FG 2011 Budget Plan - "for jobs, economic growth & fairer way to tackle deficit"

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Fine Gael have this morning launched their Budget 2011 Proposals

Perspectives on Budget 2011 and the 4-Year Plan is available at: http://www.finegael.ie/upload/BudgetPerspective2011.pdf

The spending spreadsheet is available at: http://www.finegael.ie/upload/BudgetTargets2011.pdf

Their plans propose no change to pensions with the exception of those with "generous" occupational pensions, and no income tax increases in 2011.

The party's proposals also suggest abolishing the €10 travel tax "subject to deals on re-opening routes with Ryanair and Aer Lingus", and a 1.5% reduction in the lower rate of VAT (which is 13.5%) for trades, restaurants, hotels and newspapers.

Fine Gael are also proposing an increased in DIRT to 30% to encourage consumers to spend money.

Kenny & Noonan publish FG’s plan for jobs, economic growth & fairer way to tackle deficit

Cut jobs' taxes, cut Govt waste, protect pensions & reverse minimum wage cut

Fine Gael Leader Enda Kenny TD and Finance Spokesman Michael Noonan TD have published a far-reaching Pre-Budget Plan to create jobs, stabilise the Exchequer and get Ireland back on track over the next four years.

Deputy Kenny said Fine Gael aims to create 100,000 new jobs, achieve the 3% deficit target and the €15 billion worth of adjustments within the original four year timeframe. Job creation and fairness will be the over-riding principle, within the financial constraints.

The plan will be built around three pillars:

  1. Limiting tax increases to one-quarter of the adjustment next year, and one-third of the adjustment over four years;
  2. Radical public sector reform to end waste, inefficiency and duplication, starting with the political system;
  3. And a jobs and stimulus plan.

Deputy Kenny said: ‘There is a better way, and a fairer way, than anything offered by the current failed Government. Fine Gael will make jobs and economic growth a precondition, not an aspiration’.

“International experience shows clearly that cuts in spending are more effective at fixing deficits and are better for growth and jobs than tax increases. Confronting waste, inefficiency, duplication and redundancy in public spending should be the focus of Ireland’s budgetary adjustment.”

Tackling the Deficit

Key proposals to tackle the deficit include:

  • Protecting pensions, including contributory and non-contributory old age pensions, those for widows, the blind, people with disabilities, and carers’ allowances, while collecting some extra tax from those with generous occupational pensions;
  • No income tax increases in 2011 before recovery takes hold, and limiting income tax increases to half the levels proposed by Fianna Fáil over the entire four years;
  • A much greater emphasis on closing tax loopholes for the rich, including suspending property-based tax reliefs and tightening the rules for tax exiles;
  • A fairer approach to Fianna Fáil's proposed annual recurring property tax on the family home;
  • Cutting tax relief on schemes offering pensions greater than €60,000, while protecting pensions tax relief for middle income families;
  • 18,000 more voluntary redundancies in the public sector than the Government proposes;
  • Targeting the €3 billion worth of annual social welfare fraud through the establishment of a single Payments and Entitlements system.

Fine Gael recognises the need to raise more revenues from property. But a residential property tax would unfairly hit the young generation already burned by the housing bubble. So we will increase the second home tax, cut Capital Acquisitions Tax thresholds and introduce a low Capital Gains Tax on the site values of primary residences. Alongside this, we will cut stamp duty for families trading up and down, and provide greater relief for working families in mortgage distress.

Supporting jobs and growth

Deputy Noonan said: ‘We will strengthen significantly the reforms needed to cut business costs, to improve productivity, and to incentivise and facilitate people to acquire the skills needed to re-enter the workplace’:

  • Replacing the minimum wage cut proposed by Government with a cut in the jobs' tax to encourage people off welfare and into work;
  • Accelerating capital allowances on business software investments to support a local high-tech industry;
  • A €10 million one-off marketing budget for State agencies to restore Ireland's battered business reputation across the globe;
  • No change in either the standard or top rates of income tax, or the 12.5% rate of corporation tax;
  • Abolish the travel tax subject to deals on re-opening routes with Ryanair and Aer Lingus;
  • Abolish the lower 8.5% rate of employers’ PRSI on staff earning below €356 per week for at least three years to reduce employment costs;
  • A 1.5% cut in the lower 13.5% VAT rate to re-direct consumer spending away from imports, and into labour-intensive services such as trades, restaurants, hotels and newspapers;
  • Increase DIRT to 30% to encourage higher levels of household consumption;
  • A pre-announcement that home insulation and other residential and commercial energy saving subsidies will terminate in 2013, leading to a bringing forward of demand in the intervening two years.

Deputy Noonan added: ‘Fine Gael’s job stimulus plan, NewERA, will use streamlined and restructured semi-State companies to invest an additional€6-7 billion, over and above current plans, in investments in “next generation” energy, broadband, forestry and water infrastructure. In discussions with the IMF, Fine Gael has confirmed that funds from the National Pension Reserve Fund and proceeds from the sale of State assets remain available, under conditions to be agreed, to finance the NewERA stimulus plan.

Achieving greater public sector savings & reform

Deputy Kenny said: ‘The split between spending reductions and tax increases in the Government’s four year plan moves in the right direction but there is room for additional spending savings from public sector pay of at least €900 million by 2014. This will make room for targeted initiatives to support employment and economic activity’:

  • Cutting the number of national politicians by 35%;
  • Cutting the threshold for application of minimum 30% effective tax rate to €250,000 from €400,000 at present (with marginal relief from €125,000);
  • Reducing the size of the public sector by 10% - just over 30,000;
  • Reducing the size of the core civil service working in Government Departments by a third through the establishment of shared service operations;
  • Implementing at least half of the McCarthy report recommendations, and 80% of the savings recommended by the Local Government Efficiency Review;
  • Close FÁS and the HSE and abolish 145 quangos.

Deputy Noonan concluded by saying: ‘Extending the period of the adjustment will only force Ireland to borrow more money and pay more back in interest, so we will aim to reach the targets within four years’.
 


civilserpant

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Or, with some of the waffle cut out....

• collecting some extra tax from those with generous occupational pensions;

• No income tax increases in 2011 before recovery takes hold, and limiting income tax increases to half the levels proposed by Fianna Fáil over the entire four years;

• Cutting tax relief on schemes offering pensions greater than €60,000, while protecting pensions tax relief for middle income families;

• 18,000 more voluntary redundancies in the public sector than the Government proposes;

• Targeting the €3 billion worth of annual social welfare fraud through the establishment of a single Payments and Entitlements system (waffle)

• increase the second home tax,

• increase mortgage interest relief to 30% for First Time Buyers in 2004-08 (from the current sliding scale of 20% to 25% depending on the year the mortgage was taken out), financing in part by bringing forward the abolition of relief for new buyers from June 2011.

• cut Capital Acquisitions Tax thresholds
• introduce a low Capital Gains Tax on the site values of primary residences.
• cut stamp duty for families trading up and down, and provide greater relief for working families in mortgage distress.

• Replacing the minimum wage cut proposed by Government with a cut in the jobs' tax to encourage people off welfare and into work;

• Accelerating capital allowances on business software investments to support a local high-tech industry;

• A €10 million one-off marketing budget for State agencies to restore Ireland's battered business reputation across the globe;

• No change in either the standard or top rates of income tax, or the 12.5% rate of corporation tax;

• Abolish the travel tax subject to deals on re-opening routes with Ryanair and Aer Lingus;

• Abolish the lower 8.5% rate of employers’ PRSI on staff earning below €356 per week for at least three years to reduce employment costs, which FG says will make a person on the €8.65 min wage €30 cheaper to hire.

• A 1.5% cut in the lower 13.5% VAT rate to re-direct consumer spending away from imports, and into labour-intensive services such as trades, restaurants, hotels and newspapers, but sticking with the Gov's 23% increase in top. Suggests the 12% rate for 3 years will encourage cheaper services.

• Increase DIRT to 30% to encourage higher levels of household consumption;

• A pre-announcement that home insulation and other residential and commercial energy saving subsidies will terminate in 2013, leading to a bringing forward of demand in the intervening two years.

• Cutting the threshold for application of minimum 30% effective tax rate to €250,000 from €400,000 at present (with marginal relief from €125,000);

• Reducing the size of the public sector by 10% - just over 30,000;

• Reducing the size of the core civil service working in Government
Departments by a third through the establishment of shared service operations;

• Implementing at least half of the McCarthy report recommendations, and 80% of the savings recommended by the Local Government Efficiency Review;

• Close FÁS and the HSE and abolish 145 quangos
 
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hammer

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What does "suspending property tax reliefs" mean ?

If a person bought a property in 1990 with S23 tax relief how can you "suspend" it :)
 

White Horse

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Looks promising. Much better than the scorched earth policy being forced on us by FF.

As ever, the devil is in the detail. Plenty of reading to do.
 

hammer

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"introduce a low Capital Gains Tax on the site values of primary residences"

Are they mad :(

Increase second property tax - again are they mad :(

Just deflates property further. Is that the endgame?
 

RahenyFG

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Has a re-assurance from the IMF that FG in government can use money from the National Reserve Fund for the NewEra plan.

All in all, a great budget submission by FG.
 

Expose the lot of them

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As has already been said the devil is in the detail but closing FAS and the HSE and reducing the quangos is a great start. I would add to that the redundancy payments should be limited to statutory redundancy.
 
D

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Has a re-assurance from the IMF that FG in government can use money from the National Reserve Fund for the NewEra plan. All in all, a great budget submission by FG.
Only if they find money elsewhere to pay down a similar amount of debt - so, in reality, they will not be able to use Reserve Fund money for New Era.
 

Thac0man

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Looks like the best plan so far from all the parties. No plan is going to be without pain. Those who pretend that they can just tax the rich like some crock of gold that will solve all our problems are talking crap.
 

dapman

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Thats more like it. A return to boosting the economy as a way out, rather then killing it.
Why not get rid of VRT as well?
 

davehiggz

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let's say you try and get another 10% of tax from rich people. Even if only a small number of those people leave, you're losing 100% of their tax bill. :eek:
In trying to get more, we might get less.

Fine Gael wants to end tax-breaks for wealthy people so they pay the same rates of tax as middle earners but putting them on their own band with 60%+ marginal rates will do nothing to solve the deficit or the jobs crisis.
 

civilserpant

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As has already been said the devil is in the detail but closing FAS and the HSE and reducing the quangos is a great start. I would add to that the redundancy payments should be limited to statutory redundancy.
Not going to happen. Even hawks like the Indo pay 4-6 weeks payment. Imagine the Union / Labour reaction if it was statutory... jesus.
 

twohats

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This is my favourite part...

"Cutting the number of national politicians by 35%"

Obviously, hoping it can be done with a minimum of gerrymandering and whatnot, but cutting the number of TDs (if that's what they mean by 'national politicians') by a third is a good start.

Haven't seen any mention of rejigging the voting system yet, but as the man said, 'a lot of reading to do'.
 

civilserpant

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Heres the pension bit, which was the killer in the FF 4 year plan. I'm on 50k and the Govs changes would have cost me €1,809 in pensions relief changes alone!!!!

9. Pensions, Taxation and the Elderly
A Fairer and More Effective Way to Support Younger, Middle Income Families Saving
for Retirement

Fine Gael recognises the need to cut the cost to taxpayers of subsidising pensions
provision, but this must be done in a way that is demonstrably fairer than the
measures set out in the Government’s 4‐year plan.

Under the Government’s plan, tax relief (including PRSI and health levy relief) on
contributions to pensions by middle and higher income employees will be more than
halved from 48% to 20%. Given that many of the resulting pensions will then be
taxed in retirement at almost 50%, this will destroy the incentive for tens of
thousands of middle income Irish families to save for retirement.
These are the families that have already been hammered by the recession.

Cutting
their future pensions is adding insult to injury. These changes would mean that
young middle income families can never aspire to the types of pensions enjoyed by
those already close to or in retirement, and particularly those lucky enough to be in public sector pension schemes.

In contrast, there will be no further restrictions on the often huge employer pension contributions for top tier staff in both the public and private sectors and those already close to or in retirement. This is a reform that has been designed by the top tiers of the public service for the top tier of the public service.

They also mean that high earners in the private sector, including banks, will likely sacrifice future pay increases and bonuses for tax‐free employer contributions to their pension funds.

As a fairer and more effective alternative the Government’s plans, we will make tax
savings of a similar scale through a combination of the following measures:

• A temporary, annual 0.5% contribution for all private pension funds, so that older
beneficiaries of past tax relief make some contribution to deficit reduction. An
equivalent reduction could be applied to public and private sector defined
benefit entitlements;

• Abolition of PRSI relief on employer pension contributions;

• Abolition of PRSI / health levy relief on employee pension contributions. As
pension income is not subject to PRSI, this can no longer be justified;

• Allowing defined contribution pension savers to access funds early (perhaps 2.5%
of their fund per year for 4 years) to meet their current business and personal
responsibilities (and taxing the draw-downs);

• Cutting the limit on tax-free lump sums on retirement from €1.2 million to at
most €250,000;

• A large cut in the standard fund threshold for pensions, from the existing level of €5.4 million to at most €1.5 million for public and private sector workers, while also increasing the notional annuity cost of defined benefit, final salary schemes;

• An increase in the "deemed distribution" rate on large (Annual Retirement Funds ARFs) to avoid their use for inheritance tax planning; and

• Applying from 2012 marginal rates of income tax, rather than Capital Acquisitions Tax, to ARFs on the death of the beneficiary to avoid their use for inheritance tax planning. This could be accompanied by a 1‐year window in 2011 for beneficiaries to accelerate withdrawals from ARFs at a tax rate of 35%, leading to a windfall for the exchequer at a crucial time.

The net objective of our changes will be to effectively cap taxpayer contributions to existing public and private sector schemes that deliver pensions of greater than €60,000 in retirement, while maintaining adequate incentives for younger, middle income families to continue to save for their retirement.
 
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