Varadkar says recovery will allow reduction in number on middle incomes paying top tax rate

A post-Covid economic recovery will make it possible to reduce the number of people on middle incomes being caught by the top tax rate, the Tánaiste has said.

Speaking ahead of a Fine Gael think-in, Leo Varadkar said economic recovery means this can be done while keeping to plans to cut back on borrowing.

“We don’t want people to lose most of any pay rise they get next year to tax. The economic recovery that’s now well under way can make this possible while still achieving our objective of eliminating borrow for day-to-day spending by 2023.”

Mr Varadkar will also use his time at the think-in to brief parliamentary party colleagues on his opposition to any plan to increase PRSI contributions for self-employed people as part of a plan to defray the cost of delays to hiking the age for State pension eligibility.

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The Pensions Commission appointed by the Government is set to advise that there be no rise to the State pension age for seven years. The commission will recommend that it begin to rise in quarterly increments to 67 from 2028 onwards.

However, self-employed people would bear the immediate brunt of measures to balance out the financial impact of the delay, with reported increases to PRSI contributions from 4 per cent to 11 per cent, under proposals from the commission.

A Fine Gael source said he would “oppose the massive proposed PRSI hike for the self-employed, which would go directly against Government policy to support the self-employed”.

The Fine Gael leader will also push for a welfare package in next month’s budget. Mr Varadkar said there had been no increase in the pension and most weekly welfare payments since 2019, despite rises in the cost of living.

It is thought that there could be scope for bigger moves on tax, welfare and pensions than is currently factored into budgetary plans if some other indirect taxes are raised, although Government sources said there were no firm plans to do so other than the vacant site tax. It is understood some carbon tax income will likely go to fund welfare increases – most likely in the fuel allowance.

Rail services

Elsewhere, Green Party leader Eamon Ryan will use his party's think-in to outline his vision for the future of rail services, including the possibility that passengers would be able to travel from Cork to Donegal by high-speed rail under a revamped rail network.

The Green think-in will also hear how the new Common Agricultural Policy should be used to encourage sustainable farming and encourage young people to stay on the land through the planting of native forestry.

Green Party Ministers will tell the parliamentary party that it is “achieving more in government than any junior coalition partner in the history of the State”, party sources said, pointing to the enactment of the Climate Action Bill, financial supports for live events, plans to end direct provision and other policies including a ban on smoky fuels and fur farming.