Background to this document:
With unemployment standing at 250,000 and expected to hit 300,000 by the end of 2009 and the general government deficit anticipated to come in at around 5.5% for 2008 the days of the Celtic Tiger are now a distant memory. Retail sales are falling and the construction industry is in freefall. Ireland has been hit by a double whammy. The Irish property boom had already begun to run out of steam in 2007. The international banking crisis has further exacerbated the situation. In addition excessively expansionary budgets by the FF/PD government in 2006 and 2007 further poured petrol on the flames of economic growth and ignited inflation. Rising oil gas and electricity prices have further damaged economic growth. The folly of over reliance on the property market is plain for all to see. . Now a massive retrenchment is called for. Such is the seriousness of the crisis that the government cannot boost the economy. Indeed there is a grave danger that too deflationary a budget may plunge the country into a very deep recession. It may severely damage consumer confidence already at a low ebb.
The Fine Gael Party has come up with excellent proposals to tackle the problem. These were unveiled at a news conference today. They appear in a document titled Recovery through Reform - A Budget Perspective”. It is important to remember that FG as an opposition party lacks the backing of the Civil Service for research purposes. The party has got to use its own resources. Party leader Enda Kenny- accompanied by Richard Bruton and Kieran O’Donnell has asked the paymaster general to cut his wages by 5% as he unveiled Budget proposals that include calls for a 12-month pay freeze for public sector workers earning in excess of €50,000. This cut by Kenny may be symbolic but it is leadership of the highest order. Fine Gael has proposed €1.8 billion in spending savings from the 2008 actual budget across all the Departments, excluding Social Welfare. The party proposals involve 5,000 voluntary redundancies in the civil service, a proposed fee level for banks using the Government guarantee of €1.5 billon and the introduction of an earnings cap of €125,000 for pension relief. It is opposed to any cuts in the Capital programme. Part of the proposals involves no increase in taxes. It has suggested that 30 or more quangos should be wound up.It also calls for an end to decentralization as presently proposed and a carbon windfall levy on power generators (€300m p.a.)
"Beyond these types of measures the Government can still act to help new business and encourage new industries. To do that we shouldn't see new taxes, stealth or direct, imposed on enterprise and commence the slashing of red tape for business that Fine Gael proposed 2 years ago. We should incentivise R&D and upskilling and re-training programmes so that as a country we can move up the value chain and regain our competitive export edge. This approach is set out in more detail in our document and offers a realistic road map for the Government to take. It is not an easy option and it is much more difficult than it might have been if action in this area had been taken years ago. These proposals, as set out are tough but they are, we believe, fair as well.
Commenting on the proposals today, Kieran O'Donnell said;
"It is vitally important that in the budget next week Fianna Fáil do not make the weak and the vulnerable the scapegoats for their failure to manage our finances. That is why I believe excluding Social Welfare payments from the savings programme and exempting those on wages below €50k from the pay and increments freeze are vital elements of the Fine Gael approach to this budget. In addition there is scope still to do positive things for those in greatest need. They include doubling the support for debt distressed home owners, increasing by 50% the winter fuel allowance and extending the back to education allowance for those earning less than €12p.h. These elements of fairness in next week's budget will send a signal that the Government is serious about social justice, but more importantly, serious about changing the way it governs."
Incidentally Enda Kennys two colleagues at the news conference, Richard Bruton and Kieran O'Donnell, said they would also accept a pay cut of 5%.
See full text of FG proposals here .