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'I don't say it lightly': Housing crisis is a breach in the social contract, says Tánaiste

In an exclusive interview, Leo Varadkar also indicated the minimum wage is to increase.

Varadkar says while the Housing for All plan is working, a fresh look at housing is needed.
Varadkar says while the Housing for All plan is working, a fresh look at housing is needed.
Image: Alamy Stock Photo

Updated Aug 19th 2022, 12:59 PM

IN 2018, TÁNAISTE Leo Varadkar declared the housing and homeless crisis a national emergency.

Four years later, when asked by The Journal in an exclusive interview how he would describe it today, he said: 

“I think what we’re experiencing is a breach in the social contract. And I don’t say that lightly.”

Varadkar also said there is now a need to take a fresh look at the country’s housing policy, and that while the government’s Housing for All plan is working, it is not working fast enough. 

“I think we need to have another go at housing really, and seeing what we can do. Because while our plans are working, they’re not working fast enough and that’s very obvious to me,” he said. 

Housing crisis

There has been much kite-flying over the last week regarding the Budget, such as possible tax breaks for landlords, as well as help for renters.

Housing Minister Darragh O’Brien is pushing for tax breaks for small landlords and tax credits for renters. 

Varadkar said earlier this week that not all the solutions have to be in the Budget. He said the 2% cap on rent increases and plans such as cost-rental were not budget measures. 

While he said the Government has been able to deal with problems such as Brexit, Covid and more recently, inflation, the crisis that remains and is yet to be solved by Government since at least 2014 is housing. 

The dire rental market situation was highlighted yesterday evening, when dozens of people queued for over an hour for a house viewing in Dublin. 

The most recent Daft.ie report found that Ireland’s rental market has lowered to new depths as the number of homes available dropped to an all-time low, while the rate of inflation in prices climbed to its highest level in at least 15 years.

With rents rising and house prices rising above peak 2007 prices, many are looking to this year’s Budget for some respite or solution. 

Public’s expectations

However, Varadkar commented on this: “What I just don’t want to do is raise the expectation that on Budget day, this will be the day when there’s another major housing initiative. But just because it doesn’t happen on Budget day doesn’t mean that it can’t or shouldn’t happen.” 

“I think we need to do more for renters,” added Varadkar.

When asked if he would be reluctant to bring in a tax credit for renters, as it would be similar to a Sinn Féin proposal, he said:

To be honest, if it’s the right thing to do, that wouldn’t bother me at all… it’s okay for parties to adopt the policies of other parties, if it’s the right thing to do. So that wouldn’t bother me in the slightest.

The Tánaiste said that back in the 1950s, 1960s and 1970s, up to when he was in his mid-20s and 30s, many people were able to own their own home in Ireland. However, he acknowledged that this may no longer the case for most people in that age group.

Now, for the first time in my memory, if not for much longer the vast majority of people in their late 20s and early 30s don’t own their own home. And that’s made people really annoyed. And I understand why they’re annoyed. You work hard and play by the rules to save money. And yet you’re paying a fortune on rent – money that you’d like to be paying towards a mortgage. 

Varadkar said that Ireland won’t have turned the corner on the housing crisis until the number of people in that age group and older can own their own homes. “The key thing for me is turning the tide on home-ownership,” he said.

30% tax band 

Meanwhile, the Tánaiste was reluctant to speculate on what will be in the Budget this year, stating that nothing has been decided upon. 

Last weekend it was heavily reported that his suggestion that a 30% tax band should be introduced was not being picked up on for the forthcoming Budget. When asked if the proposal was dead in the water, the Tánaiste said “it’s an option that I want considered”, and that he asked Finance Minister Paschal Donohoe “months ago” to consider it as an option. 

He said it is untrue to say that it would be a measure only for the wealthy – noting that it would benefit one million workers earning above €37,000, which he said is a modest income. 

“What the Revenue were saying is that they wouldn’t be able to do right away, it might might take a few months to get up and running,” he said of introducing the new band – something which was highlighted by Minister Paschal Donohoe – adding that that doesn’t mean that its a bad idea.

Will he introduce it into next year’s Budget, when he is Taoiseach again? All he would say was: “I suppose that’s the kind of thing that has to be discussed.”

There are lots of options on the table in relation to tax and the party leaders have not discussed them yet, he added.

“But one thing I would say is that we shouldn’t lose sight of the basic principle here. In Ireland, people on average incomes and below average incomes pay the highest rate of income tax.

“That’s not the norm in the world. It’s not the case in Northern Ireland, it is not the case in Britain, America, or Europe. That’s what I want to change. And you can do that in one of two ways.

“You can either widen the band, increase the standard rate cut-off point significantly, so that people don’t pay so much of their income at that highest rate. Or you can create a third band. And I’m happy for us to sit down as a Government and weigh up the pros and cons as to which option we go for,” he said. 

USC changes 

One item Fine Gael did campaign on in 2016 was the abolition of the Universal Social Charge (USC). This is a tax on income that replaced both the income levy and the health levy (also known as the health contribution).

The USC was introduced in December 2010 by the then-Finance Minister Brian Lenihan at the height of the financial crisis, coming into effect on 1 January 2011.

Would Fine Gael ever look to tinkering with the USC to return money into people’s pockets? Varadkar said that in recent Budgets, the thresholds and bands were changed so that people pay less, but he said the charge takes in €6 or 7 billion each year.

“So to get rid of it would be extremely expensive,” he said. Could the threshold be raised again? Varadkar said it’s an option – but not a promise.

The Tánaiste also told The Journal that he disagrees with reports that said Fine Gael is against increasing Jobseeker’s Benefit in the Budget.

When asked if his party is on a collision course with their government partners over a proposed increase, he said:

I don’t believe so. As Minister Humphreys said the other day, you need to be an octopus to hold down all the kites that are being flown about social welfare at the moment.

“There’s been no discussion in Fine Gael about what we should do in relation to Job Seekers Benefit or Jobseeker’s Allowance in the next budget. If there was such a discussion, I wasn’t party to it. And there hasn’t been a discussion among the party leaders about it.”

He said there is a list of options when it comes to tax and social welfare “that is a mile long”.

“I think what’s fair to say is we’re going to cut taxes in the budget, we can’t cut every tax, and we are going to increase payments in the Budget, we can’t increase every payment,” he added. 

A number of politicians in the Green Party, as well as some charities, have called for a double-digit increase in the Budget in social welfare payments.

Varadkar said it is agreed across all the parties that there will need to be a substantial social welfare package in the Budget. While he said last year’s increase was the biggest in a long time, the package this year is going to be bigger again.

Fine Gael is understood to not be against the idea of across-the-board increases, with a possible figure of €10 being suggested, along with targeted increases to the Fuel Allowance or Living Alone Allowance. 

It is believed the welfare budget is also set to be supplemented by one-off measures. When asked about such measures, such as an additional social welfare payment in the autumn and the usual Christmas bonus payment, Varadkar said there will be measures that kick in in January 2023 and cost-of-living measures that are rolled out this year. 

Spending and tax reductions this year will about to €6.7 billion this year, but Varadkar said the surplus tax take this year will help with the once-off cost-of-living measures that will kick in before Christmas.

The Government wants to give back the tax surplus collected this year to people “well before Christmas”.

“The details of how we do that haven’t yet been worked out, but I think it will be a mix of universal measures that help every household, but then targeted ones that help the poorest households the most,” he said.

Minimum wage increase

Meanwhile, Varadkar confirmed to The Journal that he has received a recommendation from the Low Pay Commission that the minimum wage should be increased. 

“They’ll have to be an increase in the minimum wage… I think it is needed, because the cost of living has gone up by a lot. And we know those most affected are those in lowest income,” he said. He plans to bring the recommendation to Cabinet in September, he said. 

Since 1 January 2022, the national minimum wage is €10.50 per hour. However, it is understood the recommendation would mean a significant hike in the payment given the rise in inflation and the cost-of-living crisis.

In the past, hikes in the minimum wage have been between 10c and 60c, but it is expected the increase could be higher than those in the past.

Speaking about bonuses for private sector workers, Varadkar said he is keen to see the tax-free bonus amount raised to €1,000. The Tánaiste asked the finance minister to assess the measure for the budget.

“The Government is giving €1,000 to frontline staff tax-free to recognise the work that they did during the pandemic. And private sector employers who want to do the same, if they do it, in a lot of cases, half of that is lost in tax, that doesn’t seem fair to me,” he said.     

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