Budget Proposals Launch
Posted by Alan Kelly on April 02, 2009 at 12:27 AM
Today I was part of the Labour team that launched our 2009 Budget proposals ahead of the emergency budget next Tuesday (7th). I was particularly glad to get some of my suggestions into the proposal, especially in relation ot the areas of re-prioritising Broadband in the NDP and securing more job placements for college graduates. In order to get this economy turned around we need to invest in new ideas and young people and these are two areas in which I think we can do just that.
The following are the key points from our proposals:
BUILDING A NEW, BETTER AND FAIRER FUTURE : Labour's Priorities for the Emergency Budget
CURRENT ECONOMIC POSITION
· The Irish economy is experiencing an unprecedented contraction in
activity and a rapid rise in unemployment. Output may fall by some 6%
in 2009. Tax revenues in 2009 are projected to be some 30% lower than in
2007. A fiscal deficit has opened up which is now projected to be at
least 11.5% of GDP. This deficit is unsustainable, and a major fiscal
correction is required.
· Fiscal policy must also have regard, however, to the impact that a
fiscal correction will have on activity and employment. An appropriate
balance must be struck between the twin requirements to deal with the
deficit in a credible fashion and to sustain activity and jobs. This
means that a multi-annual approach is required.
· The appropriate target for policy is the structural deficit - that
portion of the deficit that will not be eliminated by a return to
economic growth on the back of global recovery
· Following the publication of the February 2009 Exchequer Returns, the
Government indicated that it intended to stick to its 9.5% of GDP
deficit target. This implies a gross adjustment over the remainder of
2009 of €4.5 - €6 billion. Such an adjustment would constitute an
attempt to almost halve the structural deficit in nine months, rather
than over twenty-one months, and would constitute a fiscal shock on an
unprecedented scale.
· A more appropriate fiscal policy is to target the reduction of the
structural deficit by half - or some 4% of GDP - in 2009 and 2010, with
further, but less severe reductions in 2011-2013. The first stage in
this process would be a budget package of approximately €2.25billion in
net full year terms in the April Budget. Given the impact that budget
packages have on revenue buoyancy, this implies a gross full year target
of €2.8-€3bn
· This should be accompanied by robust Government action to drive down
costs in sheltered sectors of the economy, both to enhance
competitiveness and to protect family budgets, by a combination of
regulation, competition and direct control of selected prices.
· The budget package to be adopted on April 7th should have three key
objectives -jobs, fairness and a structural adjustment.
JOB CREATION/ SKILLS
· In order to fund jobs and skills initiatives, and for pre-school
education, the fees paid by the Banks for the Guarantee scheme, which
will total €1billion , which is currently being held in a ‘suspense'
account in the Central Bank, should be transferred to the National
Training Fund
· A new National Development Plan should be drawn up with immediate
priority being given to programmes with the greatest impact on job
protection or job creation. These would include school buildings and
critical infrastructure such as broadband
· A PRSI exemption scheme should be put in place that would exempt
employers from paying employer's PRSI for 18 months, where they employ a
person who has been unemployed for more than 6 months, and where they
demonstrate clearly that they are creating a new job.
· The Back to Work Enterprise Allowance should be revised so that
unemployed people can avail of the scheme after three months of losing
their job (currently 2 years)
· Private sector employers should be incentivised to offer career
breaks to facilitate parents and carers and to improve job opportunities
for other workers.
· A Graduate Placement Scheme should be put in place which would allow
new graduates to retain social welfare benefits while working in
approved job placements.
· A ‘tax-back' scheme for people who have lost their jobs and wish to
return to third level should be introduced.
· The cap on Further Education Places should be raised, the number of
place son VTOS expanded, and eligibility for the Back to Education
Allowance should be extended.
PUBLIC EXPENDITURE: DOING MORE WITH LESS
· Labour has argued for many years that far greater value-for-money can
and should be obtained from public spending, and we have advanced
numerous proposals on how this could be achieved. Reform in this area
can no longer be delayed.
· The Government has already announced its decision not to pay the 2009
and 2010 instalments of the T16 pay awards. This will yield
approximately €990m in 2010 and €1200m in 2011.
· Given the huge gap that has developed in earning levels in the public
service, an earnings cap of €200,000 in the public sector, and the
suspension of the system of performance related pay for higher civil
servants.
· There must be greater mobility of staff within the public sector, so
that key posts can be filled by transferring staff from low to high
priority areas. The Government should introduce a scheme that
encourages public servants to take career breaks or work part time, by
limiting the loss of pension entitlements that would result to the
individual.
· Non Wage Spending
· The decentralisation programme should be abandoned.
· Government should review its rent payments, and seek downward
revision in rents paid by all public sector bodies, including schools.
Rent payments under social welfare schemes should be reviewed, and a
retention tax should be applied where direct payment is made to
landlords.
· The Houses of the Oireachtas and the holders of Public Office must
give a lead in this drive to do ‘more with less'. The number of civil
servants working on constituency matters in the offices of Ministers and
Ministers of State should be reduced to 2 per Minister. The number of
Junior Ministers should be limited to fifteen, however allocated, and
the number of Oireachtas committees should be similarly reduced Payment
to Oireachtas members for acting as Chairs, Vice-Chairs and Convenors of
Committees should be abolished. Ministerial pensions should not be
payable to sitting TDs or Senators.
· As part of the drive to achieve ‘more with less', the number of Dail
sitting days should be increased by 50 per cent. Oireachtas expenses
should be vouched. Payments made to independent Deputies and Senators
under the Leader's Allowance must be accounted for in the same manner as
for political parties.
REORGANISING CAPITAL EXPENDITURE
· Falling tender prices in the construction and civil engineering
sector should be used to reduce the cost of projects. An initial target
of €1000 million should be set for such cost reductions in 2010 and is
readily achievable.
· A fundamental overhaul of the capital programme is required. This
should include a new framework document or National Development Plan.
It should be accompanied by greatly improved management, of the
programme itself and of individual projects.
· To remove uncertainty, and to retain profit from public
infrastructure delivery within the public sphere, the Labour Party
proposes the establishment of a National Development Bank (NDB) to fund
and deliver infrastructure projects. Such an agency would be set up on a
commercial semi-state basis with a mandate aligned with the public
interest.
TAXATION: FAIRNESS AND REFORM
· The interest subsidy afforded to landlords is an unjustified subsidy
for investment in housing assets, that has driven speculation in
housing, and should be phased out.
· Capital gains and capital acquisitions are taxed at a single rate of
22%, when a person on a modest or average wage faces a marginal rate of
41%. This difference also opens up a major avenue for tax-planning,
where wage income is re-routed and re-categorised as a capital gain.
· The rate of capital acquisitions tax should be increased to 28%. The
threshold for Category A should be reduced to €250,000.
· Tax relief for all property related schemes must be ended. In order
to prevent the re-emergence of such schemes in the future, we propose
that a minimum effective tax rate of 30% should be applicable to all
incomes over €250,000.
· A cap should also be placed in the Artists exemption at €75,000, with
a facility for averaging incomes over a number of years.
· A new 48% tax rate should be introduced for those earning over
€100,000.
· The existing system which allows tax exiles to avoid paying a variety
of taxes should be greatly restricted. This can be achieved by
restricting the number of days that a person can spend in Ireland
without losing their non-resident status. Restrictions should also be
imposed on temporary periods of non-residency. A requirement should be
introduced so that a tax clearance certificate must be produced with
passport applications.
· The long-promised Carbon Tax should now be implemented at a rate of
€20 per tonne.
· A package of excise measures totally approximately €400 million in a
full year should be introduced.
· A tax of 1c per text message should be introduced. The proceeds from
this tax should be earmarked initially to help fund youth related health
programmes such as the cervical cancer vaccine and the Cystic Fibrosis
centre..
· The existing system of tax relief for pensions is expensive and
heavily distorted in favour of those who pay tax at the higher rate. The
Department of Finance was not able to cost a number of options for
reform in this area. Reforms can be achieved by measures such as
restrictions on employer's relief, and an emergency levy on small
self-administered schemes
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