THE JOBS initiative was, in the words of Taoiseach Enda Kenny, a “down payment” on commitments made in the programme for government; in the words of Minister for Finance Michael Noonan, a “first step” towards improving competitiveness and job creation.
They were wise to show humility and avoid hyperbole. What was presented to the Dáil yesterday fell well short of what had been promised. Despite that, the package of measures displays a refreshing amount of joined-up thinking and offers incentives in areas most likely to produce early results.
The tourism sector received particular attention. Having invested in new hotels through tax breaks, the Government is determined they will be used and that a massive fall in visitor numbers will be reversed. VAT will be reduced from 13.5 to 9 per cent on all tourist-related ventures; air travel tax will be abolished subject to certain conditions and airport charges will be cut. Employers’ PRSI for new, low-paid workers will be halved and there will be a radical overhaul of sectoral wage levels. As promised, the old minimum wage will be reinstated.
Elsewhere, almost 30,000 additional educational and training places will be provided; capital spending will be allocated to employment-intensive projects involving schools and road maintenance and a well-publicised energy retrofitting programme for homes will get underway. This will be paid for by a 0.6 per cent levy on private pension funds. Mr Noonan acknowledged the upset caused to the pensions industry but noted bluntly that the funds had attracted massive tax relief in the past and were mainly invested overseas.
The sheer scale of the financial difficulties facing the Government was reflected by its decision to impose the four-year levy in the first place. It became necessary because the EU-IMF required the jobs initiative to be fiscally neutral.
The possibility of lower interest payments on that EU-IMF loan and what the Government might do with the money were issues the Taoiseach refused to speculate on earlier, noting that formal EU decisions would not be taken until next week. He was anxious to emphasise, however, that the terms of the loan are also up for discussion. What was not up for negotiation, according to Mr Noonan, was Ireland’s 12.5 per cent corporation tax rate. Not only that, the Minister plans to enhance incentives for foreign research and development projects. The fluidity of the situation was marked by the work-in-progress nature of some of the Minister’s announcements. A partial, credit guarantee scheme will be unveiled next month while a micro, start-up-fund for small businesses will be provided in the December budget. In the meantime, work will go ahead to ensure that restructured banks will lend €30 billion to business enterprises during the next three years.
No magic wand will return employment levels to where they were in 2007. What is on offer is incremental change of the kind that brought success in the 1990s. Then, competitiveness was the key. It still is.