Labour’s budget policy

Labour’s position on the budget can be summarised as follows

* Labour acknowledges that the size of the economic problems facing the country is enormous and must be dealt with quickly or else we will find ourselves in a deeper hole.
* It is deeply regrettable that we have found ourselves in this position but Fianna Fail’s mismanagement of the economy and creation of the property bubble means Ireland is suffering far more than most from the global financial crisis.

o Fianna Fáil have had the country’s credit card for the past twelve years.  The bill has now come in for that credit card and Fianna Fail are expecting us all to pay.

* Labour is playing a constructive and positive roll in finding solutions to the countries difficulties.  The key to solving the crisis in the public finances, and in particular reducing the social welfare bill, is getting people back to work and protecting the jobs that are vulnerable in these tough times.
* Labour has continuously suggested solutions to the jobs crisis, for example as back as April we published detailed proposals including;

o an employers’ PRSI exemption for firms creating new jobs
o training and work experience for people on the live register
o a new National Development Plan to prioritise investment that creates jobs
o Ending upward-only rent reviews on commercial property to help small businesses.

* Labour also believes we have to restore confidence and end the fear that families might lose their home.  That is why Labour has proposed a two year moratorium on home repossessions.

* Labour agrees that a €4bn adjustment must be achieved in the upcoming budget but strongly disagrees with Fianna Fail’s new ‘slash and burn’ approach.  Labour believes a more balanced approach is necessary to minimise the long-term damage to the economy and to the social fabric of the country.
* The approach that the Labour Party is taking to the €4bn adjustment is in line with the approach that the Government itself advocated last April when it brought in the emergency budget.  They suggested four billion in an adjustment for 2010 and they broke that down into three components.

o Firstly, a reduction in the capital budget of about three-quarters of a billion.
o Secondly revenue raising measures of about a billion and three-quarters and;
o Finally reductions in public spending of about a billion and a half.

* Labour does not agree with those who argue for slashing basic social welfare rates or the minimum wage.  Labour also doesn’t agree that there is any justification for indiscriminate pay cuts.  However Labour does agree that the public sector pay bill has to be reduced and that this is achievable by negotiation.

Dealing with the deficit.

* The first thing to acknowledge is that the black hole FF has created in the public finances is enormous and that there are no quick or easy solutions to the problem.  Tax revenues have collapsed, so we simply can’t go on spending at the rate that was developed over the last years of Brian Cowen’s economic bubble.
* If we don’t act decisively the public debt in this country will be unsustainable.  That’s simply not acceptable.  That’s a millstone around the necks of our children and our grandchildren that we simply can’t afford.
* Thanks to Fianna Fail Ireland has now developed two types of deficit within the public finances – the structural deficit and the cyclical deficit.  The key problem is the structural deficit i.e the FF deficit which is the result of Brian Cowen and Charlie McCreevy, buying elections, stoking the property bubble and failing to rein in the banks.
* The cyclical deficit will be eliminated in the longer term through economic growth and when we get people back to work.
* We have no hope of fixing the structural deficit by a return to normal economic growth.  According to the ESRI the structural deficit is about half of the overall problem (or about 10 billion euro).  We need to address this problem quickly.
* Postponing the adjustment will not help, as the debt will increase, the interest burden will be higher and interest rates are likely to go up.

What would Labour cut in the budget?

Fianna Fail are saying that the whole adjustment can be done on the expenditure side.  But in April they were saying that the €4billion would consist of:

* €750m in capital spending cuts (which can be largely achieved through lower tender prices)
* €1500m in current spending cuts, including pay
* €1750m in taxation/revenue raising

Labour is arguing for a balanced approach, similar to the Government’s own proposals in April

Public Sector Pay

The key point is to achieve the reduction in pay through negotiation, and as part of a process of reform.

* Cutting basic rates of pay is lazy thinking.  The government has ducked the challenge of reforming the public sector, so that it does more with less – less money, and, where appropriate, less staff.
* We need more local autonomy.  The people who know how to reduce staffing budgets are the people who work in agencies and departments.
* We all know that there are areas where staffing numbers can be brought down.  For example since 2007 Labour has been calling for a redundancy scheme for administrative staff in the HSE.

Revenue-Raising Must be Part of the Mix

Examples of where Labour would raise revenue: (Round figures)

* End property-related tax reliefs €400m
* Abolish mortgage interest relief for landlords €600m
* Carbon tax €500m
* 48% income tax on incomes over €100,000 €355m
* Text tax of 0.01c €118m
* TOTAL €1,973m

We need to do more about JOBS

Specifics include:

* Providing training and work experience for people on the live register to help them access employment.  Labour is the only party to publish detailed proposals in this area in our policy document ‘Just the Job’     http://www.labour.ie/policy/listing/1239027551994512.html
* Ending upward-only rent reviews for existing contracts on commercial property to help small businesses.
* Introducing an employers’ PRSI exemption for a limited period where a firm shows it is creating a new job, and where they hire someone who has been on the live register for 6 months or more.
* Producing a new National Development Plan to prioritise investment that will create jobs.

End Home Repossessions

* Labour believes that the banks should not be allowed to repossess a home for a period of two years, where a family is making a genuine effort to pay their mortgage.
* This gives the banks an incentive to deal with the mortgage holder in good faith, and make a genuine effort to work out a meaningful repayment schedule. The current situation only gives home owners six months and that’s way too short.
* Labour has also proposed expanding the services available to people in arrears – an advocate with teeth.
* Labour introduced these ideas in a Dáil motion, but Fianna Fáil voted it down.