LABOUR LEADER ALAN KELLY has written to the leaders of Fianna Fáil and Fine Gael today saying that at this time the Labour Party would not take part in formal discussions on a Programme for Government.

In the letter, Kelly said “it is now clear to us that you have adopted a united position on future fiscal and economic policy that is at odds with the approach of the Labour Party”.

He said it is the Labour Party’s view that “it is premature and unrealistic to rule out using taxation to achieve” economic stability.

“Such a stance does not match with the vision you outlined to us,” adds Kelly.

His letter comes a day after the Social Democrats also ruled themselves out of the next government.

When asked at this afternoon’s press conference at Government Buildings about Labour stepping aside and ruling itself out of any future talks, Varadkar said he hadn’t heard the news, but was disappointed.

Varadkar acknowledged that there may need to be tax increases down the line, but he ruled out any increases to income tax, USC or corporation tax.

Other taxes, such as the carbon tax, will increase, he said.

It would be a “mistake” to tax peoples’ take-home pay, said Varadkar, especially as the country heads into a down turn.

“But I don’t think anyone can be under any illusions. It’s not going to be an easy time to be in government. The economic consequences of this emergency are going to be very severe, in terms of jobs lost, in terms of businesses that won’t reopen again.

“The impact on the public finances, we can borrow very cheaply now but it will be a foolish person to assume that will always be the case in the next five years. So it’s not going to be an easy time to be in government,” said Varadkar.

In the letter to the Varadkar and Micheál Martin, the Labour leader said:

“It is hard to see how we can rebuild and improve public services without some change in taxation and more extensive borrowing to maintain demand and capital investment in the economy until at least the end of 2021.”

He also raised concerned about a “lack of clear direction on the Covid-19 pandemic unemployment payment” stating that workers have borne the brunt of the national effort to tackle Covid-19 and cannot be left behind in the months to come.

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Kelly said he recommended to his Parliamentary Party today that they would not take part in informal discussions on a Programme for Government, stating that it is their united view that the talks with the Green Party should now be given the space and time to reach a conclusion.

Varadkar said that a programme for government can be agreed by the beginning of June, with a new government in place by mid-June.

This week there has been intensive talks held between Fianna Fáil, Fine Gael and the Green Party on forming a government.

Minister for Finance Paschal Donohoe briefed the team of negotiators on the economic challenges posed by the Covid-19 pandemic, while other discussions were held on justice issues and the ending of Direct Provision.

Today, talks are underway on issues relating to Brexit and Northern Ireland.