Fine Gael has targeted deep cuts in public sector numbers, higher Dirt taxes on savings, and the sell-off of State assets in its pre-Budget submission, which it has said can achieve €6 billion in savings.
Party leader Enda Kenny and finance spokesman Michael Noonan launched the party’s budgetary proposals for 2011 in Dublin this morning. The document also includes Fine Gael’s perspective of the Government’s four-year austerity plan, and outlines how it can achieve the €15 billion reduction in the exchequer deficit.
It also includes a stimulus element, which the party claims can create 100,000 jobs. The €6 billion remaining in the National Pension Reserve Fund, plus some other budgetary measures, would provide the funding for growth and jobs, it said.
One of the most controversial proposals – and one that is seen as having implications for the Croke Park agreement – is the party’s proposal to seek a total of 30,000 redundancies in the public sector, some 18,000 more than is provided for in the Government’s four-year austerity plan.
The party also says it will seek additional payroll savings of 1 per cent each year in the public sector, from reducing overheads on overtime, sick leave, flexitime, special allowances and expenses.
“A failure by organisations to deliver these savings could lead to a suspension of pay increments in these organisations as part of periodic reviews of the Croke Park agreement,” it said.
Mr Kenny said that the IMF has "put the country into kindergarten” as it now had wide powers of oversight and review of the Irish economy.
Mr Noonan said that contrary to recent comments, he did not believe the country was "banjaxed”.
"I believe it’s going to be a very difficult period in [Ireland’s] history. I believe it’s manageable provided the policies outlined here are put in place,” he said.
Among the other measures is a temporary cap of €200,000 on all public sector salaries. This would include politicians, ministers and chief executives of semi-State companies.
The party said that, in Government, it would wage an “all out war” on social welfare fraud, which it claims will save €250 million next year and €1 billion over the next four years.
The party also proposes a €6 weekly cut in social welfare next year, rising to €18 by 2014. The party says that State pensioners, both contributory and non-contributory; the blind; the disabled; and carers should be excluded from the cuts.
However, the Fine Gael document reveals that it will target more modest cuts in child benefit from the Government. The document proposes no reduction on child benefit in 2011 and says a system called “child income support” - the details of which are not fully outlined – will deliver savings of €250 million by 2014.
The party also opposes any decrease in minimum wage. Instead, as part of a €800 million stimulus plan for 2011, it proposes a temporary reduction of VAT from 13.5 per cent to 12 per cent for labour-intensive services, such as construction, restaurants, cleaning, maintenance and newspapers.
To offset the retention of the minimum wage, Fine Gael said it wants a temporary three-year abolition of the lower 8.5 per cent rate of employer's PRSI for employees earning up to €356 a week. This, it claimed, will act as an incentive for employers and increase competitiveness.
Some €700 million can be gained in 2011 from the sell-off of semi-State companies, although the party has not specified which companies it will target for sale. It also claims that some €1.2 billion can be raised in 2011 from closing tax breaks in property and patents, as well as an increased tax take on private pension funds.
The document also discloses that it will seek the abolition of the PRSI and healty levy relive on employee pension contributions.
The party has also stated that it is against any increase in the standard or higher rates of income tax – they will remain at 20 per cent and 41 per cent respectively under the party’s plans.
The party has also come up with alternative proposals to the Government’s property tax, with a smaller yield. Instead of a property tax, it has proposed a low rate of capital gains on primary residences when sold. This will levy a tax of between 5 and 10 per cent on the difference between what the property was bought for and its sale price.
To offset that, the party proposed a reduction in the 7 per cent and 9 per cent rates to 2 per cent for at least two years. This measure will cost €100 million but the party claims that the capital gains tax, imposed from 2012 onwards, can yield €350 million by 2015.
The party also outlined its proposals for resucing Irish banks. It advocates the quick wind-down of Anglo Irish Bank and the sell-off of AIB with deep discounts being applied on its subordinated bonds. It said that Bank of Ireland should be forced to recapitalise by welling off foreign subsidiaries and renegotiating liabilities with bondholders.
In relation to Anglo’s bondholders, it stated: “All of its investors, including unsecured bond-holders, should be forced to share in the burden of the bank’s wind-down losses.”
When asked about this aspect this morning, Mr Noonan said he understood from senior sources involved in the negotiations with Ireland that once Anglo ceases to have a bank licence, the possibility opens up of burden-sharing by its senior bondholders as it will not longer be considered capable of having a contagion effect.
He said that the senior source had strongly suggested that the veto exercised by the European Union on discounting senior bondholders would be less strong if Anglo was no longer licensed as a bank.