C: FineGael Twitter

USC: Why are you still paying thousands every year for the bailout of now-profitable banks? 

One of the things I’ve always found curious about public reaction is that the whole country rose up in indignation and fury when asked to pay for water charges, yet we seemed to to have simply accepted, with epic meekness, the Universal Social Charge (USC) – the tax levied on every penny we earn to keep paying the cost of the consequences of bailing out the banks. 

How much would water charges have cost the average household? €200 per annum? Yet the USC can cost a family thousands every year, and we’re still paying it 11 years after its introduction in 2011, with no end in sight.

For someone on an average wage, which is €40,000 according to the CSO, USC adds up to a whopping €1,100 to their tax bill – an increase of 15% on what they would otherwise pay. It’s flabbergasting to me that we continue to fork this out without complaint.

Or take two teachers, married with two kids, each earning €45,000 a year. You will fork out an eye-watering €2,656 in additional taxes because of the USC. Yet we continue to be described as a low-tax economy. It’s a joke.

Sometimes it’s disputed that the USC is a charge applied to every cent you earn to cover the bank bailout. But that’s being disingenuous.

The 2008 bank guarantee, which left the Irish taxpayer in hock for the reckless behaviour of the lenders – and the mostly French and German bondholders who lent said banks billions to splash out in risky loans – left an enormous hole in Ireland’s public finances. (It should be remembered too that the EU placed significant pressure on the Irish government to bailout the French and German unguaranteed bondholders, which really crippled us.)

The cost of that guarantee crystallized as hugely inflated property values collapsed and by 2010 the government was forced to call in the IMF and the EU to take over the country, lend us €64 billion, and enforce years of austerity.

The state then had shares in what were pretty much hollowed out banks. As the share prices have risen and the economy recovered, some of the debt has been paid off. But, as ever, some of the reporting around what the State – that is, the taxpayer – was forced to fund is presented in a fashion that seems certain to confuse.

The office of the Comptroller and Auditor General, reporting in 2018, for example, said that the net cost to the State of the bank bailout is some €42 billion.

But it separately assesses the cost to the taxpayer of servicing that debt which it estimates as a “long-term recurring annual cost of servicing the debt” of  €1.1 billion to €1.3 billion a year. That’s an enormous burden on the taxpayer – at least one tenth of the cost of the ‘giveaway budget’ we saw this week.

This month, an Oireachtas Committee heard that while Bank of Ireland has now paid its debt, AIB has only repaid €11.1 billion of its €20.8 billion rescue package thus far, while Permanent TSB still owes at least €1.3 billion.

And so to the point of this piece: isn’t it past time for the USC to be scrapped and for the banks to be asked to commit their profits to servicing this enormous debt incurred because of their bad actions?

The government loves this tax, as it raises an enormous €4 billion from the taxpayer every year.  Former Minister for Finance, Michael Noonan, described it as “very efficient”, no doubt because it is levied on all income and very easy to collect. And since the government keep adding billions to the public debt with ridiculously long Covid lockdowns and chaotic mismanagement, they’d argue the USC must stay.

But it is massively unpopular with voters who see the hole it makes in their paypacket week after week. And many of them doubtlessly rightly feel that it is desperately unfair that they are being scalped for thousands in extra taxes – during a cost of living crisis – while the banks are back to merrily turning profits.

AIB recorded a profit of €645 million in 2021, and says its fundamentals are strong. That’s great to hear. Isn’t it time then that the banks stopped being treated with cotton gloves and are asked to step and start meeting the cost of servicing the debt they landed on the taxpayer?

Paschal Donohue, who denies he ever said the USC would be temporary, now says scrapping it for taxpayers earning less than €70,000 would cost the exchequer €1.1 billion – almost exactly what servicing the bailout debt costs. That seems like a fair swap – let the banks service their own debt, just as any of us would have to, and scrap the USC for ordinary families.

Fine Gael have tried in recent times to say that they never said the USC would be temporary, but they did. Here’s Leo Varadkar making that promise in 2016.

And Fine Gael put it front and centre of the campaign back then. Not that we could, in fairness, reply on Sinn Féin to take a stronger stance, to be honest, since despite all their blustering they voted for the bank bailout in 2018.


In fact, mostly because of corporation tax receipts, the government is currently running a surplus. But they are still levying huge additional taxes on workers for a debt that is not of our making. That needs to change.

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