Fianna Fáil has proposed a 50-50 split between cuts and taxes in its pre-budget submission, a marked departure from the Government’s ratio for the €3.5 billion adjustment for the budget on December 5th.
The party’s document, A Fairer Way to Recovery, was launched yesterday by finance spokesman Michael McGrath, public expenditure spokesman Seán Fleming and jobs and employment spokesman Dara Calleary. It agrees with the level of adjustment but veers away from the Government’s ratio of two-to-one between cuts and taxes.
Most of the increased taxes are focused on higher earners and the proposals do not include a property tax, the central plank of the Coalition’s tax proposals.
The €1.4 billion new taxes include an increase of 3 per cent in the universal social charge (USC) for those earning over €100,000. That would bring the effective tax rate for those earners to 55 per cent for PAYE workers and 58 per cent for the self-employed.
The plan also proposes reducing reliefs for private pensions, bringing down the earnings cap to €70,000 from €115,000 and reducing the rate of relief from 41 per cent to 30 per cent.
There are also proposals for new levies on off-licence alcohol, an increase of 75 cent in duty on a bottle of wine, price increases for tobacco and a new “sugar and salt” tax.
“The overall theme is a fairer way to recovery,” said Mr McGrath. He said there were two million people living on less than €100 a month after paying off all bills. “Do we reduce [their incomes] or ask those on €120,000 or more to make more contributions? For me there is no contest.”
Mr McGrath said the impetus was to protect fully education, mental health and disability. He said the budget was also “supporting enterprise by not adding to the cost of employing people in the country”.
“We have a progressive approach to the budget,” he said, adding the Government’s last budget was the first in recent years to hit the lowest income groups the hardest.
He said people had made “enormous sacrifices in the past four years and more will be asked in two years . I am not saying there is an easy way to come up with a tax and cuts package of €3.5 billion,” he said.
Mr Fleming said the document proposed to cut public sector pay by an extra €350 million next year through a deferral of increments, cuts in allowances, changes in work practices and an acceleration of the redundancy programme recently announced by the Coalition.
There are also proposals to cut higher pension payments of retired public payments earning over €75,000.
When it was put to Mr McGrath that this would reduce the pensions of former taoisigh Bertie Ahern and Brian Cowen (who get circa €160,000 per annum) by €10,000, he replied it was the most that could be done without the threat of a legal challenge.
Unfair cuts
Some €90 million has been set aside in the Fianna Fáil proposals to reverse what it described as the “most unfair cuts” imposed by the Government to date.
They include rowbacks on cuts to third-level student grants, guidance teachers, home help hours and the Deis rural school scheme. Fianna Fáil also wants to lift the ban on garda recruitment.
Other proposals are an increase in Dirt on savings to 35 per cent and the provision of free GP cover for every newborn child from 2013 onwards.
Mr Calleary said the party would oppose any proposals to make employers pay for sick pay. He also said that a change of approach was needed to ensure that small businesses were getting credit from banks.
He said it should be measured on loans drawn down, not those approved. He said AIB had disclosed at a recent meeting of the finance committee that only €600 million in loans had been drawn down by small and medium firms under credit review.
