Labour: €6bn cuts package ‘dangerous’

THE danger of a double-dip recession will rise sharply if the Government pushes through its €6bn cuts package in next week’s budget, Labour last night warned.

Launching the party’s own proposals to right the economy, leader Eamon Gilmore warned it would be “dangerous” to impose spending decreases and tax hikes greater than €4.5bn.

Mr Gilmore put the party’s €500m job creation initiative at the centre of its “back to work” agenda which will also see all political and public sector salaries capped at €190,000 and a top income tax rate of 48% brought in, in order to raise revenue.

Opening up a wide rift with Labour’s would-be partner in Government Fine Gael, Mr Gilmore insisted it would be “dangerous for Ireland” to go along with the Government’s €6bn adjustment figure as the main opposition party does.

Mr Gilmore said it was essential to concentrate on job creation as well as reducing the deficit.

Aware of Sinn Féin’s rise in the polls on Labour’s left flank, Mr Gilmore said that there was an alternative to the Fianna Fáil/Fine Gael “right-wing consensus” outlook, which he warned would badly hit growth.

“The level of front-loading of cuts and tax hikes planned for the budget is simply too much to swallow in one year. We cannot cut our way out of this crisis, we must also have growth,” he said.

Mr Gilmore said the €6bn was no longer relevant as it had been produced in order to try and calm bond market fears that Ireland would default on its debts.

The Labour leader said that the Government’s IMF “sell-out” meant the country would not be able to return to the bond markets for a number of years so the adjustment did not need to be as great.

Mr Gilmore pledged Labour would re-negotiate the IMF deal as soon as possible and indicated he was not in favour of semi-state sell-off as envisaged in the bailout deal.

While there was little new in Labour’s proposals for next week’s budget, Mr Gilmore said €5m could be saved by politicians “acting in solidarity” by pooling ministerial cars, and cutting Cabinet pay by 17%.

Mr Gilmore insisted the public sector pay bill could be cut by €1.4bn over three years without the need to go against the Croke Park deal and he also suggested €215m could be saved in better tackling welfare fraud.

Other ideas would see property-related tax reliefs abolished in order to save €360m million a year, raising the second home tax to €500 a year, increasing DIRT on savings and cutting personal tax credits by €250.

Labour insisted Dublin’s Metro North transport scheme could go ahead despite cutting €1.2bn from the capital budget.

Labour’s finance spokeswoman Joan Burton defended the proposed new top rate of tax.

“The core of our budget proposals is made up of measures that will ensure that very high income earners make a fair contribution by limiting their ability to shelter their incomes from tax.

“The focus of public spending in this country must be on the delivery of quality frontline services to the citizens and taxpayers footing the bill,” she said.

Labour also promised to maintain education spending and protect frontline health services.

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