Taoiseach Enda Kenny has defended the decision to introduce a levy on pension funds to finance the Government’s jobs plan, describing it as a “modest proposal given the economic constraints on the country”.

The employment stimulus package, announced yesterday, provides for a reduction in VAT on certain tourism-related activities, new infrastructural spending on roads and schools and almost 21,000 training places and internships for those without jobs.

It is to be financed 0.6 per cent levy on pension funds which will raise €470 million year for four years, or €1.88 billion in total.

Speaking in the Dáil today, Mr Kenny said the initiative would not solve the current unemployment problems facing the country but would “begin to bring confidence back into the economy”.

But Independent TD Shane Ross said the wrong people were targeted by the charge.

Mr Ross described the pensions industry as “a swamp of hidden fees, upfront fees and riches for people who actually do not deliver to the people they’re milking” but who earn from €250 million to €500 million a year from Irish pensions.

He said “the Government has hit the contributors and the victims” of fund managers, rather “than tackling those who are milking the pensions’ industry itself”.

Mr Kenny said he will consider a call by Mr Ross to investigate what the former senator described as the “goldmine”, “gravy train” and “swamp” of pension fund managers.

The Government should put a cap on the fees pension fund managers charge and then put “a 50 per cent tax on these people which would have certainly produced a figure very close to the €470 million which they’ve come up with as a jobs creation fund,” he said.

The Taoiseach said there “may well be some merit” in Mr Ross’s proposal.

“The Government took its decision in this case to impose the levy in this way for a temporary period and has pointed out the reasons why that was done and the opportunities that are going to spring from it.”

Mr Kenny added: “The question that you ask about alternatives to what the Government actually did is certainly a matter than can be considered by the finance committee” and in the Dáil in the run up to the 2012 Budget.

He told Mr Ross: “You make a valid point about elements of swamps being associated with some of these industries and I will transfer you require to the Minister for Finance. I do believe this is a matter that should be looked at.”

The Taoiseach said that obviously “the costs associated from an administration point of view by the pensions’ industry could certainly be reduced to something approaching those costs that apply in the UK which are a fraction of what they are here”.

Fianna Fáil leader Micheál Martin also hit out at the levy, saying it was “not credible” to say the removal of €1.88 billion over four years would not have a negative impact. Mr Martin also called on Mr Kenny to publish all documentation associated with the Coalition’s jobs initiative.

Earlier Minister for Public Expenditure Brendan Howlin said the levy imposed on pension funds would not be increased or extended.

Mr Howlin said the Government was looking at ways to garner resources to create jobs with minimum impact on the "real economy".

"People were able to put away significant sums of money in private pension pots with very generous tax breaks over the years.

“It is reasonable that they be asked to make a contribution now to rebuilding our economy, and a modest contribution of 0.6 per cent," he told RTÉ radio. "This will be a time-bound, four-year programme for a particular purpose."

Asked if the levy could be extended beyond the planned timeframe, Mr Howlin said: "It'll neither be increased or prolonged."

Acknowledging the Government needed to cut public spending, Mr Howlin defended the Government's decision on accelerating cutbacks.

"We have not only to cure a broken economy but we have to hold together a society," he said. "As a mathematical or economic exercise, an academic can say, 'Do this, do that' but there is a consequence for doing any of these things."

Defending the move last night, Minister for Finance Michael Noonan accused the pension industry of reacting in a “quasi-hysterical” manner to the levy, saying the Government was “pulling back a very small proportion” of the tax relief enjoyed by the industry over the years.

The challenge faced by the Government in promoting job creation is underlined by the latest quarterly report of the Economic and Social Research Institute which forecast that gross domestic product will grow by 2 per cent this year and gross national product 0.5 per cent.

The quarterly report out today, which is written by Joe Durkan and Cormac O’Sullivan, urges the Government to make a faster reduction than planned in the current budget deficit and advocates cuts in capital spending.

“The Metro North, for instance, shouldn’t happen,” Mr Durkan said.

As well as more rapid cuts in expenditure, the ESRI advocates higher taxes. “I think that taxes have to be raised as well. I think it’s inevitable and I think we should just do it,” said Dr Durkan.

JOBS PLAN: MAIN POINTS

A 0.6 per cent levy on pension funds to raise €470 million a year.

VAT on tourism-related goods and services will be cut to 9 per cent.

Air travel tax will be suspended.

Employers’ PRSI for workers on below €356 a week will be halved.

The minimum wage to be restored to €8.65 per hour from July 1st.

Extra funds for work on regional roads and schools.

More training places, back to education initiatives and internship scheme will provide 20,900 places.