The abolition of the universal social charge (USC) has been ruled out by Taoiseach Enda Kenny and Tánaiste Joan Burton, but both have promised to further reduce its burden on low and middle-income earners.

In a Christmas interview, Mr Kenny said that as the USC brought in €4 billion a year, it would not be possible to abolish it. He said that 500,000 people had been taken out of the net since the Government took office.

Mr Kenny said the adjustments in the budget, which will come into force next week, were designed to help lower and middle-income families earning up to €70,000.

He said that further reductions would take place in next year’s budget, but it was simply not possible to abolish the charge.

“I note that the Fianna Fáil speakers seem to be indicating that you could make up for it by general taxation which would mean pretty serious increases in income tax, “ said Mr Kenny.

He added that the Government had actually reduced income tax and adjusted the USC and that that would continue in the next budget.

USC reductions

Ms Burton said people would see USC reductions in their pay packets from next week.

“This January and February, depending on when employers put the changes through, people will actually see for the first time a small but significant reduction in USC,” she said.

Ms Burton also said that the USC generated very significant tax revenue for the Government.

“To suggest that it could be abolished overnight, without any replacement revenues, I think would be simply to try and mislead people,” she said.

She said she had repeatedly stated her objective of reforming the USC over a period of years and that process would continue in Budget 2016.

“In addition, I have always said as well, that there is scope, for instance, to look at some of the revenues which people contribute to the USC becoming a contribution for a future benefit, as opposed to what it is now, which was an additional tax or levy brought in by the previous government in the context of the financial collapse.

“What I have suggested is that the area where that could be used is, in fact, to assist people in increasing their pension over their lifetime, so that we would move to a situation where, like the United Kingdom, Australia and New Zealand, we would develop a supplementary pension model which would allow people to save over and above the State retirement pension; I think there is some scope for reform there and it’s something that I’ve spoken about before.”

Ms Burton also said a spring budget statement would help focus on where the economy was now, how employment was proceeding and where investment should take place.