Simon Harris (Wicklow, Fine Gael)

I thank Deputy Nash for this proposal. I have heard him talk about this time and time again, and for good reason. I fully accept that budgets are about choices and we will have rigorous debates in this House about whether our choices are right. I contend – the Deputy will have a different view – that the choices we made this year were about trying to boost economic resilience, protect jobs and stimulate housing supply. We have had that debate and we will continue to have that debate.

I wish to make a couple of points. I understand that the absence of indexation of income tax credits this year has an effect on workers within our country. I also, however, have to read and marry that alongside the fact that wage growth is still expected to take place in our economy next year at such a rate that we still expect that all income earners who experience wage growth will see a net increase in their after-tax income. That is a point worth making and monitoring in the time ahead. Obviously, I have made comments in the past in relation to indexation and those comments are accurate when it comes to not indexing. The issue of wage growth and how that interplays is also a fair point.

I reiterate that this is the first of five budgets to be delivered by the Government. The Government and I, as the new Minister of Finance, remain committed to standing by the programme for Government commitment to make progressive changes to income tax - I have to say the next few words - if the economy remains strong. We all want it to remain strong. We have spelled out in the programme for Government what we will do and what we will defer doing if times become more difficult.

On the broader issue of automatically indexing credits and bands, it is worth pointing out that no Government has done this to date. One can say that is a good or bad thing, but the reason we have not done this traditionally as a country is that it does not allow the flexibility to adapt spending as necessary to match the level of resources available in any given budget. There is an argument that it actually restricts the ability of a Government to target resources where the need is greatest. However, the programme for Government makes some commitments in this area. It commits to “implement progressive changes in taxation if the economy remains strong, including indexing credits and bands to prevent an increase in the real burden of income tax.” It also states, “In the event of an economic downturn and unexpected deterioration in the public finances ... [we would] postpone changes to income tax credits or bands, as we did in Budget 2021”. I am happy to engage further with the Deputy on this in the time ahead. In fairness to Deputy Nash, he has acknowledged already that some of his request goes broader than my direct ministerial remit for the purpose of this debate in terms of what would be included in the summer economic statement. Some of the items he referenced, as he said himself, are the responsibility of other members of the Government, but I understand the broader thrust he is trying to get at.

My Department provides regular updates regarding the indexation of the income tax system. In recent years, information on the indexation of tax credits and bands has been included in the annual tax strategy group paper on income tax. Most recently, the budget 2026 strategy paper set out information relating to indexing the income tax system, including the estimated cost to the Exchequer. The costs used in this publication were taken from the Revenue Commissioners’ ready reckoner publication. This year’s annual progress report also included projections of wage growth to estimate the yield from non-indexation of the tax system. In other words, this is an affect of how much additional revenue the Exchequer would receive from the fiscal drag if income tax bands and credits were not adjusted to keep pace with wage growth.

I understand that the tax strategy group paper on social protection included similar budgetary options for consideration in that space. It is our view, and certainly the Department’s view, that the information requested by the Deputy in relation to the specific amendment on indexation is already regularly addressed in the variety of areas I have outlined. This is a practice that I will request the Department continues to consider as part of future reports as well as any other useful information we can provide in this regard. While I am not in a position to accept the Deputy’s amendment as is, I am happy to see if we can constructively engage on this in the time ahead.

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