Budget 2011 : Some Proposals by Annette J Dunlea

Published in The Carrigdhoun Newspaper 20th Nov 2010 p.11

Finance Minister Brian Lenihan announced a more detailed four-year plan for returning Ireland's deficit to 3 per cent of GDP in 2014.Ireland's budget will comprise of €4.5 billion in spending cuts and 1.5 billion in taxes.The government are struggling to get parliamentary approval for the 2011 budget.Budget 2011 is the first year of a four-year plan for €15billion in fiscal adjustments to reduce the annual deficit to 3% of GDP. Ireland is commited Mr.Lenihan said to restore stability to the public finances.

The Sinn Fein's document called 'There is a Better Way', outlines a series of taxation measures aimed at high earners, the abolition of wastages in public spending and the transfer of €7bn from the National Pension Reserve Fund for a 3.5 year state-wide investment programme to stimulate the economy and create jobs.Mr Adams restated Sinn Féin’s opposition to the target agreed by the other main parties that the State’s deficit should be cut to 3 per cent of national income by 2014.Sinn Féin's finance spokesperson Arthur Morgan said the proposals could be regarded as radical, but they were fair.They propose €5.266 billion gross savings in 2011 and a €595 million stimulus package.

Sinn Feins Suggestions are:

1.The introduction of a new wealth tax; a new 48 per cent tax for high earners (€100,000); the standardising of all discretionary tax reliefs; an abolition of the PRSI ceiling; and increases in transaction taxes.

2. The cuts in spending are targeted at salaries. Sinn Féin has proposed a cap on the salaries of Ministers and TDs, as well as a cap of €100,000 on all public service salaries.

Instead, Mr Morgan outlined a six-year plan to achieve the target. He said the Sinn Féin plan was based on a prediction for economic growth of 3 per cent per annum.

3. They advocated the transfer of €7 billion from the National Pension Reserve Fund to be used for a "financial stimulus" package over the next six years.These include schools, hospitals, social housing, energy efficiency and public transport.

4.A Cut national deficit to 3 per cent over six years and a Standardise discretionary tax reliefs, saving €1.1billion.

5.Imposing a Income-linked wealth tax of 1 per cent on non-farm assets, raising €1billion.

6.To abolish PRSI ceiling, raising €119milion.

7.Increase capital gains tax to 40 per cent, raising €240 milion.

8.Increase DIRT to 30 per cent from 25 per cent, raising €123 million.

9.Increase taxes on second homes to €600, raising €120 million.

10.A series of cuts Sin Fein propose to introduce includes: capping ministerial salaries at €100,000, TD salaries limit to €75,000,a €100,000 maximum salary for public sector semi-State employees.

11. A reduction of professional fees by 25%

12.Charge full price for private beds in public hospitals. Reduce cost of medicine and overheads in health sector by reducing waste and buying generic drugs

13. refundable tax credits for poorer families

14. the return of the Christmas social welfare bonus

15. a revamped Community Enterprise scheme, and using State employees to build infrastructure

16. We are also calling for the abolition of a number of tax exemptions including mortgage interest relief for landlords

Party leader Gerry Adams said they were seeking to get those who earn the most to pay more.Arthur Morgan said the measures would achieve the necessary savings while protecting frontline public services and those on low and middle incomes.The party is providing a better, fairer way to economic recovery. The party also opposes the government’s plans to reduce the deficit to 3 per cent of GDP by 2014

Leading businessmen propose their ideas on Budget 2011:

 

Sean Gallagher, founder Smart Homes and member of Dragons’ Den:

1. A breakdown the €5 billion budget cuts as follows:

capital expenditure cuts: €1 billion;

current expenditure cuts, €3 billion;

tax increases and/or new taxes, €1 billion.

Five things I’d do in the budget:

1. Streamline services for start-up entrepreneurs.

2. Give tax incentives for investment of savings in start-ups and reduce capital gains tax measures could be introduced for those who invest in new businesses.

3. Extend film industry tax relief to the gaming sector: Section 481 relief for the film industry could be extended to include the closely-aligned gaming industry.

4. Extend graduate placement initiatives: graduate placements enhance future employability by providing opportunities to develop job skills and key competencies.

5. Reform the public sector with improved efficiency, better management and increased accountability in all areas.

 

John Teeling, chairman, Cooley Distillery suggestions are:

1. To Increase income tax at all levels by 5 per cent.

2. Tax all pensions, including company contributions to pension plans.

3. Increase corporation tax to 20 per cent but implement reliefs for profits derived from exports.

4. Implement most, if not all, of Colm McCarthy’s proposals over four years: ie, eliminate quangos, non frontline staff such as consultants and administrators.

This could keep the Croke Park deal intact.

5. Prepare for debt restructuring.

 

Bill Cullen, Glencullen Group and TV show The Apprentice measures for Budget 2011:

1. Make expenditure cuts of €1 billion: prioritise projects with Irish construction companies and delay the least important.

2. Cut €3 billion from current expenditure, again by prioritising. Reduce health services by €1 billion.

3. Reduce social service by €1 billion.Take a third of a billion off public service costs viaw age cuts and staff reductions, including cancelling all quangos.

4. Raise €1 billion through tax increases: a 2 per cent increase on high earners, a minimum of 10 per cent on all pay over €30k per annum.

5.Plus a water charge on all households and double the holiday home charge.

6. Offer a two-year moratorium on all stamp duty and commercial rates.

7.Impose a six month moratorium on PRSI for all new job hires.

 

Oliver Lonergan, managing director, Dornan Engineering, Cork

I would divide a €5 billion budget like this:

capital expenditure cuts, €1 billion;

current expenditure cuts, €3 billion;

extra taxation ,€1 billion.

Five things I would do:

1. Work in the pharmaceutical sector has diminished over the last ten years, with investment lost to other countries in Europe. This issue should be addressed.

2. The Registered Employment Agreement (REA) that governs the pay structure and levels in the construction industry needs to be reviewed immediately.

3. The government should take €2 billion from the Pension Reserve Fund and reinvest it in infrastructure.

Taxes generated from this expenditure (Vat, PAYE, PRSI, corporation tax) should be ring fenced (around €1 billion) and reinvested in the Pension Reserve Fund.

4. Implement greater cooperation between government departments and provide severe penalties for offenders caught engaging in the black economy.

5. Dole recipients should have to do some kind of work for state organisations and local authorities in return for their dole payments.

 

Paul Walsh, chief executive, CUNA Mutual, Europe

I would break down a €5 billion budget like this:

capital expenditure cuts, €3.5 billion;

current expenditure cuts: €750 million;

tax increases and/or new taxes, €750million.

Suggested measures for Budget 2011:

1. Improve funding for research and development, and give capital grants for export-led businesses in Ireland.

2. Refocus our investment in the smart people (currently being channelled through FÁS and the universities) into more employer-based talent development programmes.

3. Support the creation of intellectual property through our smart economy with new products, new technology and talent development.

4. In cutting public sector costs, we need to retain experience and expertise by avoiding voluntary redundancy - instead we should be eliminating poor performers.

5. Our political parties need to invest as much time in the next strategic plan for this country as they have spent dwelling on the current financial crisis.

 

Mick McBennett, chairman, Oriel Windfarm Project

These would be my suggestions for the coming budget:

capital expenditure cuts, €1.25 billion;

current expenditure cuts, €3 billion;

tax increases, €750 million.

Through the budget, the government must:

1. Analyse all capital investments on a cost/benefit basis and prioritise projects which will create direct and indirect employment.

2. Recognise the economic opportunities which lie in addressing climate change. Ireland is so far ignoring the potential that is on our doorstep.

3. Planning processes for infrastructure are not working. This issue must be addressed.

4. The Croke Park agreement must go. Public sector reform is necessary and long overdue, and should not be subject to ransom.

5. End the practice of government through process.

The practice of commissioning a report, appointing consultants or setting up a committee in order to defer making a decision must end.

 

Kieran McSweeney, Discovery Partnership, Limerick

€5 billion savings could be made in the budget based on the following breakdown:

capital expenditure cuts, €1.25 billion;

current expenditure cuts, €3 billion;

tax increases, €750 million.

Suggested measures for the budget would include:

1. Bring public service staff numbers back to what they were in 2002 - in other words, reduce them by 20 per cent.

Also reduce public service pay by 10 per cent: include cuts in pensions for all retired TDs and senior civil/public servants

2. Reduce local authority rates by a minimum of 25 per cent, as well as electricity costs.

3. Drop the Dublin Metro North project.

4. Throw out the Croke Park deal. Eliminate all quangos.

5. Introduce a 5 per cent corporation tax on labour-intensive manufacturing for the next four years.

 

Cormac Tobin, managing director Unicare and Doc Morris Pharmacies

My €5 billion budget would require the following:

capital expenditure cuts, €1 billion;

current expenditure cuts, €3 billion;

tax increases, €1 billion.

Suggested measures for the coming budget include:

1. Follow the British example of taking 500,000 jobs out of the public sector .

2. Bring social welfare payments down to reflect what has happened to everyone else who is working - most people are now paralysed in terms of their spending.

3. Bring in an outside company or agency to look at government procurement.

4. Put everything on Nama’s books into a big brochure.

International companies could be offered empty office space free of charge for five years, and free PRSI.

5. In future ,move the budget to August or September and make sure there are no leaks.

This drip feed of bad news is causing a collapse in spending and sentiment, and making people frightened.

 

Paul Gill, proprietor, Claregalway Hotel

1. €3 billion in tax increases and €2 billion, to incorporate a clampdown on social welfare fraud and re-tendering projects.

My budget measures would be:

1. Remove the €10 airport tax for two years and support Ryanair, Aer Lingus and other airlines in delivering on their promise on inbound tourist passenger numbers.

2. Sell Shannon Airport or hand it over to local tourism bodies so they can market the destination separately to Dublin Airport.

3. . Call an election, asking each party to publish in advance its proposed budget.

4. Introduce a corporate and industrial equipment scrappage and product renewal scheme.

5. Reduce Vat on alcoholic drinks to 13.5 per cent and ban below-cost selling of alcohol in supermarkets.

6. Abolish the JLC guaranteed wage rates.

7. Reduce the council rate on business

8. Streamline government agencies.

 

Europe is anxious about Ireland's financial situation and there are constant calls for us to accept the EFSF fund. Irish banks are tied to the Irish state and the banks are borrowing heavily from the European Central Bank.It is greatly feared the the collapse of one Euro zone economy will impact greatly on all the other euro currency countries. The Irish government are under pressure to pass this budget in the Dail and international eyes are monitoring our finances daily. A Day does not pass when financial rumours about Ireland are rife some say we are out of money , we are not. Others say we have applied for EFSF funds, we have not. Brian Devine Of the EFSF says: If there is not a dramatic change in sentiment we actually believe that it would be a positive for both the Irish economy and the bond market were Ireland to ask for the The European Financial Stability Facility. The European Financial Stability Facility (EFSF) is a agreed by the 27 member states of the European Union on 9 May 2010, aiming at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty.It would take away the uncertainty surrounding the fiscal situation and the Irish economy.Plans would be laid down in black and white and worries about interest costs would subside as they would be largely known. People and corporations like to make decisions in a stable world. Crucially it would enable the country to focus on correcting the deficit, regaining competitiveness and promoting its virtues: highly educated, English speaking, productive work force with world class companies and a pro-business environment.At the end of the three year period we believe that Ireland would be in a position to re-enter the funding markets as it would have demonstrated that it was able to enact the required fiscal measures and leave the economy with a decent primary surplus at the end of the process.

 

Bond yields are still unbearably high and contagion is in the air, threatening their capacity to retain a semblance of control over events.However, the Irish government insist we do not need the EFSF bailout instead we will proceed as planned with the €15 billion four-year plan. The Budget is to be announced on 7th December 2010.Mr.Lenihan is confident after meeting with the other party leaders that it will be passed. The European Commission will not sign off on the Irish four-year plan and the 2011 Budget until after they are passed said Commissioner Olli Rehn confirmed.He said he looked forward to seeing a greater level of detail which the Government is due to provide shortly.Mr Rehn told the IIEA meeting that the general economic crisis risked a financial and economic meltdown of the the euro area as a whole.On Ireland he commented that budget deficits had not been the problem rather, private debt has become public debt. The financial sector has misallocated resources in the economy and then stopped working. It needs reform," he said.

 

A new report published by the Oireachtas Joint Committee on Finance and Public Spending recommends that from Budget 2011, a new budgetary process must be introduced.It suggests major changes in how Ireland manages its fiscal, budgetary and taxation policy.Among the recommendations are a new reserve fund and clauses on downward flexibility in wages for periods of deflation. It noted the need for precise, accurate and timely communication between the Central Bank, the Financial Regulator and the Department of Finance.Michael Ahern said the report will not solve the economic crisis but what it does is chart a path so that we run fiscal policy in a new way when Ireland recovers and is on the path to sustainability.

 

The End