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Fianna Fáil's alternative budget: Cuts to politician pensions and no property tax

Fianna Fáil today launched its budget proposals entitled “A Fairer Way to Recovery”.

From left: Spokesperson on Public Expenditure and Reform Sean Fleming, Fianna Fail Finance Spokesman, Michael McGrath and spokesperson on Jobs, Enterprise and Innovation, Dara Calleary at the launch of its Budget 2013 proposals.
From left: Spokesperson on Public Expenditure and Reform Sean Fleming, Fianna Fail Finance Spokesman, Michael McGrath and spokesperson on Jobs, Enterprise and Innovation, Dara Calleary at the launch of its Budget 2013 proposals.
Image: Sam Boal/Photocall Ireland

FIANNA FÁIL TODAY published their submission for Budget 2013, with a near 50:50 split between tax increases and expenditure cuts.

Outlining projected savings of €3.5 billion, party spokesperson on finance Michael McGrath said that it was based on three priorities:

First, we are proposing that education, mental health and disability services be fully protected.
Second, enterprise is at the heart of our budget approach and we will not add to the cost of employing people.
Third, we are committing ourselves to a progressive approach to the budget unlike last year’s budget which hit poorer income households the hardest.

Public Sector Pension Deduction

As a “solidarity measure,” the party called for the pensions of “retired senior civil servants, public servants and politicians” to be reduced.

Only pensions of €75,000 and over would be impacted, however, with those  between €75,000 and €100,000 cut by 25 per cent, with any excess over €100,000 cut by 30 per cent.

Taxation

Fianna Fáil proposed that salaries over €100,000 should be subject to a Universal Social Charge of three per cent, which would pertain to the portion above the €100,000.

They also suggested reducing tax relief on pensions to 30 per cent, with a reduced earnings cap of €70,000. In place of this would be a deferred tax credit.

The party believe that “now is not the right time” to introduce a property tax, which they believe would further damage an “already weak economy”.

Increasing the capital gains tax rate to 35 per cent would bring in €80 million, while increasing the proportion of the retail price of cigarettes that goes to government would raise a minimum of €100 million in the first year, and €150 million in subsequent years.

The party also proposed a ramp-up in revenue enforcement, noting that the number of tax audits have dropped from 13,400 in 2009 to approximately 9,800 in 2012. The redeployment of certain revenue staff, along with further recruitment could, “at a conservative estimate” yield an additional €100 million next year.

While Sinn Féin proposed to reduce the excise on petrol and diesel by five per cent, Fianna Fáil proposed an equalisation of the duty paid on agricultural fuel to bring it into line with other motor fuels. Believing it to lead to a reduction in the illegal laundering of diesel, up to €100 million could be achieved within the first year.

The party proposed a 10 per cent levy on off license alcohol sales, which they believe will raise a “minimum of €100 million in a full year.” In addition, the cost of a beer license should reflect the volume of sales and the square footage of the retailer. An abolition of the below cost selling of alcohol would also net €20 million, according to “industry estimates”.

Wishing to see the introduction of a “junk food” tax which would be based on the levels of salt, sugar and added sugars, up to €95 million could be raised from a sugar tax and €13 million from a salt tax.

Property owners and renters

It was proposed that first time buyers would have an addition one year added to the term of their mortgage interest relief, subject to an annual maximum of €2,000. This would cost government approximately €20 million.

A “range of measures” were also suggested to assist those in negative equity. This would include legislation to allow those who move house to keep their tracker mortgage, where applicable, along with a “revision to the rules” which govern how a principle private residence is defined, with a view to income tax.

We propose a simple change to the income tax code which would allow people who bought their house between 2000 and 2009, who have now moved out and are themselves renting another house, to offset this payment against the rental income for a period of 3 years. We estimate this will cost €20m in the first year.

The party also proposed an increase of €4 per week in the contribution for individuals under the Rent Supplement Scheme which would save government €25 million.

Home improvements

Fianna Fáil also proposed reversing cuts to home insulation grants which were made in last year’s budget, while providing a tax credit of up to €2,500 for “approved home improvements” carried out by “registered, tax compliant contractor” in the hope of reducing black market activity.

The availability of “green loans” with favourable terms should also be made available through credit unions.

Business

Fianna Fáil stated that they believe that Ireland’s corporation tax should remain as is.

While suggesting that the rate of employers’ PRSI should remain the same, Fianna Fáil believe that commercial rates for businesses should be determined based on their economic circumstances. Other measures, including allowing full tax relief for start-up companies, were also proposed.

The party also said that the Minister for Social Protection Joan Burton needs to “rule out any changes to the arrangements for employee sick pay.”

Improvements in efficiency within the ESB, Bord Gáis and Eirgrid should also be considered, with a National Energy Efficiency Action Plan undertaken to achieve a nation energy saving of 20 per cent by 2020.

On the topic of credit availability, Fianna Fáil said that government should “adopt proposals” made by them which “called for greater lending powers to be given to credit unions and greater use of the County Enterprise Boards in respect of micro-finance.”

Motor Tax

While keeping the cost of motor tax unchanged, Fianna Fáil believe that cutting the evasion rate to one per cent would result in savings of €40 million.

Employment

An increase of up of 10,000 places on local employment schemes, including the work Tús (work placement) scheme was outlined.

On the topic of youth unemployment, the party proposed the cutting of courses in education and training “that are no longer relevant to labour market needs,” while mirroring the UK model of education and training vouchers on a pilot basis.

Young people who are not in education, employment or training six months after qualifying for job seekers allowance should enter a “strengthened” community employment scheme as opposed to suffering from cuts to their benefit.

The party would also like to see 100,000 job seekers up-skilled to have ICT skills over the next four years.

They also proposed expanding the current JobBridge scheme by 5,000 places which would be specifically targeted at those under 25.

Bank Pay and Pensions

Making reference to the fact that consultant firm Mercer are currently reviewing bank pay levels, Fianna Fáil said that if government did not act immediately, they would seek to introduce legislation to impose “a significant reduction” on pay levels.

They also want a reduction in pensions paid to bank staff, which they plan to seek support for in the Dáil.

On pensions in general, the party want people to be able to gain early access to up to 20 per cent of their pension scheme, which would be taxed at a marginal rate.

Croke Park Agreement

Fianna Fáil believe that the country’s public sector pay bill needs to be tackled more aggressively with stricter deadlines set, and adhered to. They want an additional €350 million in savings next year, with an increased focus on “procurement, shared services, out-sourcing and administration.”

Stimulus measures

The party proposed a three-year investment of at least €4.2 billion.

This would be generated by ending the current pension fund levy by the end of 2013 and replacing it with a mandatory investment by private pension funds into the Strategic Investment Fund, at one per cent per year for three years.

Calculating this as bringing in €700 million per year (a total of €2.1 billion), this figure would be matched each year by taking €700 million from the National Pensions Reserve Fund (NPRF).

Expenditure

Fianna Fáil have proposed that government should have a capital spend of €3.4 billion for this year, which is €150 million more than is currently proposed. This, combined with the current underspend of €336 million, could be used to create between 3,000-5,000 new jobs.

Finance spokesman for Fianna Fáil, Deputy Michael McGrath TD said the the party were proposing that “education, mental health and disability services” would be fully protected, while cuts to home help support hours would be reversed, costing €10 million.

The party also called for a reversal in cuts to third level grants, at a cost of €10 million. A further €5 million would also be incurred by their proposal to restore career guidance teachers in schools.

Lifting the ban on the current Garda recruitment embargo (€5 million) and a reversal in cuts to DEIS schools (€2 million) were also suggested.

An increase in the number of school resource hours would cost €5 million, while offering free GP care to all children would cost €10 million.

A new employment programme which would allow participants to have their social payments transferred to employers could lead to approximately 12,000 new jobs.

Other

Separate to their own budget proposals, Fianna Fáil want a co-ordinated Europe-wide response to the current Eurozone crisis.

The party also called for a deal on the country’s bank debt, saying that “it is in Europe’s interests that Ireland turns out to be a success story.”

Fianna Fáil also want to see the agri-food sector continue to be a “a great success story for the Irish economy”.

Seeing arts and culture as “valuable to Irish society as a whole” film investment relief should be extended to 2016 in order maintain “Ireland’s attractiveness as a location for film production”.

Changing payments from the State Claims Agency from one-off lump sum payments to periodic payments could save €25 million in 2013.

(Taken from “A Fairer Way to Recovery”)

“The package we are publishing today is not a template for an easy budget, but we believe it is fair, progressive and it supports the very enterprises who have the ability to lead this country to recovery,” McGrath said.

Read: Sinn Féin launches alternative budget, say “Government still have choices” >

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Paul Hyland

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