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OCTOBER 2014 BUDGET 2015 PRE-BUDGET PROPOSALS 2015 A MORE CARING SOCIETY www.facebook.com/fiannafail C
OCTOBER 2014
BUDGET
2015
PRE-BUDGET
PROPOSALS 2015
A MORE CARING SOCIETY
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The principles underpinning our budget proposals are:  We are committed to reaching a deficit

The principles underpinning our budget proposals are:

We are committed to reaching a deficit of less than 3% by 2015 and moving towards a balanced budget. We propose a budgetary adjustment of €220m for 2015.

The priority areas at this time for any available resources should be education, health, childcare, services for older people and social housing. This will help build a fairer and more caring society.

There must be no return to auction politics. Tax cuts should only happen after the recovery is further cemented and only as resources allow.

The reform of taxes and charges should encompass a greater focus on ability to pay.

We are in the midst of a major housing crisis which demands a radical set of policy responses.

There is a significant social and physical infrastructure deficit emerging across the economy which needs to be confronted to prevent both social and economic problems in future years.

Ireland’s enterprise policies need a radical shake up. Domestic entrepreneurs should be incentivised and given the same priority as is afforded to foreign direct investment.

As well as defending our autonomy to set our own corporation tax rules, we need to improve our offering as a destination for mobile foreign direct investment.

Greater savings and efficiencies for the taxpayer through better public procurement and shared public services.

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Na bun aidhmeanna atá taoibh thiar de na moltaí cháinasnéise seo. Táimid socraithe ar easanamh

Na bun aidhmeanna atá taoibh thiar de na moltaí cháinasnéise seo.

Táimid socraithe ar easanamh 3% a shroichint i 2015 ag dul i dtreo buiséad comhardaithe.

Na achmainní atá ar fáil anois, ba chóir iad a chaitheamh ar Oideachas, Sláinte, Cúnamh Leanaí, Seirbhísí do Dhaoine Aosta, agus Tithíocht Soisíalta. Sa bhealach seo, tógfaimid comhphobail cothrom chineálta.

Ni bheah sé ceart fillead ar pholaitíoacht na gceant. Tiocfaidh ísliú cáin tar éis don ghnóthú beith bunaithe níos mó, agus mar atá achmainní ar fáil.

Is fuí aird speisíalta a dhirú ar cumas íochaíochta i gComhtheacs athchóiruí cánach agus táillí.

Táimid i lár géarhchéim tithíochta agus tá polasaithe radacúilacha ag teastáil.

Tá easnamh súntasach le feiscint san infrastructúr fiscuíl agus soisialta ar fud ná tire. Cathfear déileaíl leis na fadhbanna seo chun deacrachtaí a sheachaint sa todhchaí.

Tá gá práinneach ag teastaíl chun ár polasaithe gnó a réabhlóidiú. Cathfear an cúnamh chéanna a thabhairt d'ár lucht fionntraíochta féin is atá ar fáil ag na Comhluchtaí a thagann isteach anseo.

Ní amháin go gcaithfimid ár neamhspleáchas a chaomhnú maider le cúrsaí cáinach, ach caithfimid feabhas a chur ar cé chomh tarraingteach is atá muid do comhluchtaí idirnaisiúnta atá saor agus solúbhtha le dul aon ait.

Is feidir a lán airgid a shábháil tríd a bheith críonna nuair atáimid ag ceannach don stáit agus trí seirbhisí poiblí a roinnt suas go stuama.

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There are real choices to be made in this budget. The decisions taken will shape

There are real choices to be made in this budget. The decisions taken will shape the nature of Irish society for many years ahead. While the budget presented by the government may be fiscally neutral, it is unlikely to be socially balanced. We are presenting an alternative which emphasises the urgent need to improve services for our citizens. We believe the principle of ability to pay must be enshrined in taxes and charges. The hallmark of this government to date has been a series of regressive budgets.

It is important to remember that the government are taking €300m from families in 2015 through the introduction of water charges and there will be further cuts to family incomes from the phasing out of mortgage interest relief, restrictions on tax relief for medical insurance and changes to the one parent family payment. Fine Gael and Labour have already introduced €3.9bn in tax increases and over €6bn in expenditure cuts. Any budget day concessions must be seen in this context.

Overall we are proposing 361m in net new tax measures, targeted efficiency savings in the public sector of a further 290m and immediate action to secure a reduction in the interest bill on Ireland’s IMF loans yielding a saving of €300m. Based on data currently available, we believe our overall adjustment of €220m would result in the deficit falling comfortably below 3%.

The immediate need to improve public services must take priority over tax cuts. We have identified the pressure on working families, medical costs and housing as the priority areas for Budget 2015. It is our belief that tax changes in the next number of years should be focused on reforming the universal social charge, increasing tax credits, addressing anomalies in respect of low paid workers and the self-employed as resources allow.

low paid workers and the self-employed as resources allow.  A reduction of 1 point in
low paid workers and the self-employed as resources allow.  A reduction of 1 point in

A reduction of 1 point in the pupil teacher ratio at primary level and a reversal of the cuts to small rural schools.

Prioritising of mental health and suicide prevention.

Provision for 20,000 new discretionary medical cards.

Targeted childcare supports for working families and long term unemployed persons taking up employment.

Help for older people, in particular those living alone.

Increased resource hours for special needs pupils.

The recruitment of 500 additional Gardai.

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We have identified a package of measures which will deliver modest relief to those who

We have identified a package of measures which will deliver modest relief to those who have taken some of the hardest hits in recent times:

An increase in the living alone allowance of €5 per week.

A reduction in the threshold for the Drug Payment Scheme to €120 a month from

€144.

The extension of the €100 payment to offset water charges to recipients of the fuel allowance and measures to help low income working families including those on Family Income Supplement.

Help for people who are forced by employment or family circumstances to rent out their own home to ensure they are not hit with large income tax bills.

home to ensure they are not hit with large income tax bills.  We are setting

We are setting out a path to reduce the tax burden and make the taxation system more equitable. This would occur over three years. In the first year, the only adjustment we propose is to increase mortgage interest relief for those who took out a qualifying loan prior to 2009 from 30% to 40%. This would cost €49m and be focused on assisting those who are continuing to struggle with high mortgage payments. We are setting out our six priority areas for tax reform.

Marginal rate relief for pension contributions should be maintained. We are proposing a modest reduction in the maximum allowable contribution to pensions for tax relief purposes.

A new levy on sugar sweetened drinks should be introduced to tackle childhood obesity. Excise duty on tobacco should be increased as part of the drive to make Ireland smoke free by 2025.

The Local Property Tax currently takes no account of ability to pay. We are initiating a review of the tax to ensure greater equity in its application.

of the tax to ensure greater equity in its application.  Tackle the skills crisis. The

Tackle the skills crisis. The number of people undertaking apprenticeships has fallen dramatically. This can only be met through a major expansion of apprenticeship places.

Expand the role of the Strategic Banking Corporation of Ireland to allow it to lend directly to SMEs.

Require the Central Bank to publish and implement targets for all banks in respect of dealing with legacy debt of SMEs.

Incentivise entrepreneurs to set up new businesses by providing tapered relief from capital gains tax. A reduced rate of CGT of 15% should apply to entrepreneurs who subsequently sell their business.

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Address the lack of credit which is hampering many businesses from expanding, through the introduction of tax relief for individuals making loan capital investments to SMEs.

Establish a pilot scheme on Crowd Financing similar to that supported by the UK government in order to give a new source of finance to smaller start-up companies

Extend PRSI benefits to the self-employed on a voluntary basis.

Address the disparity in tax treatment between the self-employed and PAYE sector, particularly at lower levels of income.

As a matter of urgency require energy firms to implement measures to reduce energy costs for business and domestic users.

Within the existing €1bn budget for job support, re-allocate resources to support progressive relief from Employer PRSI. This should be linked to growth in employee headcount.

Ensure enterprise policy tackles the disparity in employment opportunities between Dublin and areas outside the capital.

Reform the commercial rates structure to align it more closely to the economic reality facing firms.

align it more closely to the economic reality facing firms.  There is over €2.5bn in

There is over €2.5bn in cash sitting in the Ireland Strategic Investment Fund. We are proposing an investment of €1bn in 2015 to build 6,500 social housing units which will be available to local authorities and voluntary housing partnerships on a long term lease arrangement.

Reduce the windfall tax on development land from 80% to 40% to encourage the release of more housing units.

Provide increased resources for the Housing Adaptation Grant for people with a disability, Housing Aid for Older Persons and Mobility Aid schemes.

Increase the rent ceiling for rent supplement recipients in Dublin, Cork and Galway cities where pressure on rents is putting families at risk of homelessness.

Implement a national strategy to tackle homelessness.

 Implement a national strategy to tackle homelessness.  Take advantage of record low interest rates

Take advantage of record low interest rates to increase capital expenditure in a way that generates a positive return for the state in the years ahead.

Establish a target for 95% of all capital expenditure to be spent on goods and services provided by domestic Irish contractors.

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While economic growth is improving at an overall level, this is largely confined to the

While economic growth is improving at an overall level, this is largely confined to the Dublin region and particular industry sectors. Outside Dublin, the economy remains largely flat.

An improvement in GDP numbers has not translated into a commensurate improvement in the number of people at work. While the government regularly talk about the creation of 1,000 additional jobs a week, the reality is that, according to the Quarterly National Household Survey, there were just 5,500 more people at work in the first half of the year. This is well below the rate at which jobs need to be created

to

make a serious dent in unemployment and gives rise to concern that the recovery

is

not translating into real jobs.

It

is less than 12 months since the Troika left and a sense of complacency is

apparent in terms of the government’s management of the economy. It appears to have all but given up on a deal on legacy banking debt. No progress has been made on dealing with the cost to banks of loss making tracker mortgages. The Medium

Term Economic Statement lacked strict deadlines for the achieving of targets.

The government have proceeded with the sale of Bord Gáis, massively undervaluing

it while the projects the privatisation programme is supposed to fund, such as the

new National Childrens Hospital, are stalled. The National Pension Reserve Fund is

sitting on €2.5bn in cash which could be put to use in the domestic economy.

A sufficient social dividend is not being realised from NAMA. More than half of the

properties it identified for social housing have been turned down by local authorities.

The agency appears content to focus solely on disposing of its portfolio without giving full consideration to the long term implications of decisions on the wider economy.

In our pre-Budget commentary last year, we cited the need for a far more co- ordinated response at European level to the economic crisis. This has not been forthcoming to date. The policy response has been piecemeal and more focused on optics than real delivery. Ireland appears to remain tied to a Europe-wide austerity policy which is leaving the Eurozone lagging behind the rest of the world in terms of economic recovery. While the ECB has taken a more expansionary monetary stance, a corresponding fiscal response has not been advanced. There is a strong case to be made for a Europe-wide stimulus plan which would stave off deflation and tackle unemployment which is still close to record levels. Ireland is currently vulnerable to the potential impact of a further slowdown in the European economy.

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The Irish Fiscal Advisory Council (IFAC) struck a cautious tone in respect of Budget 2015.

The Irish Fiscal Advisory Council (IFAC) struck a cautious tone in respect of Budget 2015. It rightly points out that the level of national debt at over €200bn is now five times higher than when the crisis started in 2008. This makes Ireland vulnerable to any renewed economic difficulties and the government cannot throw caution to the wind as it seeks re-election.

The tone of the government’s response to the recent assessment report of IFAC was dismissive with suggestions that it would be for future governments to follow the advice of IFAC. While the government is within its rights to disagree with the advice it receives, it should issue a detailed response setting out why it is taking a different course of action.

Ireland is certainly making steady progress towards reducing the deficit below 3%. The deficit for 2014 is likely to be circa 3.4% of GDP, following a deficit of 5.7% last year. It is noteworthy that the outturn for last year was significantly improved by a restatement of the GDP figure. This was a purely statistical change rather than any specific improvement in the underlying state of the economy. It reduced the deficit by 1.6% and has made the Minister’s task considerably easier.

We disagree with the Fiscal Council in its recommendation that a €2bn adjustment be made in Budget 2015 though we fully acknowledge that the points they make are valid and worthy of careful evaluation. The government should have allowed the Dáil to debate in full the recommendations of the Fiscal Council. It is our belief that, after six years of very difficult austerity measures, the recovery should be allowed to take hold and additional tax and expenditure cuts of the order of €2bn would threaten to choke off the recovery. We believe that a budget adjustment of just over €200m will comfortably achieve a deficit below 3%.

As well as the general buoyancy in tax revenue indicated in the recent Exchequer returns, there are also other potential positives which could further improve the financial position of the state in the year ahead. The most significant among these is the potential to reduce the interest bill on the national debt by an early repayment of the IMF loans under the EU / IMF programme. The IMF calculate that, based on an assumption that IMF loans are replaced with 10 year debt at a yield of 1.88%, interest costs could be reduced by up to €600m in 2016 with total savings of €2.1bn over the next ten years. It is our contention that, at a minimum, €300m of saving can be achieved in 2015. This will help mitigate the need for further spending cuts.

It is our belief that the focus for any additional resources should be on improving public services and reversing some of the most damaging cuts while at the same time outlining a pathway to reform taxation over the next three years. Our core belief is that spending on public services such as education, health, social protection and childcare is progressive in nature as it benefits everyone in society but particularly those on lower income. By contrast, cutting the top rate of tax cuts for high earners helps a far smaller number of people.

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The Irish health service has gone through an enormous period of upheaval in recent years.

The Irish health service has gone through an enormous period of upheaval in recent years. Cuts of some €3bn have been imposed and resources have been stretched to the limit. Health service staff deserve enormous credit for working under these pressures.

The health estimate that was introduced for 2014 was considerably underfunded and the government should have known at the time that there would be yet another budget overrun. While we believe it is essential that the health service continues to look for the most effective way to use resources, there is also a clear need for additional funding to be provided to meet the most urgent patient needs.

Fianna Fáil believes that any available resources should be prioritised for services in mental health, discretionary medical cards and recruitment of additional therapists. This will provide much needed services for children and older people, in particular those who need speech and language, physical and occupational health therapy. This will help build a more caring society.

health therapy. This will help build a more caring society. Suicide remains the nation’s silent crisis
health therapy. This will help build a more caring society. Suicide remains the nation’s silent crisis

Suicide remains the nation’s silent crisis and despite the best efforts of the many organisations, volunteers and professionals working in the area of suicide prevention the statistics sadly underline the scale of this problem. In Ireland, 554 people died from suicide in 2011. The scale of loss of life through suicide is the same as losing the population of a village every year if this scourge is allowed to continue.

The establishment of the Road Safety Authority helped halve deaths on our roads, saving 200 lives a year. We can do the same in the field of mental health.

Fianna Fáil is proposing the establishment of a National Mental Health Authority. This will be charged with leading a national programme to promote positive attitudes to mental health and to reducing the incidence of self-harm and suicide. This policy needs a permanent increase in funding for mental health services. The initial cost of establishing the authority would be approximately €5m with an additional €5 million funding in the first year, increasing in subsequent years.

Amongst other measures this would allow for the establishment of out-of-hours emergency social worker teams throughout Ireland and an increase in the number of Resource Officers for Suicide Prevention

in the number of Resource Officers for Suicide Prevention The plight of people with chronic medical
in the number of Resource Officers for Suicide Prevention The plight of people with chronic medical

The plight of people with chronic medical conditions who have either had their medical card removed or have been denied one has caused considerable disquiet over the last twelve months. This is particularly the case with terminally ill children and people who are battling cancer. Ireland needs to have a responsive health service and one that meets the needs of those who cannot afford their own medical treatment. A society is judged on how it treats the sick and frail .The discretionary medical card process worked well for many years until this Fine Gael / Labour

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government undermined it. The government have indicated that the average cost of a medical card is €1,130. We need to rebuild trust in the system by making adequate resources available for a minimum of 20,000 additional discretionary medical cards.

a minimum of 20,000 additional discretionary medical cards. Waiting times for both assessments and services for
a minimum of 20,000 additional discretionary medical cards. Waiting times for both assessments and services for

Waiting times for both assessments and services for essential therapies are unacceptable. This covers a wide range of groups including children with speech and language needs, physical therapists for stroke victims and occupational therapists for people with life challenging conditions.

There is a chronic shortage of resources at the moment across the full range of these services and the recruitment of an additional 500 therapy staff should commence in 2015.These therapists would be recruited in the health and education sectors. This would prevent children having to wait more than two years for a much needed appointment.

to wait more than two years for a much needed appointment. The Programme for Government commitment
to wait more than two years for a much needed appointment. The Programme for Government commitment

The Programme for Government commitment on the expansion of BreastCheck to 65-69 year old women must be honoured in 2015. Lives are saved by extending the age category and it cannot be delayed any further.

the age category and it cannot be delayed any further. In the wake of an alarming
the age category and it cannot be delayed any further. In the wake of an alarming

In the wake of an alarming increase in waiting times in 2014, we propose a waiting list initiative to reduce the current waiting times along the lines of the original National Treatment Purchase Fund. Where it is not possible to treat patients within a reasonable period, the HSE will make arrangements under the treatment purchase fund to refer public patients for treatment in private hospitals at home and abroad, having regard to quality, availability and cost.

This should always be subject to the patient's prior agreement and done in co- operation with the patient's consultant and / or general practitioner. We would provide €20 million for this in 2015.

We would provide €20 million for this in 2015. This Fine Gael and Labour government made
We would provide €20 million for this in 2015. This Fine Gael and Labour government made

This Fine Gael and Labour government made changes to the Drug Payment Scheme that resulted in extra costs for people on numerous medications. We propose the reduction of the threshold for the drug payment scheme from €144 a month to €120 a month. This will particularly benefit families who fall outside the income guidelines for a medical card but may be incurring significant medical expenses on a monthly basis. Approximately 200,000 per month benefit from the scheme currently.

The total additional commitment to health from these proposals is €94.1m.

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According to OECD figures, Ireland is one of the two most expensive countries in the

According to OECD figures, Ireland is one of the two most expensive countries in the world for childcare, with the average family with two children spending 40 per cent of their income on childcare costs. The typical cost of childcare nationally is up to €16,000 per year for a family with two children.

Our aim is to allow parents take up employment and remain in employment when children are under school age and to give children from lower socio-economic backgrounds supports to succeed on an equal level. The basic principle is a tapered series of subsidies to help with childcare for low income families: 67% subsidy for long term unemployed people returning to work, 50% for people on Family Income Supplement and 40% for those just above the Family Income Supplement limits. Costings are based on the Indecon report on support for childcare for working families and implication for employment, November 2013”.

families and implication for employment, November 2013” . Incentives are required to target specific groups where
families and implication for employment, November 2013” . Incentives are required to target specific groups where

Incentives are required to target specific groups where childcare costs are a barrier to labour market participation. We propose to provide assistance for 67% of childcare costs subject to certain limits and would be aligned with the current Community Childcare Subvention Programme (CCS) level of incentives. It would be of particular benefit to people in long term unemployment returning to the workforce.

people in long term unemployment returning to the workforce. We also propose the provision of a
people in long term unemployment returning to the workforce. We also propose the provision of a

We also propose the provision of a direct payment to families related to the cost of childcare, through the Family Income Supplement Scheme (FIS). There is a childcare allowance currently available to FIS participants using the CCS scheme amounting to up to 67% of eligible expenditure. However, CCS provision is not available in all areas and it also may not meet particular family requirements. To incentivise individuals to remain in work, a subsidy of 50% of the cost of childcare would be provided subject to specified limits and eligibility criteria. This would also strengthen the sustainability of private childcare services and eliminate the segregation of children on grounds of family background.

the segregation of children on grounds of family background. The childcare tax incentive would provide a
the segregation of children on grounds of family background. The childcare tax incentive would provide a

The childcare tax incentive would provide a subsidy of up to 40% of childcare costs for families in employment and are earning at or below the industrial wage but are not eligible for FIS. Families would only be able to avail the tax break subject to a maximum eligible spend of €5,320 per child by using registered childcare.

spend of €5,320 per child by using registered childcare . We support an expansion of the
spend of €5,320 per child by using registered childcare . We support an expansion of the

We support an expansion of the Early Childhood Care and Education (ECCE) Scheme to provide a full second year of support for 6,400 children with special needs. This will help them avail of a longer preparation period prior to starting school.

The total additional commitment to childcare from these proposals is 68.2m.

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Education is of critical importance to the wellbeing of our society. Investment in education pays

Education is of critical importance to the wellbeing of our society. Investment in education pays a huge dividend in the long run. Spending at primary level is particularly effective at challenging disadvantage in society and ensuring equality of opportunity for all.

Fianna Fáil has a proud tradition of emphasising education spending and we want to develop a new phase of investment in our schools and universities.

a new phase of investment in our schools and universities. The issue of overcrowded classes at
a new phase of investment in our schools and universities. The issue of overcrowded classes at

The issue of overcrowded classes at primary level must be addressed. As a first step, Fianna Fáil proposes a reduction in the pupil-teacher ratio at primary level from 28:1 to 27:1 with effect from 2015/16. The full year cost of this would be €15m.

In addition we believe the government’s cuts to the school staffing ratio in smaller schools must be reversed. This would cost an additional €20m in a full year.

This would cost an additional €20m in a full year . We propose increasing the teaching
This would cost an additional €20m in a full year . We propose increasing the teaching

We propose increasing the teaching hours allocations for 2014/15 from 85 per cent of Special Education Review Committee recommended allocation levels to 92.5 per cent from 2015/16. The full year cost of this would be in the region of €29m. We also believe that additional resource teaching hours should be made available for children with Down Syndrome and that it should be listed as a low incidence disorder. We would cost this in the region of €1m.

disorder. We would cost this in the region of €1m. The Education Act 1998 provided a
disorder. We would cost this in the region of €1m. The Education Act 1998 provided a

The Education Act 1998 provided a legal obligation on schools to provide appropriate guidance. Fianna Fáil believes guidance counsellors are the only persons in a school setting professionally qualified to provide guidance counselling to students. This was underscored by a 2009 report from the former Chief Inspector of the Department of Education which outlined that best practice involved the appointment of fully qualified guidance counsellors. It is our belief provision must be made for this vital resource. This would cost €30 million in a full year.

resource. This would cost €30 million in a full year. Fianna Fáil proposes that the grant,
resource. This would cost €30 million in a full year. Fianna Fáil proposes that the grant,

Fianna Fáil proposes that the grant, which provides funding for maintenance and upgrade works be placed on a permanent footing. This grant is essential for the upkeep and maintenance of schools right across the country. Many schools have been forced to run up huge debts over the past two years to pay for essential works like roof repairs and toilet upgrades after the grant was rescinded. There may have been a one off rebate this year, but now these schools are back to square one and will either have to rely on loans or ask parents to foot the bill for any additional work.

The total additional commitment to education from these proposals is €123m.

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The government is failing to recognise the economic and social value of the Household Benefits

The government is failing to recognise the economic and social value of the Household Benefits Package. The cumulative impact from four rounds of cuts is to undermine the ability of recipients to live dignified, independent lives. It goes against every instinct of Irish people who have always valued the principle of social solidarity and inter-generational support.

of social solidarity and inter-generational support. The most intractable problem in relation to unemployment
of social solidarity and inter-generational support. The most intractable problem in relation to unemployment

The most intractable problem in relation to unemployment currently is the number of people out of work for over a year with 180,000 in this category. We want to help ease the transition for people who are long term unemployed and who face losing a number of benefits on returning to work. The estimated full year cost of allowing persons in receipt of jobseeker’s allowance for more than a year to retain increases in respect of qualified children for a period of one year after they return to employment is €22m.

of one year after they return to employment is €22m . The living allowance is a
of one year after they return to employment is €22m . The living allowance is a

The living allowance is a critical support for older people who face the burden associated with not having an immediate family member with whom to share the cost of running a household. It is currently an additional payment of €7.70 per week made to people aged 66 years or over who are in receipt of certain social welfare payments, including State pensions, and who are living alone. A €5 increase in the Living Alone Allowance would cost €48m in 2015.

in the Livin g Alone Allowance would cost €48 m in 2015. The introduction of water
in the Livin g Alone Allowance would cost €48 m in 2015. The introduction of water

The introduction of water charges is going to impose a very significant burden on all households. We have committed to an examination of the structure of water charges to introduce a greater degree of fairness and recognition of ability to pay. As the final tariff structure for Irish Water was only announced the day before charges were introduced, it is not possible to publish an alternative charging structure at this stage.

The government are proposing a €100 water credit for persons in receipt of the household benefits package. As an interim measure we propose extending this to the 211,000 recipients of the fuel allowance payment at a cost of €21.1m. Our review of the structure of water charges will focus on how to help low income working families including those in receipt of Family Income Supplement. We will also address the high cost that is likely to be borne by families with dependent children aged 18 or more still living at home. We are providing a total of €60m to moderate the impact of water charges.

a total of €60 m to moderate the impact of water charges. We pr opose a
a total of €60 m to moderate the impact of water charges. We pr opose a

We propose a €2 a week increase in the fuel allowance from €20 to €22 for 26 weeks for eligible recipients.

These measures would cost an additional €151m on an annual basis.

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Unfortunately Ireland has not yet returned to anything that could be described as a normal

Unfortunately Ireland has not yet returned to anything that could be described as a normal housing market. Transactions are at historically low levels and there are a number of outstanding issues around supply, reluctance of people on tracker mortgages to move home, credit availability, mortgage arrears and negative equity.

In addition, social housing waiting lists continue to soar and there are now 90,000 on the waiting list. This issue is made worse as there is massive pressure on the private rental sector. Families are under enormous strain and this can be divisive for society. Fianna Fáil wants to see this issue dealt with as a matter of urgency.

Ireland is falling way behind the estimated 25,000 housing units needed per year. The government has failed to provide any meaningful capital plan beyond re-heated announcements. The failure to accelerate the transfer of NAMA units has also exacerbated social housing waiting list. Only 10% of homes earmarked by NAMA for social housing have actually been transferred to local authorities.

The state can no longer depend on out-sourcing social housing provision to the private rented sector. One of our greatest achievements historically as a country was the large scale provisions of housing to meet the needs of the community. This was done at times of even greater economic constraint than we face today.

Fianna Fáil is proposing that €1bn of the current €2.5bn in cash that the Ireland Strategic Investment Fund is sitting on be immediately allocated for the construction of social housing. Data provided in the Dáil indicates that the average cost of construction of social housing units is €152,000. This indicates that upwards of 6,500 units could be made available under this proposal.

The Strategic Investment Fund operates to a commercial mandate in that it must achieve an appropriate return on investment. This condition can be fully met by local authorities entering into long term lease arrangements with the ISIF for the houses constructed. The Fund would be in a positon to earn a return of 4-5%, considerably greater than it is getting at the moment from sitting on a large amount of cash, while the local authorities would have an additional stock of housing to tackle chronic waiting lists provided to it at a fair price.

From the State’s overall point of view, it would be maintaining a valuable asset rather than simply paying rent to private landlords while at the same time getting to grips with providing much needed homes to families across the country.

providing much needed homes to families across the country. In addition to the provision of additional
providing much needed homes to families across the country. In addition to the provision of additional

In addition to the provision of additional social housing units through the Strategic Investment Fund, there is a need for increased provision through the local authorities themselves. The recent comptroller and auditor general report shows the massive reduction in social housing spending under this government.

We are proposing an additional €100m be allocated for social housing through the local authorities capital programme in 2015. We recommend a new tenant purchase

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scheme be initiated. Any revenue raised by local councils from this source should be deployed in new house construction and renovation of vacant properties for re- letting.

and renovation of vacant properties for re- letting. In many areas rents have risen considerably above
and renovation of vacant properties for re- letting. In many areas rents have risen considerably above

In many areas rents have risen considerably above the rent supplement limit. This is putting many families in danger of losing their home. It is important that a balance is struck between ensuring that short term housing needs are met and the risk of the state assisting in driving up private rents.

We are proposing a 5% upward revision of the rent cap in Dublin, Cork and Galway to take the immediate pressure off the rent supplement scheme. If problems arise in other areas, the Department of Social Protection should be willing to intervene and review rent caps.

should be willing to intervene and review rent caps. There are three vital grants schemes which
should be willing to intervene and review rent caps. There are three vital grants schemes which

There are three vital grants schemes which assist people with housing adaptation, the Housing Adaptation Grant for people with a disability, Housing Aid for Older Persons and Mobility Aid schemes. An additional €23m is required to restore these to previous levels and to tackle a significant backlog in claims.

levels and to tackle a significant backlog in claims. There is another group of people in
levels and to tackle a significant backlog in claims. There is another group of people in

There is another group of people in addition to those who have actually fallen behind in their mortgage payments who require help. It is often couples with young children who face the toughest challenges. Negative equity, childcare costs and back to school expenses are a constant source of worry for thousands of families.

A combination of falling incomes, rising personal taxes and changed family

circumstances mean that tens of thousands of people are living in homes that no longer meet their needs. Negative equity is preventing many of these people from being able to sell their home.

In such circumstances the only option may be to rent their home and in turn rent a new property for themselves. Anyone that takes this course of action faces an array

of charges including income tax, universal social charge, fees to the Private

Residential Tenancies Board and PRSI on rental income. They also face losing their mortgage interest relief and their tracker rate, if they are lucky enough to have one.

In practice, thousands of families are in significant financial difficulty having to

subsidise a mortgage on their home as well as facing significant income tax bills. A family with a €300,000 mortgage on an apartment earning rent of €1,200 a month

could face a tax bill of up to €2,000 on an annual basis.

We propose a simple change to the income tax code which would allow people who bought their house between 2000 and 2009, who have now moved out and are themselves renting another house, to offset this payment against the rental income

for a period of 3 years. This would substantially reduce or eliminate the tax bill on

their rental income. It would only be available in respect of a property that was

15

someone's principal private residence. We estimate the cost of this to be €20m in the first year.

estimate the cost of this to be €20m in the first year. This tax was originally

This tax was originally designed to curb speculative land hoarding and its subsequent impact on property prices. However, the 80% rate acts as a disincentive to putting potential development land on the market as any gain may be taken by the state. A reduction of the rate to 40% would continue to act as a curb on speculation and ensure that added value is captured from re-zoning without unduly restricting the supply of land on the market. No windfall tax revenues have been taken by the state to date. Therefore it will have no immediate impact on exchequer revenues.

it will have no immediate impact on exchequer revenues. There is an acute shortage of family

There is an acute shortage of family homes particularly in the Dublin area. Many older couples would consider selling 3 or 4 bed family homes which are possibly too big for their current needs and trading down to a smaller house or apartment. Consideration should be given to proposals which would provide an incentive to persons who wish to trade down in such circumstances. These include:

Exempting the seller from stamp duty on the purchase of a new home.

Exempting the seller from LPT on their new home for a period of five years.

Allowing the seller to pass on the new house to their children without Capital Acquisitions Tax when they die up to a maximum threshold of €200,000.

The total additional spending on housing from these proposals is €154m.

16

During the last general election, Labour ran a campaign called ‘Every Little Hurts’ in which

During the last general election, Labour ran a campaign called ‘Every Little Hurts’ in which they warned what Fine Gael had in store for people. All six of those measures are now in place with Labours agreement.

While claiming they have not increased income tax rate since coming to power, this government have made 13 separate increases in tax on income.

Increased tax on income under FG / Labour government

 

€m

2012 USC put on cumulative basis Increase in DIRT to 30%

47

50

2013 Maternity benefit taxed Top slicing relief on redundancy payments reduced Increase in Dirt to 33% Full USC applied to over 70s earning > 60k Abolition of PRSI allowance Increase in minimum PRSI for self employed Abolition of PRSI block exemption for income from trade or profession

40

10

64

38

289

18

32

2014 One parent tax credit only available to principal carer Restriction on tax relief for medical insurance Abolition of top slicing relief Increase in DIRT tax to 41%

25

127

22

140

 

902

In all, there were 10 tax increases announced in 2012, 20 in 2013 and a further 10 in Budget 2014. Budget 2014 had four separate effective income tax increases including the reduction in Medical Insurance Tax relief.

DIRT tax has been increased by a massive 14% with an additional 4% PRSI also applying. Any single pensioner earning over €18,000 (or €36,000 for a couple) is liable for DIRT at the full rate of 41% even if they are only subject to income tax at 20%. For low income families under 66, the thresholds are even lower. The government is planning another major tax increase with the abolition of mortgage interest relief which will take €350m a year from hard pressed families.

which will take €350m a year from hard pre ssed families. Everyone agrees on the need

Everyone agrees on the need to reduce the tax burden particularly on struggling families. However we are still at the early stages of economic recovery. Across the board income tax reductions at this early stage would not be prudent.

The focus in the first instance must be on restoring and enhancing services. As the recovery is further bedded down there is likely to be scope in future years to initiate a programme of tax reform.

17

We are outlining a series of six priority areas for tax reform to be implemented over the next 3 years as resources allow. We do not propose to repeat the mistakes of the past by engaging in large pro-cyclical tax cuts at this stage.

We believe it is more prudent to wait twelve months before introducing significant changes to the tax regime. This should be targeted to ensure that employment is supported and people facing the largest burden in terms of household expenses are supported.

largest burden in terms of household expenses are supported. There is a need to simplify the

There is a need to simplify the tax system. Employees currently face three separate deductions from their pay: income tax, PRSI and USC. Each has a different entry point as which you start paying the tax, €10,000 for USC, €16,500 for income tax and €18,000 for PRSI.

This government created an anomaly whereby at a certain income level a person can be worse off than a person with a lower income. While someone earning €18,304 pays an effective tax rate of 5.25%, someone who is paid one euro more will pay an effective tax of 9.25% as all their income becomes subject to PRSI. This is a disincentive to employers to increase wages, or for employees to accept extra hours of work or a promotion.

Over 120,000 employees earn between €17,000 and €20,000 a year and are potentially affected by this problem. The way to tackle this situation is to allow a partial PRSI refund for people earning just above the current level at which employee PRSI becomes payable to offset the impact of this anomaly. This will remove the current anti-work provision which this government introduced.

anti-work provision which this government introduced. Two of the main revenue raising measures introduced by the

Two of the main revenue raising measures introduced by the government, the local property tax and water charges take no account of ability to pay. In many instances they represent a regressive burden on family incomes. The combined revenue from the two measures will be over €850m in 2015.

Political parties who suggest that they can simply abolish them without any negative consequences for the public finances are not being honest with the public.

Our commitment is to examine the structure of both the local property tax and water charges to introduce a greater degree of fairness linking them to ability to pay.

As an interim measure, we propose extending the €100 payment to assist with water charges to the 211,000 households in receipt of the fuel allowance payment.

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Current rates Rate On the first €10,036 2% On the next €5,980 4% On the

Current rates

Rate

On the first €10,036

2%

On the next €5,980

4%

On the balance

7%

Much of the criticism of the USC is that the high rate applies at too low an income level and that taxpayers on income of €16,016 are expected to pay the same rate as those with income of €100,000 or more. As resources allow, the lower rates of USC should be expanded to increase the number of people paying at below the 7% rate.

increase the number of people paying at below the 7% rate. 1.84m income tax payers pay

1.84m income tax payers pay no tax at the higher rate and would not benefit from any change to the entry point for the top tax rate. According to a parliamentary reply, only 18% of income earners would benefit from a cut in the top rate of tax.

By contrast increasing tax credits provides the same value to all taxpayers provided the increase in the credit is not more than their current income tax bill. In simple terms a €100 increase in tax credits has the same monetary value on an annual basis to someone on €20,000 as it does to someone on €200,000. We will prioritise increasing tax credits over and above changes to the rates and bands.

tax credits over and above changes to the rates and bands. Insofar as possible, the tax

Insofar as possible, the tax system should treat people in an equitable manner. Self- employed people lose under the current regime because, while they receive the personal tax credit, they cannot claim the PAYE allowance, both of which are currently worth €1,650 per annum.

This has a particularly stark impact at lower levels of income. For example a self- employed single person on an income of €15,000 pays almost 6 times as much tax and PRSI as an employee on the same income. There is a strong case for addressing the unfair treatment of self-employed particularly those at the lower level of the income scale. This should be done by means of an earned income tax credit as suggested by the Commission on Taxation.

tax credit as suggested by the Commission on Taxation. The level at which an individual has

The level at which an individual has to pay Capital Acquisitions Tax on a gift or inheritance from a parent to a child has been reduced by 60% in recent years to €225,000. This reflected the very significant fall in house prices and asset values generally. The government also increased the CGT rate to 33%.

There is an urgent need to review the current thresholds so that they more accurately reflect current house prices. The reality is that unless the thresholds are changed many people who are far from wealthy will end up having to sell a property they inherit in order to be able to meet their capital acquisitions tax bill.

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We are setting out a programme for tax reform over three years. In the first
We are setting out a programme for tax reform over three years. In the first
We are setting out a programme for tax reform over three years. In the first

We are setting out a programme for tax reform over three years. In the first year we propose to increase mortgage interest relief for those who took out a qualifying loan prior to 2009 from 30% to 40%. This would cost €49m and be focused on assisting those who are continuing to struggle with high mortgage payments.

who are continuing to struggle with high mortgage payments. We propose retaining the two Universal Social
who are continuing to struggle with high mortgage payments. We propose retaining the two Universal Social

We propose retaining the two Universal Social Charge measures which were due to lapse at the end of the year, pending a full review of the USC. These are the additional 3% for self-employed earners over €100,000 and the lower 4% rate for medical card holders with an income under €60,000. The yield and cost are €123m and €102m respectively.

The yield and cost are €123m and €102m respectively. In this budget we propose to reduce
The yield and cost are €123m and €102m respectively. In this budget we propose to reduce

In this budget we propose to reduce the earnings cap for pension contributions from

€115,000 to €60,000 while maintaining marginal rate relief. We believe that this strikes a balance between the need to encourage employees to make provision for their future income needs without unduly depriving the State of income tax revenue.

without unduly depriving the State of income tax revenue. A recent survey indicated that 87% of
without unduly depriving the State of income tax revenue. A recent survey indicated that 87% of

A recent survey indicated that 87% of the population believe that sugar sweetened

drinks contribute to obesity among children and young people. Sugar sweetened drinks have both a high calorie content and very low, if any, nutritional value. A tax on these products can help reduce consumption over time and assist in promoting public health. We endorse the suggestion of the Irish Heart Foundation to have a tax equivalent to 20% on sugar sweetened drinks yielding approximately €60m.

on sugar sweetened drinks yielding approximately €60m. As part of the plan to make Ireland smoke
on sugar sweetened drinks yielding approximately €60m. As part of the plan to make Ireland smoke

As part of the plan to make Ireland smoke free by 2025, we propose increasing the excise duty price of a packet of 20 cigarettes by €0.50.

excise duty price of a packet of 20 cigarettes by €0.50 . It is inexplicable that
excise duty price of a packet of 20 cigarettes by €0.50 . It is inexplicable that

It is inexplicable that the government have not yet extended betting duty to online bets. We would do this immediately and increase the rate to 1.5% to raise €40m.

immedi ately and increase the rate to 1.5% to raise €40m . We propose abolition of
immedi ately and increase the rate to 1.5% to raise €40m . We propose abolition of

We propose abolition of building heritage relief (€4million) and extension of the option of early pension access (see section 14, €75m)

the option of early pension access (see section 14, €75m) We are proposing an all party

We are proposing an all party committee to examine the issue of taxation of alcohol

in particular the question of very cheap alcohol sales in off licences.

The net yield from these measures is a cumulative €361m.

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The 374,800 people on the live register will take little comfort from the g overnment’s

The 374,800 people on the live register will take little comfort from the government’s claim that they are meeting 85% of their targets under the Action Plan for Jobs.

While the total number on the live register fell by 38,000 over the last year, there are upwards of 85,000 people on activation schemes. In addition, the figures are flattered by emigration and the expiration of benefits resulting in some people not being entitled to means tested assistance.

The improvement of 31,600 in the number in employment seen in the Quarterly National Household Survey is welcome. However, there was a significant slowdown in the rate of job creation in the first half of the year when only 5,500 net jobs were created.

half of the year when only 5,500 net jobs were created. Year Registrations Apprenticeship population 2008

Year

Registrations

Apprenticeship population

2008

3,765

26,170

2009

1,535

21,407

2010

1,204

14,801

2011

1,307

13,001

2012

1,434

8,862

2013

1,266

7,125

The dramatic decrease in construction activity decimated apprenticeship numbers. The sector appears to be a low priority for the government. In fact they have made the attainment of an apprenticeship more difficult. Apprentices who started a 10- week placement in 11 colleges in January were hit with an increase in the student contribution of between €833 and €1,433. Traditionally, the contribution was paid to the colleges on their behalf by the Exchequer, but this was changed in last year’s budget. Students are now liable for the charge twice during their four-year apprenticeships.

It is our intention to radically overhaul how we approach apprenticeships.

We are recommending the following measures:

Apprenticeships should be offered in a wider range of skills/crafts. This should be based on regular reviews of industry needs. For example an apprenticeship scheme in the bar and catering trade could be of great assistance to both prospective employees and the hospitality sector. This will prevent the casualisation of trades.

The government must ensure that the quality of apprenticeships is such that they do not lag behind academic qualifications in terms of how they are perceived by both employers and prospective apprentices.

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Apprentices should be able to learn a broader range of skills during the off- the-job element of their course. This should cover skills in numeracy, technology and language which are highly valued by employers.

Firms should be incentivised to take part in the apprenticeship scheme. Germany has a long tradition of major industrial firms offering apprenticeships and seeing it as an integral part of their industrial policy.

More online support should be given such as an apprentice vacancy matching service, similar to that available in the UK.

matching service, similar to that available in the UK. We propose a number of measures to

We propose a number of measures to specifically help domestic businesses:

Tapered capital gains tax relief for entrepreneurs. This would involve a lower rate of 15% capital gains tax applying for people who establish and subsequently sell their own business.

Within the existing €1bn budget for job support, we believe resources should be reallocated to support a progressive relief from Employer PRSI. This should be linked to growth in employee headcount.

We commit to examining how to close the tax disparity between low income self-employed and PAYE workers. As publicpolicy.ie have pointed out, a low self-employed person can pay up to six times more income tax than a PAYE worker with the same income.

Enhance the Employment and Investment Scheme (EIS) to make it more attractive. Allowing full tax relief when the investment is made in a start-up company would facilitate raising capital for SMEs.

Investigate the potential for providing access to vacant or underutilised public property for entrepreneurs or business start-ups to use as incubation centres.

Address the lack of credit which is hampering many businesses from expanding, through the introduction of tax relief for individuals making loan capital investments to SMEs. In addition we propose to establish a pilot scheme on Crowd Financing similar to that supported by the UK government in order to give a new source of finance to smaller start-up companies

Additional incentives to encourage energy efficiency and impose rigorous efficiency targets on the energy companies.

impose rigorous efficiency targets on the energy companies. The Action Plan for Jobs claimed the ambition

The Action Plan for Jobs claimed the ambition “to make access to finance a central feature of the government’s recovery and growth plans for the economy in general and for the SME sector in particular.However, overall lending to SMEs continues to decline. In the year to the September 2014, the amount of non-property related lending to SMEs declined by 4.6%.

22

The recently established Strategic Banking Corporation of Ireland (SBCI) will not have a banking licence. Instead, it will provide credit to existing banks (and potential new entrants) who will “on lend” to SMEs. We know from the manner in which banks

have hoarded capital over the last five years, it is likely that they will continue to take

a very risk averse approach to lending. This means that many firms with viable

business propositions will be denied the capital they need to invest and grow their

business. Cheap funding from the SBCI may help the banks’ profitability without improving credit flow in the economy.

The new entity falls well short of a full service, state backed bank along the lines of the Industrial Credit Corporation (ICC) which operated successfully in the economy for many years. This was a commitment in the Programme for Government but has not been delivered. A fully fledged Enterprise Bank should be part of a permanent solution to the lending gap which exists in Irish banking and would lend to any company, regardless of sector or size, provided it can demonstrate its creditworthiness

or size, provided it can demonstrate its creditworthiness During the boom years, a significant number of

During the boom years, a significant number of small and medium sized Irish companies borrowed heavily for property, premises and machinery. In many cases the property investment was unrelated to the activities of the SME itself. Statistics from the Central Bank show that Irish SMEs have over €30 billion in property-related debt.

In most cases, SMEs are generating an operating profit but may be making an overall loss due to the cost of servicing historic debts. Targets for SME debt

restructuring are needed not just for the two pillar banks but across the sector. While

it is critical that SMEs have the necessary funds for working capital and plant and

equipment needed to run their core business, this cannot be separated from the need to fix the problem of legacy debt and urgent action is needed on this issue.

of legacy debt and urgent action is needed on this issue. Many SMEs are unable to

Many SMEs are unable to afford the accountancy fees needed to support making applications for new credit to their bank or an equity source or to restructure existing credit facilities. By assisting in the provision of this type of advice (akin to MABS for personal borrowers), the state can help firms out of financial difficulty and back to profit.

help firms out of financial difficulty and back to profit. Many potential entrepreneurs have a good

Many potential entrepreneurs have a good idea but lack the expertise to bring it to fruition. Within the existing budget for job supports, the government should provide growth vouchers to give entrepreneurs a helping hand at the start up and early growth stage to obtain the advice they need to get their business off the ground.

In addition, a structured system of role models and mentors can provide inspiration and support to people starting up in business. Enterprise Ireland, Bord Bia and Local Enterprise Offices should encourage entrepreneurs to share ideas, support each

23

other and take a team approach to the establishment of new enterprises rather than going solo. This could be expanded out to include a network of business angels looking to invest in the business ideas of other young people.

to invest in the business ideas of other young people. Many children of entrepreneurs go on

Many children of entrepreneurs go on to establish businesses themselves. A US survey found that around half of all self-employed business people in America were second-generation entrepreneurs. By encouraging entrepreneurship from an early age in school, we can help foster a culture of people taking the risk of setting up their own business. Businesses need to play a more pro-active part with local schools. Putting entrepreneurship on the curriculum and giving young people the chance to gain practical experience selling products, controlling a business bank account and navigating other hurdles, may help encourage them to set up their own business in time.

help encourage them to set up their own business in time. It is essential for firms

It is essential for firms to be able to transport their goods to customers at a reasonable cost. The logistics industry has become considerably more efficient in recent years with deliveries and services supplied in shorter timescales and at lower costs. As an island, the industry has a vital role to play in the export of Irish goods and services to the European Union and other major markets. The state should develop a co-ordinated national logistics strategy to help firms get goods to customers as efficiently as possible. This would cover infrastructure, taxation policies, environmental regulation and the overall regulatory regime in which firms operate. Germany in particular has taken a proactive approach in supporting logistics firms and in so doing helping thousands of other businesses in the process.

doing helping thousands of other businesses in the process. The incentive currently works by offering relief

The incentive currently works by offering relief to individuals who have recently paid Capital Gains Tax (CGT) and subsequently invest in a new business, before selling that new interest no earlier than three years after the investment date.

The CGT due on this sale is reduced by the lower of either the CGT paid on the original disposal or by half of the CGT due on the new sale. This is quite restrictive and the second company must be involved in an activity "not previously carried on" by the entrepreneur or an associate.

Our proposal is for a 15% rate of CGT for entrepreneurial investors regardless of whether they invested in a new business, up to a limit of €5m. This would create a clear distinction between passive investment and entrepreneurial activity.

24

Fianna Fáil would double the support available to the Trading Online Voucher Scheme from €

Fianna Fáil would double the support available to the Trading Online Voucher Scheme from 5m to 10m with a specific focus on encouraging independent retailers to avail of the opportunities presented by the online market. This would be funded through a reallocation of resources within the current enterprise budget.

of resources within the current enterprise budget. The self-employed currently pay Class S PRSI at a

The self-employed currently pay Class S PRSI at a rate of 4%. This entitles them to a significantly reduced range of benefits when compared to PAYE workers. To be eligible for Jobseekers Assistance, a self-employed person must undergo a means test. This can be time consuming with waiting periods of up to eight months. Inaccurate media reports have led some people to believe that they are entitled to nothing because they have no automatic entitlement to Jobseekers Benefit. This has caused unnecessary confusion among the self-employed.

Extending social welfare protection to self-employed people achieves a measure of social justice. In addition, it reduces the risk for those entrepreneurs who wish to start up their own businesses by providing a safety net.

To facilitate this, we propose to allow the self-employed to opt into Class A. In addition to their existing Class S contribution, the voluntary PRSI payment the self- employed person will make will depend on the level of income they earn.

The same terms and conditions would then apply for the unemployed self-employed as they do for the unemployed employee. For example, the level of average weekly earnings would impact on the level of rate of Jobseekers Benefit.

25

The agri-food sector is a great success story for the Irish economy. The combination of

The agri-food sector is a great success story for the Irish economy. The combination of thriving family farms and world leading food production companies has the potential to be a key element in economic recovery.

The abolition of milk quotas in 2015 is an opportunity to greatly expand the output from this sector. Currently farmers can claim a capital allowance on the construction of farm buildings and certain other works. The cost is written off over 7 years. Reducing this to 3 years to take advantage of the current opportunity will potentially yield economic returns into the future.

will potentially yield economic returns into the future. Pillar Two is a critical part of an
will potentially yield economic returns into the future. Pillar Two is a critical part of an

Pillar Two is a critical part of an effective CAP package. The government has failed to provide adequate funding for the provision of resources for rural development with only a 43/57 financing rate. A 50/50 co-financing rate will allow resources to be targeted where they are needed and support low income farmers. 50/50 co-funding would cost €313m per annum from 2015-2020. This is an increase of €25m per annum on the current financing rate.

increase of €25m per annum on the current financing rate. The Rural Social Scheme is an
increase of €25m per annum on the current financing rate. The Rural Social Scheme is an

The Rural Social Scheme is an important measure in sustaining low income farmers. In particular the fragile suckler cow sector, which has historically been subject to low profit margins requires additional support to keep farmers in the industry. Doubling Rural Social Scheme farmer numbers from 2,500 to 5,000 would cost the exchequer an additional €10m allowing for the fact that recipients are currently in receipt of certain social protection payments.

currently in receipt of certain social protection payments. The beef crisis is threatening the financial viability
currently in receipt of certain social protection payments. The beef crisis is threatening the financial viability

The beef crisis is threatening the financial viability of thousands of beef farmers. The suckler cow sector is the backbone of the beef industry and needs direct support. The establishment of a special €200 per head payment in 2015 will help to bolster beef farmers’ income in the short term while an enhanced framework is put in place to protect a sustainable beef industry. This special payment will be drawn from the Rural Development Program under 50/50 co-financing with an additional 2015 top up of €7m.

co-financing with an additional 2015 top up of €7m . The Targeted Agricultural Mechanisation Scheme is

The Targeted Agricultural Mechanisation Scheme is an important process in upgrading farm infrastructure. Enabling farmers to increase their productive capacity is a vital part in achieving Food Harvest 2020 targets. It is also important in facilitating farmers in addressing greening demands under the new CAP arrangements. We propose expanding the scheme by an additional €5m.

The total cost of these measures is €47m.

26

Ireland’s corporation tax policies are currently under the international spotlight. As a country we need
Ireland’s corporation tax policies are currently under the international spotlight. As a country we need

Ireland’s corporation tax policies are currently under the international spotlight. As a country we need to send out a strong united message that Ireland values its ability to determine our own corporation tax policies and that our rules are in accordance with OECD guidelines on taxation.

In the face of a sustained international campaign to mis-represent our corporation tax rules, it is important that we re-emphasise the following points:

The headline corporation tax rate is only one consideration in assessing a country’s corporation tax regime.

A one size fits all tax regime would not work for Europe.

The international trend is to cut corporation tax, not to increase it.

Market access, skilled labour and a stable regulatory environment are cited by multinationals as key reasons for locating here in addition to our tax regime.

Our tax rules are set out clearly in legislation and the rules are applied fairly to all companies regardless of size. Other EU countries not subject to as close scrutiny as we face do not have the same level of transparency. It will come as no surprise that there are many in the European Commission who would like to puncture a hole in Ireland's corporation tax offering.

In framing Budget 2015, the government should not engage in any precipitative act in unilaterally changing Ireland’s corporation tax laws in the face of pressure from countries whose motivation is their own national advantage.

Ireland has historically used its tax policy in a manner designed to attract and retain multinational investment in the country. At the end of 2013 there were 166,000 people employed in IDA Ireland supported companies. While not all of these jobs can be directly attributed to the impact of Ireland’s corporation tax regime it remains a vital part of our offering to prospective FDI investors.

We cannot merely take a defensive role in relation to corporation tax. The international environment in which we compete is evolving rapidly. While we have a strong track record in offering a competitive tax regime to potential investors, the level of competition we face for mobile investment is at the highest it has ever been. Our track record will count for little if competitor countries offer a regime that is considerably more favourable than ours.

It is important to acknowledge that in recent years the attractiveness of Ireland’s offering has declined relative to that of the UK and other competitor countries. A number of factors have brought this about:

Abolition of remittance base of taxation for non-domiciled persons

Abolition of patent exemption

Increase in capital gains tax rate to 33%

27

Bringing non domiciled persons within the scope of Irish gift and inheritance tax if they live here for five years.

While these measures were introduced in the context of an exceptionally difficult budgetary environment, they must also be viewed in the context of the actions being undertaken by our nearest neighbour who have taken a very deliberate policy decision to use tax as a lever to attract new business.

Among the measures taken by the UK to improve their tax regime are:

A reduction in the main rate of corporation tax from 28% in 2010 to 23% in 2013 with a stated intention to reduce it to 20% by 2015.

A change in the way the UK taxes overseas profits to concentrate on taxing profits from UK activities

The introduction of a patent box, which attributes a 10 per cent corporation tax rate to the profits earned on products patented in the UK.

An enhanced R&D offering.

Ireland must adapt its offering in the face of this heightened threat.

adapt its offering in the face of this heightened threat. The benefit of a SARP type

The benefit of a SARP type programme is clear. Providing an attractive regime for mobile talent clearly improves the attractiveness of a location when a company is deciding where to invest. Bringing in “project champions” who have familiarity with key business processes and who can supplement local talent will often be key to getting new projects off the ground. However the current regime is not working and has had negligible take up. The criteria on which a scheme like this should be judged include its ability to boost employment without an unacceptable loss of revenue to the State from creative use of its terms.

Options for reform SARP include applying full taxation on all assignee earnings up to €100,000 and a maximum effective rate of 25% on earnings above this level without the current earnings cap. Consideration should also be given to removing the restriction on the individual carrying out some of their employment duties abroad and the requirement that they must have been working for the assigning employer for 12 months prior to relocating in Ireland. In addition, the restriction that the assignee cannot have been resident in Ireland in the 5 years prior to their arrival limits the flexibility of the scheme.

prior to their arrival limits the flexibility of the scheme. Foreign Earnings Deduction relief is available

Foreign Earnings Deduction relief is available to individuals where foreign work days exceed 60 days in a 12 month period. The concept makes sense as we want companies based here to be able to win new export markets. However the full year estimated cost to the Exchequer of the Foreign Earnings Deduction scheme for the 2012 tax year was €0.6 million in respect of just 83 employees. The scheme should

28

be extended to all jurisdictions outside the EEA and consideration given to removing the cap on relief with the basis for qualifying days adjusted and simplified.

with the basis for qualifying days adjusted and simplified. We have already noted the importance of

We have already noted the importance of treating Irish entrepreneurs who establish and successfully grow a business differently from passive investors. Specifically, we want to see a lower rate of capital gains tax apply in such situations. This can also help attract mobile foreign entrepreneurs with good business ideas to set up here. A further enhancement could be in the form of a lower rate of tax applying to the dividends paid to entrepreneurs from qualifying companies. This would reflect the inherently greater risk associated with entrepreneurial activities.

greater risk associated with entrepreneurial activities. We have an excellent base from which to make further

We have an excellent base from which to make further progress. Two thirds of Ireland’s R&D is in the private sector, creating new product and service innovations. Currently the R&D credit is a function of increases in expenditure using 2003 as the base year of comparison. The incremental approach needs to be reviewed in light of the pressure on company budgets. In order to encourage investment in the sector, all R&D expenditure should for a two year period be eligible for a tax credit, subject to EU competition approval.

To help attract additional R&D investment into Ireland, a pre-approval mechanism should be put in place to enable firms to agree in advance the percentage of an R&D grant-aided project that qualifies for the tax credit.

We propose a specialist dedicated unit be established within Revenue to deal with specific R&D tax matters, as well as handling technical appeals in a more streamlined manner. In addition we should broaden the relief to enable loss-making companies pass on the benefit of their R&D credits to their key research staff.

of their R&D credits to their key research staff. Employee share incentive schemes encourage employee loyalty

Employee share incentive schemes encourage employee loyalty and participation through long-term equity incentive awards. The current tax relief for employees who acquire shares in their company has a number of drawbacks. As an initial step to widening the employee share scheme, the definition of “shares” should be widened to include restricted stock units and options over shares.

29

Investment in our national infrastructure is vital to sustaining economic recovery and underpinning the provision

Investment in our national infrastructure is vital to sustaining economic recovery and underpinning the provision of public services in the year ahead. At this stage, the capital budget has been cut too far and has been reduced to dangerously low levels.

Key areas for investment in the years ahead should be in water mains and treatment facilities, broadband, waste management, renewable energy and flood remediation.

The sale of public assets such as Bord Gáis Energy is of dubious long term value. In this context, the minimum that the public expects is that the revenue raised would be put to use in new capital projects. However, major pieces of infrastructure such as the new National Children’s Hospital are stalled.

A reduction of nearly 70% in the capital budget since 2008 has contributed to massive emigration of skilled employees. Record low interest rates and identified deficiencies in our capital infrastructure mean now is the time to begin rebuilding the state’s investment programme.

The national broadband network has improved considerably but significant gaps remain particularly in rural areas. In addition, 4G mobile phone coverage needs to be considerably improved.

Our national road and motorway network is generally in good shape. However there are obvious gaps which should be addressed in the years ahead. Specifically the road system should be improved by linking the cities of Cork, Limerick, Galway and Sligo. The long stalled A5 motorway should be completed.

The regional airport network is a vital component in ensuring balanced development across the country. It is essential that Ireland Airport West, Knock, Waterford, Kerry and Donegal airport are supported as part of the policy of providing maximum employment opportunities to people outside Dublin. Greater autonomy needs to be afforded by the DAA to Cork Airport to allow it to compete effectively with a newly independent Shannon Airport.

Last winter showed up the risk which many communities face from flooding. Ireland was required to prepare flood hazard and risk maps for the areas deemed at risk of flooding by December of 2013. The vital step now is to put in place flood management plans with clear targets for these areas. This should be done as quickly as possible. There must be no slippage from the end of 2015 deadline to have these plans in place. If anything, this target should be brought forward to the summer of next year given the seriousness of the situation. The implementation of these plans is going to require significant investment in the years ahead.

As an initial step towards rebuilding the capital budget, we are proposing an additional €100m in capital expenditure for 2015 to be targeted at the areas which will give the greatest immediate employment benefit and support the long term capacity of the economy.

30

The overall State procurement budget for the supply of services each year is approximately €9bn.
The overall State procurement budget for the supply of services each year is approximately €9bn.
The overall State procurement budget for the supply of services each year is approximately €9bn.

The overall State procurement budget for the supply of services each year is approximately €9bn. In addition to this, there is approximately €3bn of capital expenditure giving a total procurement by the State of €12bn annually.

The new National Procurement Office has set a target of savings from procurement in respect of this €12bn of €500m over a three year period. A minimum of €150m of this must be achieved in 2015. This is an actual saving of just over 1% and it is a very conservative estimate of what could be achieved by effective national procurement policies.

The HSE alone has a procurement budget of €1.4bn and their recent annual report states: “The HSE does not have an automated centralised system to maintain a register of contracts awarded without a competitive process”. They are required to disclose details each year of any contracts in excess of €25,000 which have been awarded without a competitive process. This is one clear example of a lack of proper procurement policy. It is unsurprising that the HSE is not always getting the best value for money when they do not have an automated centralised approach for dealing with this area.

The Comptroller and Auditor General (C&AG) identified “significant level of non- compliance” with procurement rules in the HSE in his most recent report. Clearly these issues are examples of where procurement procedures can be improved across the public service.

Greater efficiency can be brought about by sharing services across the public service. This will result in centralised units carrying out key administrative functions on behalf of other sections in the public service rather than each individual unit carrying out the work on a stand alone basis. This sharing of services has scope not just to produce efficiencies but also free up much needed public service staff for other frontline services.

The New National Shared Services Office must immediately assist sectoral shared services projects in health, local government and the education sectors.

Key priorities in this area include:

The HSE to develop a single integrated finance system

The HSE to establish one national recruitment system

One shared payroll service for all Educational Training Boards

The education sector to examine one overall back office function service for the entire sector

Local Authorities to complete the work for a national shared payroll and a superannuation service

31

Local Authorities to have a shared service in relation to dealing with banks and financial services and their treasury management function.

financial services and their treasury management function. The existence of fraud and error within the social
financial services and their treasury management function. The existence of fraud and error within the social

The existence of fraud and error within the social protection system diverts resources from those in most need of assistance while undermining public confidence in the system as a whole. Technological advances and more detailed case examination can assist significantly in detecting and eliminating fraudulent claims. Attention should also be given to more clearly communicating to claimants their rights and responsibilities and the consequences of fraudulent activity.

The overall savings target for 2013 was €710 million. However, the actual saving achieved was €632m. An accelerated roll out of the public services identity card would assist with achieving savings. A greater exchange of data and information between approved public bodies will also assist in this area such as, information between the Department of Social Protection and the Revenue Commissioners regarding Deposit Interest Retention Tax (DIRT) and Local Property Tax (LPT), Department of Agriculture, Food & Marine and Local Authority Housing Departments.

Food & Marine and Local Authority Housing Departments. The state drugs bill continues to be a
Food & Marine and Local Authority Housing Departments. The state drugs bill continues to be a

The state drugs bill continues to be a source of considerable concern. The total spent on drugs grew by €60m to €1.61bn in 2013 despite government claims of major cost savings arising from agreements with the pharmaceutical industry. While this partly reflects greater numbers of medical cards in issuance, it also highlights the failure to extract the full savings expected from the 2012 agreement with the makers of branded and generic drugs which had the intention of saving €400m over three years. The HSE is in some instances paying more for individual drugs than private patients would pay over the counter. Certain items cost multiples of the price that applies in the UK. A large proportion of the reimbursement costs for generic medicines appear to go to the distribution chain.

It was reported during the summer that the HSE still does not employ a health

economist. It is our belief that the National Procurement Office should now be given the task of managing purchasing medicines on behalf of the HSE. This must involve

direct meetings between the National Procurement Office and the relevant pharmaceutical companies. We believe a 3% reduction in the drugs budget can be achieved through full implementation of the 2012 agreement and action to tackle overprescribing of medicines.

agreement and action to tackle overprescribing of medicines. A report in September indicated that, to the
agreement and action to tackle overprescribing of medicines. A report in September indicated that, to the

A report in September indicated that, to the end of July, the HSE cost for agency

staff was €194.3 million. This represented an increase of €63 million or 49 per cent on the corresponding period in 2013. The cost of agency staff in the acute hospital sector was just over €132 million compared with €86 million for the same period last

year. This is symptomatic of the mis-management of the health budget.

32

Earlier this year, evidence given to the Dáil Public Accounts Committee indicated that the HSE is paying €110,000 every 13 weeks to fill a single consultant post at Letterkenny general hospital. A total of five consultant posts are being filled at the hospital on a per-hour basis. A full time consultant could be hired for a year for the same cost of hiring someone through an agency for 3 months. Hiring staff on this basis is not just expensive, it also undermines consistency in patient care. The escalation of the bill for agency staff must be reversed and the cost substantially reduced through direct hiring of staff as determined by patient need. This will both save money and improve the quality of care provided.

both save money and improve the quality of care provided. The State Claims Agency has responsibility
both save money and improve the quality of care provided. The State Claims Agency has responsibility

The State Claims Agency has responsibility for the management of personal injury and property damage claims against the State. The total paid out in respect of all claims in 2013 amounted to €140 million. €93 million of this related directly to awards and €47 million related to legal and professional fees. The situation whereby these fees constitute 50% of the amount paid out in awards is unacceptable.

At the end of 2013, the State Claims Agency reported that the estimated potential liability in respect of all active claims was €1.22 billion. €1.04 billion of this is in respect of clinical personal injury claims while around €186 million related to other forms of claims.

Currently, if someone receives an award following a medical negligence claim, the payment is made in the form of a once off lump sum. The Working Group on Medical Negligence and Periodic Costs concluded that system should be replaced with one of periodic payments. This would reduce the upfront financing cost to the state while not impacting on the quality of life of the recipient. In February 2014, the Minister for Justice promised to bring forward legislation on periodic payments but this has not yet occurred. The legislation should be introduced as a matter of urgency.

In August 2012, the State Claims Agency announced a new procurement structure requiring barristers to engage in a competitive tendering process under which their fees were capped at up to 25% below prior levels. However the total amount spent on legal fees increased from €39m to €42m in 2013.

The introduction of periodic payments combined with a reduction in legal fees has the potential to provide the State with a minimum cash flow saving of €20m in 2015.

33

The Minister for Finance compounded the inequality of the levy on private pension funds by
The Minister for Finance compounded the inequality of the levy on private pension funds by

The Minister for Finance compounded the inequality of the levy on private pension funds by breaking his word to end the levy after four years when he announced in the budget last year that it was to be increased by a further 0.15% for 2014 and extended in to 2015. The levy has done considerable damage to the incentive of employees to save for their retirement. Individuals and companies are naturally less inclined to put money aside for future pension needs when they see the Minister can dip in to their savings at any time to balance the books.

In its first three years in existence, the pension fund levy yielded €1.48bn for the State and will yield €2.2bn by the time it is due to end. The levy was to fund job creation measures in the hospitality and service sectors but it was only under sustained pressure from Fianna Fáil that the government actually admitted that not all the funds raised were being deployed for job creation as intended. In effect, it was a revenue raising exercise at the expense of current and future pensioners. The government have already reneged once on their commitment to bring it to an end. We need the minister to confirm that he will on this occasion keep to his word.

to confirm that he will on this occasion keep to his word. In 2012 the government

In 2012 the government introduced a measure that, for a three year period only, employees who had made additional voluntary contributions (AVCs) to their pensions have one-off access to take back up to 30% of these contributions. Drawdowns are subject to marginal-rate income tax.

Only €75m in tax revenue had been generated from the measure to date, well below the expected €200m over 3 years. This is not surprising given the restrictive nature of the scheme. Employer paid contributions, regular employee contributions, self- employed personal pensions and normal Personal Retirement Savings Account (PRSA) contributions are excluded.

For 2015 we propose an amendment that would widen the current range of pension assets that could be accessed before retirement to include those in Defined Contribution schemes (including Personal Retirement Savings Accounts) subject to certain qualifying conditions:

Redundancy

First Time buyer home purchase

Critical illness

Dealing with debt problems

In recognition of the difficulties faced by many individuals, we propose that people availing of the early draw down option should pay a rate of tax 5% below their marginal rate for the first €20,000 and the marginal rate on any additional amount. We estimate an additional €75m can be raised from these measures in 2015.

34

Summary of adjustment € million New taxation measures (Appendix Two) 361 Expenditure savings (Appendix

Summary of adjustment

€ million

New taxation measures (Appendix Two)

361

Expenditure savings

(Appendix Three)

290

Savings on IMF loans

(page 8)

300

Increased dividends from commercial semi states

50

 

1,001

Expenditure commitments (Appendix Four)

(746)

 

255

Adjustment for partial year impact

(35)

Net adjustment

220

for partial year impact (35) Net adjustment 220 New taxation measures € million Retention of USC

New taxation measures

€ million

Retention of USC measures

21

Reduce earnings cap for pension contributions from €115,000 to

 

€60,000

149

Introduce a tax on sugar sweetened drinks

60

Increase excise duty on packet of 20 cigarettes by €0.50

61

Extend betting duty to online and raise rate to 1.5%

40

Abolish building heritage relief

4

Yield from improved early access to certain pension benefits

75

Increase in mortgage interest relief

(49)

 

361

35

Expenditure savings € million Procurement savings 150 Social Protection control measures 50 HSE

Expenditure savings

€ million

Procurement savings

150

Social Protection control measures

50

HSE drugs budget

50

Reduction in use of agency staff in health sector

20

State Claims Agency legal fees and stage payments

20

 

290

– legal fees and stage payments 20   290 Expenditure commitments* € million Health (page

Expenditure commitments*

€ million

Health

(page 9)

94

Childcare (page 11)

68

Education (page 12)

123

Social Protection (page 13)

151

Housing (page 14)

154

Agriculture (page 26)

47

Justice recruitment of 500 additional Gardai

9

Capital expenditure (page 30)

100

 

746

* figures rounded to nearest €m.

36

OCTOBER 2014 BUDGET 2015 PRE-BUDGET PROPOSALS 2015 A MORE CARING SOCIETY Fianna Fáil Headquarters Áras
OCTOBER 2014
BUDGET
2015
PRE-BUDGET
PROPOSALS 2015
A MORE CARING SOCIETY
Fianna Fáil Headquarters
Áras De Valera
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info@fiannafail.ie
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