGrath has said, we'll have to take a look at where we are in November in particular to see if it's part of a broader trend," he said.

"But this goes back to the value of running surpluses, that if it does decrease again in the future, it won't have a material immediate effect on day-to-day spending," he added.

In relation to one-off measures in Budget 2024, he said it will be in October when the Government makes a decision in relation to that.

"By that point we'll have a clearer view regarding where inflation stands. We'll have another month of tax collection under our belt and of course we make that decision conscious of how difficult it is for so many at the moment with the cost of living," he said.

"We have a number of weeks of work ahead of us," he added.