Measures proposed at the party’s economic growth plan yesterday included savings in pay, spending and department budgets as well as furthering taxes through pension reliefs, VAT and property.
Party leader Eamon Gilmore said surgery on the economy was needed, not butchery, and pushing out the completion date of the EU/IMF bailout to 2016 would reduce the pain for Ireland and therefore help growth.
Referring to the European Central Bank in Germany, partners in the bailout for Ireland, he said the election was about whether our budget was done Frankfurt’s way or Labour’s way.
Fighting back suggestions that the deal would not be renegotiated by the 27 EU member states, as required, Mr Gilmore argued: “We won’t get outcomes unless we get to the table.”
Under the present terms of the bailout, Ireland must reduce its exchequer deficit to 3% by 2015. Labour, if elected, would push Europe for an extra year and yesterday appealed for a mandate from voters to renegotiate the deal.
Mr Gilmore said the party’s series of alternative saving measures would see Ireland’s deficit pushed down to 4.8% of GDP by 2014 and by 2016 the country would effectively be rid of the deal.
Labour proposes making savings of €7 billion, with essentially a final 50/50 ratio when it comes to taxes and cuts.
Taxation measures include taxing high earners with incomes of more than €250,000 with a minimum 30% rate, reducing tax relief for pensions, hiking up capital taxes, increasing VAT by 1% as well as pushing up carbon, packaging and property taxes.
Labour will keep the bank levy and leave untouched the low 12.5% corporation profits tax rate, as well as boost efforts to go after tax exiles.
The total savings through taxes proposed would be €2.9bn.
On cuts, the party would overhaul and reduce capital expenditure through a seven-year plan, carry out a ‘waste audit’ through departments (not external consultants), reduce the number of quangos and tackle welfare fraud.
The party promises to cut public service numbers by 18,000, as well as cutting ministerial pay and introducing a cap on public sector pay of €190,000 per year.
The total savings through proposed cuts would be just over €4bn.
Labour also proposes a €1bn spending plan which would then bring the ratio of taxes and cuts close to 50/50.
Funds would go on a €500 million jobs plan and another €500m on investment in health to drive down costs.
Labour said a plan to overhaul the bailout deal could begin by March, when a council of EU ministers meet, and that the IMF had said late last year that there was room for renegotiation.
Last night Fianna Fáil claimed Labour’s plans would keep Ireland mired in debt by borrowing more and for longer.
There was also no hope of a wholesale revision of the deal, claimed outgoing Finance Minister Brian Lenihan. Starting a new bank, as Labour proposed, would also be contrary to the EU/IMF objective of downsizing the banking sector, he added.
* €7bn savings through €4bn cuts and €3bn in taxes.
* Minimum tax rate of 30% for earners of €250,000.
* No new income taxes for those earning below €100,000.
* Savings of €500m in amount of tax relief given to pensions.
* Raising €236m through changes to Capital Gains Tax and Capital Acquisitions Tax.
* Increasing Carbon Tax from €15 to €25 per tonne and introducing a packaging tax which will raise a total €240m in a year.
* Increasing the rate of VAT by 1% which will raise €310m in a year.
* A site value charge, but not before 2014, with exemptions which will raise €250m while raising the second homes tax from €200 to €500 will raise €95m.
* Department non-pay budgets to be cut by at least 6% over three years.
* Reduction of €1.1bn in social protection through getting people back to employment and tackling welfare fraud among areas.
* Reducing public sector numbers by 18,000, capping their pay and cutting ministerial salaries, as well as implementing the Croke Park deal and a three-year private sector pay freeze will save €700m.
* Setting up a Strategic Investment Bank, with €2bn from the National Pensions Reserve Fund, which will distribute loans to companies and take deposits and offer bonds.