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Pre-Budget Perspectives on a Fair Way to Fix the Economy and the Public Finances

Pre-Budget Perspectives on a Fair Way to Fix the Economy and the Public Finances. Ireland vs The World. (OECD Economic Outlook, Nov 2009). A Home Grown Recession. End of the Domestic Bubble. Not Internationally Driven. (OECD Economic Outlook, Nov 2009). Fine Gael Budget Perspectives.

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Pre-Budget Perspectives on a Fair Way to Fix the Economy and the Public Finances

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  1. Pre-Budget Perspectives on a Fair Way to Fix the Economy and the Public Finances

  2. Ireland vs The World (OECD Economic Outlook, Nov 2009)

  3. A Home Grown Recession End of the Domestic Bubble Not Internationally Driven (OECD Economic Outlook, Nov 2009)

  4. Fine Gael Budget Perspectives • We cannot tax our way to recovery • Politics must lead the adjustment • Broadest shoulders to bear the biggest burden • We have to make room for job measures • Protect services by cutting costs and bureaucracy • We must protect those who cannot work • Activate the unemployed

  5. 1. We Cannot Tax our Way to Recovery

  6. 2. Politics Leading from the Front • 100% of McCarthy recommendations for Oireachtas accepted • Additional FG proposals: • Commitment to cut Oireachtas members by one-third, including abolition of the Seanad • Cut no. of Junior Minister’s to 12 from 15 • Taoiseach’s salary as cap for public sector

  7. 3. Broadest Shoulders Should Bear the Biggest Burdens • €593m in extra taxes on better off for job creation and deficit reduction, incl.: • Tighter rules for non-residents (€20m) • restriction of exemptions for artists (€33m) • Restrictions on pensions tax relief (€235m) • Curtain other tax shelters (€87m) • Lower threshold (€125k-€250k) for minimum 20% tax rate on higher earners (€9m) • Abolition of PRSI ceiling (€120m)

  8. 4. Make Room for Job Measures • €1.3bn tax cuts for jobs, trade and tourism • Cut the jobs tax (€887m) • 2% off 10.75% employers’ PRSI rate • 4.25% off 8.5% lower employers’ PRSI rate • Allow R&D spending offset against employment tax bill • Reverse 2008 0.5% VAT hike (€127m) • Abolish €10/€2 travel tax (€125m) • Cut in 13.5% VAT rate on labour-intensive services (building, catering, motor repairs) to 10% (€175m) • €250m Sustainable Economy Fund

  9. 4. Make Room for Job Measures • Free up resources for: • NewERA (€750m seed capital in 2010) • National Recovery Bank (€1 billion capital) • By: • Winding down Anglo Irish Bank – save €2-3 billion in repayments of sub-bonds • Selling non-network utility assets (€2-3 billion)

  10. 5. Protect Services – Cut Costs and Bureaucracy • Permanent €1.2 billion reduction in the pay bill (excl. head-count) • shelter earnings below €30,000 • cut core payroll by 3.2% (€575m) • defer increments (€250m) • local pay efficiencies (€375m) • Future upside dividend linked to public service re-configuration and fiscal stability

  11. 5. Protect Services – Cut Costs and Bureaucracy • 10,000 head-count (extra €500m off payroll) • 150 cut in agencies (€175m)

  12. 5. Protect Services – Cut Costs and Bureaucracy

  13. 5. Protect Services – Cut Costs and Bureaucracy • Start a total Public Sector Transformation, with 3 drivers: • Performance at the heart of new Budget Process (B.A.R.T.) • Reconfigure Routine Processes • Choice, contestability and local mgt. autonomy at the Front line (FairCare, Choice, Contestability)

  14. 6. Protect Those Who Cannot Work • Ring-fence from cuts the “human shield” against poverty and isolation • old age pensions • children (child benefit and qualified allowances) • carers, the disabled and the blind • foreign aid

  15. 6. Extra Tax Relief for Young Home-Owners in Debt Distress • Increase mortgage interest relief rates from 20-25% of interest paid to 25-35% for 160,000 First Time Buyers in 2004-08, nearly all of whom are in negative equity • Financed by closing mortgage interest relief to new entrants and cuts in other property-related tax reliefs

  16. 7. Activate the Unemployed • Protect Family Income Supplement • Move recipients of Rent Supplement to Rental Accommodation Scheme to make savings and reduce poverty traps) • Youth Activation Plan to support 38,000 job and training places (removing 30,000 under 25s from next year’s live register) • 3% cut in weekly working age payments • €50 weekly cut for < 25s who refuse offers of training or work after six months

  17. Summary of Jobs Measures

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