THE plan to be put to Cabinet by Richard Bruton will certainly ruffle a few feathers. The result of a detailed analysis by his Department, it will now form a key part of the Cabinet's discussion of what to do in the Budget about unemployment.
Mr Bruton will not get everything he is looking for, but the challenge he now faces is to get agreement that the Budget should take a significant first step to implementing his proposals.
There is no doubt that last Friday's unemployment figures, which showed a 2,900 seasonally adjusted rise in the live register to 283,000, has raised the stakes in the run-up to the Budget. The constant upward trend in recent months has led to considerable unease in Government buildings. While Ministers quibble with the reliability of the figures, they now appear to agree that the Budget must "do something" to tackle unemployment.
Mr Bruton's proposals have a number of key goals. His Department's study is understood to argue strongly that tax reform is a key strategy towards creating jobs. The package thus aims both to make it cheaper for employers to take on more staff and to lower the tax burden for the employee. The chosen method is to exempt the first £75 of income from tax and PRSI. If the Government agrees in principle, an obvious step on Budget day would be to increase the £50 PRSI allowance introduced last year to £75, or higher.
Mr Bruton also suggests further phased reductions in employers' PRSI, pointing out that the graduated British system which increases the rate from 3 per cent to 10 per cent as the employee's income rises is much less onerous than the Irish one, which has a standard 12.2 per cent charge and a special 9 per cent rate for those earning up to £12,000 per annum.
As the Minister for Jobs, Mr Bruton's plan goes further and suggests an £80 per week subsidy for an employer hiring someone out of work for two years or more. This is not so much a scheme to `create' jobs as one which is designed to make an employer more likely to take on a long-term unemployed person.
Full costing of the tax and subsidy scheme is still being completed, but may be the subject of some debate. Mr Bruton is likely to argue that the "net" cost is not high because social welfare would have to be paid anyway. However, the mandarins in the Department of Finance may retort that using subsidies to take one employee off the live register may end with another taking his or her place.
Costings of the proposed reforms of the social welfare system must also of necessity be speculative. However, it is clear that withdrawing benefits, such as medical cards, from people once they reach a relatively low wage in work is a major disincentive from moving off the dole.
While there will be argument about how best to deal with this, Mr Bruton's proposal of allowing those moving from unemployment into work to retain such benefits would appear a logical way forward.
