Any USC cuts to focus on those on low and middle incomes

Potential future reductions in the Universal Social Charge will focus on low- and middle-income earners, Fianna Fáil and Fine Gael have agreed in their talks on government formation.

The parties yesterday focussed on economic and social issues, with talks on Irish Water and water charges expected to resume today.

It is understood the parties also agreed that potential future available resources should be split on a 2:1 basis between investment and tax cuts.

While no specifics on any future USC reductions were finalised, sources said it was broadly agreed that they would focus on the lower and middle income groups. In the election, Fine Gael had committed to abolishing the USC while introducing a clawback mechanism on incomes above €100,000.

Phased out

During its recent negotiations with Independents, however, the party said it will “ask the

Oireachtas

to continue to phase out the USC as part of a wider medium-term income tax reform plan – to be published for consultation with the Oireachtas Committee on Finance by July and for approval by the Oireachtas in October”.

Fianna Fáil said it would eliminate the USC on incomes up to €80,000, but both parties committed during the election to reducing it in the next budget.

Fine Gael promised a 1 per cent cut in the 5.5 per cent USC rate, which applies to income between €18,668 and €70,044, in the next budget. Fianna Fáil promised to abolish the 1 per cent rate that applies to income up to €12,012. Both moves cost roughly the same.

Fianna Fáil also urged Fine Gael to commit to reinstate the National Treatment Purchase Fund, but this was resisted by Fine Gael.

The Fianna Fáil parliamentary party met yesterday and has reiterated its position that Irish Water must be abolished and water charges suspended.

TDs said their manifesto, which outlined such positions, must be their bible, and some were said to be deeply unhappy with the compromise floated during the Fianna Fáil-Fine Gael talks.

Scrapped

Waterford

TD Mary Butler and

Galway East

TD

Anne Rabbitte

told the meeting they had fought the election on the basis Irish Water would be scrapped and insisted the party could not shift from the position.

Party leader Micheál Martin said the party was satisfied to support Fine Gael from the opposition benches in the national interest.

Members raised questions about potential motions of confidence in a government and Mr Martin told them they had no duty to support ministers in those cases.

TDs also raised concern about mortgages, housing, health and mental health.

Others expressed frustration at why the party had made Irish Water a key issue and said they needed to prioritise mortgages, housing and health.

The parliamentary party has been told to be on standby for a meeting on either Saturday or Monday, in case agreement is reached with Fine Gael on supporting a minority government.