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Fianna Fáil: Correcting the public finances alone will not be enough to drive recovery

The challenge facing the government is to enhance economic recovery prospects without damaging society’s well-being, says Fianna Fáil’s Michael McGrath ahead of Tuesday’s Budget.

Michael McGrath

ON TUESDAY THE government will unveil its third Budget. The size of adjustment and whether it will be less than the €3.1bn originally planned has been the focus of most pre-Budget speculation.

In reality ordinary families do not think of their lives in terms of deficits and percentages. What they want to know is after Budget day will it be harder for them to meet their household bills or will the public services they rely on be able to meet their needs?

During the last general election, Labour ran a campaign called ‘Every Little Hurts’ in which they warned what Fine Gael had in store for people. They listed six Fine Gael cuts and charges, including a cut to child benefit, which a vote for Labour would stop.

Five of those measures are in place while the sixth charge, a water tax, is on its way. Little wonder the public have grown ever more cynical of political promises.

We need an easing of the overall level of adjustment but what we need even more so in this budget is a change of direction. The split between tax increases and expenditure cuts should to be much closer to 50 /50 this time. That would limit the damage to frontline services and protect vital welfare payments.

People are angry and frustrated at the constant erosion of their living standards. In the last two years we have seen a litany of seemingly small cuts but which have had a massive impact on those affected.

Lack of engagement

As well as losing €40 a month per child, low income parents have seen the back to school allowance slashed, seriously ill patients have been turned down for discretionary medical cards and elderly people living alone have seen their electricity and telephone allowances cut.

Where expenditure savings are made, the first stop should be on eliminating waste and inefficient spending. The OECD recently highlighted that we do not do enough to help people who are out of work to find employment. Our welfare system is often characterised by passive income support.

There is a lack of engagement with people out of work. The longer this goes on the greater the risk of someone drifting into long term unemployment.

It is simply unacceptable that each case officer within the Department of Social Protection has to look after 800 people on the Live Register. This makes it impossible to provide the type of personalised service that can help match those looking for work with the skills and information they need to help them back to work.

Taxation measures should focus on restricting pension relief from those who have already accumulated large retirement incomes as well as asking for a greater contribution from very high earners and a widening the tax base in a manner that promotes the well-being of society.

Correcting the public finances alone will not be enough to drive recovery. We need to re-orientate the economy towards domestic job creation.

Holding the government to account

While everyone recognises that Ireland does a good job in attracting foreign multinationals to locate here I want to see the same level of intensity applied to encouraging home grown entrepreneurs.

Capital Gains Tax is an important source of revenue for the State but at the moment we make little distinction between an investor who passively buys and sells shares on the stock market and someone who takes the risk to start their own business and subsequently sells it on. I want to see a lower tax rate apply to these start-ups and I want to make it easier for businesses to attract loans from sources other than banks.

It is also imperative that we do not make it any harder on the self-employed who are already struggling to survive. The proposal currently with the government for a compulsory increase in the self-employed rate of PRSI should be scrapped. The alternative that we are putting forward is to have a voluntary opt-in system which would extend to the self-employed those benefits that are currently means tested.

The challenge on Tuesday is to enhance the prospects of economic recovery without damaging to the well-being of society. Getting employers to take on more people in the months ahead will be closely related to consumer confidence and spending.

Consumer confidence can fade quickly and a harsh or unfair budget would stop any recovery in its tracks. The Government have the means to deliver a fair and equitable package. As an opposition party, we will be holding them to account.

Michael McGrath TD represents Cork South-Central and is Fianna Fáil Spokesperson on Finance

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