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Inflation

Living wage proposals to be brought to Government before summer, says Varadkar

Tánaiste Leo Varadkar said indexing the tax bands further is needed now more than ever.

TÁNAISTE LEO VARADKAR has received the Low Pay Commission’s report on establishing a living wage in Ireland and plans to bring proposals to Government before the summer recess. 

Speaking at the Royal College of Physicians this evening, Varadkar said he had just received the report, indicating the Government will be among the early movers in adopting a national, mandatory living wage. 

Varadkar also used his speech to reiterate that he believes now is the time to index the tax bands further.

He said opinion is divided on how to calculate what a living wage should be. 

“I see merit in the basket of goods and services approach – that each year we would decide what is needed to achieve an agreed standard of living – but I also think that approach would be subjective. We would have inconclusive debates about what should be in the basket and how much should be in it,” he said.

However, Varadkar said an alternative approach is setting the living wage as a percentage of the median wage.

“This approach is simpler and provides certainty,” he added. 

Speaking about concerns Irish businesses might have, particularly having endured a two year pandemic and now facing increased costs due to the war in Ukraine, Varadkar said any reforms to wages should be phased in.

Phased approach

In the UK, a targeted future living wage rate was set five years in advance, he said.

“This is something we could do in Ireland. Companies would have the time to plan, prepare and adjust,” said the Tánaiste. 

“A living wage will be an important milestone for workers in Ireland,” he said. 

Varadkar said the inflationary cycle right now cements the need to index the tax bands further.

He said employers should look at pay increases for workers, but added:

“I do believe there should be pay rises and indeed further increases in pensions and welfare.

“I also believe that it is a mistake to think that pay rises will solve the problem of inflation. Pay rises won’t bring down the price of anything. And pay rises could actually contribute to inflation and make the situation worse. That is why we have to look at these things in the round,” said Varadkar.

He said there is a need “to reduce the income tax burden on middle-income earners in particular so they can keep their pay rise if they get one and at least get something back in their pockets if they don’t”. 

“I can’t understand why the Opposition parties continue to oppose the indexation of tax bands. 

“The case for it is never stronger than now given inflation. Not to do so puts the entire burden on the employer to provide pay rises and will leave some workers with nothing if their employer cannot afford to do so,” he added.

October’s budget

Giving a hint what might makes it way into Budget 2023, Varadkar said next year, increased subsidies should be used to reduce the costs of childcare “considerably” for parents. 

“This will increase disposable family incomes and make it more attractive for parents to return to the labour market thus helping to fill vacant positions and moderate wage inflation,” he said.

“We should also reduce charges for healthcare, the cost of public transport and higher education. Other Europeans simply do not have to pay so much to see their doctor, attend a hospital or buy medicines,” he added. 

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