Fianna Fail Pre Budget Submission Final Draft

8/11/2019 Fianna Fail Pre Budget Submission Final Draft

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OCTOBER 2014

BUDGET

2015

C L

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A MORE CARING SOCIETY


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The principles underpinning our budget proposals are:

We are committed to reaching a deficit of less than 3% by 2015 and movingtowards a balanced budget. We propose a budgetary adjustment of 220mfor 2015.

The priority areas at this time for any available resources should beeducation, 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 happenafter the recovery is further cemented and only as resources allow.

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

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

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

Irelands enterprise policies need a radical shake up. Domestic

entrepreneurs should be incentivised and given the same priority as isafforded 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 directinvestment.

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


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Na bun aidhmeanna at taoibh thiar de na molta chinasnise seo.

Timid socraithe ar easanamh 3% a shroichint i 2015 ag dul i dtreo buisadcomhardaithe .

Na achmainn at ar fil anois, ba chir iad a chaitheamh ar Oideachas,Slinte, Cnamh Leana, Seirbhs do Dhaoine Aosta, agus TithochtSoisalta. Sa bhealach seo, tgfaimid comhphobail cothrom chinelta.

Ni bheah s ceart fillead ar pholaitoacht na gceant. Tiocfaidh sli cin taris don ghnth beith bunaithe nos m, agus mar at achmainn ar fil.

Is fu aird speisalta a dhir ar cumas ochaochta i gComhtheacsathchiru cnach agus till.

Timid i lr garhchim tithochta agus t polasaithe radacilacha agteastil.

T easnamh sntasach le feiscint san infrastructr fiscul agus soisialta arfud n tire. Cathfear dileal leis na fadhbanna seo chun deacrachta asheachaint sa todhcha.

T g prinneach ag teastal chun r polasaithe gn a rabhlidi. Cathfear

an cnamh channa a thabhairt d'r lucht fionntraochta fin is at ar filag na Comhluchta a thagann isteach anseo.

N amhin go gcaithfimid r neamhsplechas a chaomhn maider le crsacinach, ach caithfimid feabhas a chur ar c chomh tarraingteach is atmuid do comhluchta idirnaisinta at saor agus solbhtha le dul aon ait.

Is feidir a ln airgid a shbhil trd a bheith cronna nuair atimid agceannach don stit agus tr seirbhis poibl a roinnt suas go stuama.


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There are real choices to be made in this budget. The decisions taken will shape thenature of Irish society for many years ahead. While the budget presented by thegovernment may be fiscally neutral, it is unlikely to be socially balanced. We are

presenting an alternative which emphasises the urgent need to improve services forour citizens. We believe the principle of ability to pay must be enshrined in taxes andcharges. The hallmark of this government to date has been a series of regressivebudgets.

It is important to remember that the g overnment are taking 300m from families in2015 through the introduction of water charges and there will be further cuts to familyincomes from the phasing out of mortgage interest relief, restrictions on tax relief formedical insurance and changes to the one parent family payment. Fine Gael andLabour 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 efficiencysavings in the public sector of a further 290m and immediate action to secure areduction in the interest bill on Irelands IMF loans yielding a saving of 300m.Based on data currently available, we believe our overall adjustment of 220m wouldresult in the deficit falling comfortably below 3%.

The immediate need to improve public services must take priority over tax cuts. Wehave identified the pressure on working families, medical costs and housing as thepriority 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 taxcredits, addressing anomalies in respect of low paid workers and the self-employedas resources allow.

A reduction of 1 point in the pupil teacher ratio at primary level and a reversal ofthe 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 unemployedpersons 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 thosewho 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 thefuel allowance and measures to help low income working families including thoseon Family Income Supplement.

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

We are setting out a path to reduce the tax burden and make the taxation systemmore equitable. This would occur over three years. In the first year, the onlyadjustment we propose is to increase mortgage interest relief for those who tookout a qualifying lo an prior to 2009 from 30% to 40%. This would cost 49m andbe focused on assisting those who are continuing to struggle with high mortgagepayments. We are setting out our six priority areas for tax reform.

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

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

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

Tackle the skills crisis. The number of people undertaking apprenticeships has

fallen dramatically. This can only be met through a major expansion ofapprenticeship places.

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

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

Incentivise entrepreneurs to set up new businesses by providing tapered relieffrom 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 capitalinvestments to SMEs.

Establish a pilot scheme on Crowd Financing similar to that supported by the UKgovernment in order to give a new source of finance to smaller start-upcompanies

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

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

As a matter of urgency require energy firms to implement measures to reduceenergy 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 inemployee headcount.

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

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

There is over 2.5bn in cash sitting in the Ireland St rategic Investment Fund. We

are proposing an investment of 1bn in 2015 to build 6,500 social housing unitswhich will be available to local authorities and voluntary housing partnerships ona long term lease arrangement.

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

Provide increased resources for the Housing Adaptation Grant for people with adisability, 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.

Take advantage of record low interest rates to increase capital expenditure in away 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 andservices provided by domestic Irish contractors.


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

An improvement in GDP numbers has not translated into a commensurateimprovement in the number of people at work. While the government regularly talkabout the creation of 1,000 additional jobs a week, the reality is that, according to theQuarterly National Household Survey, there were just 5,500 more people at work inthe first half of the year. This is well below the rate at which jobs need to be createdto make a serious dent in unemployment and gives rise to concern that the recoveryis not translating into real jobs.

It is less than 12 months since the Troika left and a sense of complacency isapparent in terms of the g overnments management of the economy. It appears to

have all but given up on a deal on legacy banking debt. No progress has been madeon dealing with the cost to banks of loss making tracker mortgages. The MediumTerm Economic Statement lacked strict deadlines for the achieving of targets.

The government have proceeded with the sale of Bord Gis, massively undervaluingit while the projects the privatisation programme is supposed to fund, such as thenew National Children s Hospital, are stalled. The National Pension Reserve Fund issitting 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 theproperties it identified for social housing have been turned down by local authorities.The agency appears content to focus solely on disposing of its portfolio withoutgiving full consideration to the long term implications of decisions on the widereconomy.

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 beenforthcoming to date. The policy response has been piecemeal and more focused onoptics than real delivery. Ireland appears to remain tied to a Europe-wide austeritypolicy which is leaving the Eurozone lagging behind the rest of the world in terms ofeconomic recovery. While the ECB has taken a more expansionary monetarystance, a corresponding fiscal response has not been advanced. There is a strongcase to be made for a Europe-wide stimulus plan which would stave off deflation andtackle unemployment which is still close to record levels. Ireland is currentlyvulnerable 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 Budget2015. It rightly points out that the level of national debt at over 200bn is now fivetimes higher than when the crisis started in 2008. This makes Ireland vulnerable to

any renewed economic difficulties and the government cannot throw caution to thewind as it seeks re-election.

The tone of the g overnments response to the recent assessment report of IFAC wasdismissive with suggestions that it would be for future governments to follow theadvice of IFAC. While the government is within its rights to disagree with the advice itreceives, it should issue a detailed response setting out why it is taking a differentcourse 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 arestatement of the GDP figure. This was a purely statistical change rather than anyspecific improvement in the underlying state of the economy. It reduced the deficit by1.6% and has mad e the Ministers task considerably easier .

We disagree with the Fiscal Council in its recommendation that a 2bn adjustmentbe made in Budget 2015 though we fully acknowledge that the points they make arevalid and worthy of careful evaluation. The government should have allowed the Dilto debate in full the recommendations of the Fiscal Council. It is our belief that, aftersix 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 tochoke off the recovery. We believe that a budget adjustment of just o ver 200m willcomfortably achieve a deficit below 3%.

As well as the general buoyancy in tax revenue indicated in the recent Exchequerreturns, there are also other potential positives which could further improve thefinancial position of the state in the year ahead. The most significant among these isthe potential to reduce the interest bill on the national debt by an early repayment ofthe IMF loans under the EU / IMF programme. The IMF calculate that, based on anassumption 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 2.1bnover the next ten years. It is our contention that, at a minimum, 3 00m of saving canbe 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 improvingpublic services and reversing some of the most damaging cuts while at the sametime outlining a pathway to reform taxation over the next three years. Our core beliefis that spending on public services such as education, health, social protection andchildcare is progressive in nature as it benefits everyone in society but particularlythose 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 recentyears. Cuts of some 3bn have been imposed and resources have been stre tched tothe limit. Health service staff deserve enormous credit for working under these

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

Fianna Fil believes that any available resources should be prioritised for services inmental 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.

Suicide remains the nations silent crisis and despite the best efforts of the manyorganisations, volunteers and professionals working in the area of suicide preventionthe statistics sadly underline the scale of this problem. In Ireland, 554 people diedfrom suicide in 2011. The scale of loss of life through suicide is the same as losingthe 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 Fil is proposing the establishment of a National Mental Health Authority.This will be charged with leading a national programme to promote positive attitudesto mental health and to reducing the incidence of self-harm and suicide. This policyneeds a permanent increase in funding for mental health services. The initial cost ofestablishing the authority would be approximately 5m with an additional 5 millionfunding in the first year, increasing in subsequent years.

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

The plight of people with chronic medical conditions who have either had theirmedical card removed or have been denied one has caused considerable disquietover the last twelve months. This is particularly the case with terminally ill childrenand people who are battling cancer. Ireland needs to have a responsive healthservice 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 discretionarymedical 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 ofa medical card is 1,130. We need to rebuild trust in the system by making adequateresources available for a minimum of 20,000 additional discretionary medical cards.

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

There is a chronic shortage of resources at the moment across the full range ofthese services and the recruitment of an additional 500 therapy staff shouldcommence in 2015.These therapists would be recruited in the health and educationsectors. This would prevent children having to wait more than two years for a muchneeded appointment.

The Programme for Government commitment on the expansion of BreastCheck to65-69 year old women must be honoured in 2015. Lives are saved by extending theage category and it cannot be delayed any further.

In the wake of an alarming increase in waiting times in 2014, we propose a waitinglist initiative to reduce the current waiting times along the lines of the originalNational Treatment Purchase Fund. Where it is not possible to treat patients within a

reasonable period, the HSE will make arrangements under the treatment purchasefund 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 wouldprovide 20 million for this in 2015.

This Fine Gael and Labour government made changes to the Drug Payment

Scheme that resulted in extra costs for people on numerous medications. Wepropose the reduction of the threshold for the drug payment scheme fro m 144 amonth to 120 a month. This will particularly benefit families who fall outside theincome guidelines for a medical card but may be incurring significant medicalexpenses on a monthly basis. Approximately 200,000 per month benefit from thescheme 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 theworld for childcare, with the average family with two children spending 40 per cent oftheir 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 whenchildren are under school age and to give children from lower socio-economicbackgrounds supports to succeed on an equal level. The basic principle is a taperedseries of subsidies to help with childcare for low income families: 67% subsidy forlong term unemployed people returning to work, 50% for people on Family IncomeSupplement and 40% for those just above the Family Income Supplement limits.Costings are based on the Indecon report on support for childcare for workingfamilies and implication for employment, November 2013 .

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

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 achildcare allowance currently available to FIS participants using the CCS schemeamounting to up to 67% of eligible expenditure. However, CCS provision is notavailable in all areas and it also may not meet particular family requirements. Toincentivise individuals to remain in work, a subsidy of 50% of the cost of childcarewould be provided subject to specified limits and eligibility criteria. This would alsostrengthen the sustainability of private childcare services and eliminate thesegregation of children on grounds of family background.

The childcare tax incentive would provide a subsidy of up to 40% of childcare costsfor families in employment and are earning at or below the industrial wage but arenot eligible for FIS. Families would only be able to avail the tax break subject to amaximum eligible spend of 5,320 per child by using registered childcare .

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 specialneeds. 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 ineducation pays a huge dividend in the long run. Spending at primary level isparticularly effective at challenging disadvantage in society and ensuring equality of

opportunity for all.Fianna Fil has a proud tradition of emphasising education spending and we want todevelop a new phase of investment in our schools and universities.

The issue of overcrowded classes at primary level must be addressed. As a firststep, Fianna Fil proposes a reduction in the pupil-teacher ratio at primary level from28:1 to 27:1 with effect from 2015/16. The full year cost of this would be 15m.

In addition we believe t he governments cuts to the school staffing ratio in smaller

schools must be reversed. This would cost an additional 20m in a full year .

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

The Education Act 1998 provided a legal obligation on schools to provideappropriate guidance. Fianna Fil believes guidance counsellors are the onlypersons in a school setting professionally qualified to provide guidance counsellingto students. This was underscored by a 2009 report from the former Chief Inspectorof the Department of Education which outlined that best practice involved theappointment of fully qualified guidance counsellors. It is our belief provision must bemade for this vital resource. This would cost 30 million in a full year.

Fianna Fil proposes that the grant, which provides funding for maintenance andupgrade works be placed on a permanent footing. This grant is essential for theupkeep and maintenance of schools right across the country. Many schools havebeen forced to run up huge debts over the past two years to pay for essential workslike roof repairs and toilet upgrades after the grant was rescinded. There may havebeen a one off rebate this year, but now these schools are back to square one andwill 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 theHousehold Benefits Package. The cumulative impact from four rounds of cuts is toundermine 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 solidarityand inter-generational support.

The most intractable problem in relation to unemployment currently is the number ofpeople out of work for over a year with 180,000 in this category. We want to helpease the transition for people who are long term unemployed and who face losing anumber of benefits on returning to work. The estimated full year cost of allowingpersons in receipt of jobseekers allowance for more than a year to retain increasesin respect of qualified children for a period of one year after they return to

employment is 22m .

The living allowance is a critical support for older people who face the burdenassociated with not having an immediate family member with whom to share the costof running a household. It is currently an addi tional payment of 7.70 per week madeto people aged 66 years or over who are in receipt of certain social welfarepayments, including State pensions , and who are living alone. A 5 increase in theLiving Alone Allowance would cost 48 m in 2015.

The introduction of water charges is going to impose a very significant burden on allhouseholds. We have committed to an examination of the structure of water chargesto introduce a greater degree of fairness and recognition of ability to pay. As the finaltariff structure for Irish Water was only announced the day before charges wereintroduced, 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 thehousehold benefits package. As an interim measure we propose extending this tothe 211,000 recipients of the fuel allowance payment at a cost of 21.1m . Our reviewof the structure of water charges will focus on how to help low income workingfamilies including those in receipt of Family Income Supplement. We will alsoaddress the high cost that is likely to be borne by families with dependent childrenaged 18 or more still living at home. We are providing a total of 60 m to moderatethe impact of water charges.

We pr opose a 2 a week increase in the fuel allowance from 20 to 22 for 26weeks 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 anormal housing market. Transactions are at historically low levels and there are anumber 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 onthe waiting list. This issue is made worse as there is massive pressure on the privaterental sector. Families are under enormous strain and this can be divisive for society.Fianna Fil 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-heatedannouncements. The failure to accelerate the transfer of NAMA units has alsoexacerbated 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 theprivate rented sector. One of our greatest achievements historically as a country wasthe large scale provisions of housing to meet the needs of the community. This wasdone at times of even greater economic constraint than we face today.

Fianna Fil is proposing that 1bn of the current 2.5bn in cash that the IrelandStrategic Investment Fund is sitting on be immediately allocated for the constructionof social housing. Data provided in the Dil indicates that the average cost ofconstruc tion of social housing units is 152,000. T his indicates that upwards of 6,500units could be made available under this proposal.

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

From the States overall point of view , it would be maintaining a valuable asset ratherthan simply paying rent to private landlords while at the same time getting to gripswith providing much needed homes to families across the country.

In addition to the provision of additional social housing units through the StrategicInvestment Fund, there is a need for increased provision through the local authoritiesthemselves. The recent comptroller and auditor general report shows the massivereduction in social housing spending under this government.

We are proposing an additional 100m be allocated for social housing through thelocal 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 bedeployed in new house construction and renovation of vacant properties for re-letting.

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

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

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

There is another group of people in addition to those who have actually fallen behindin their mortgage payments who require help. It is often couples with young childrenwho 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 familycircumstances mean that tens of thousands of people are living in homes that nolonger meet their needs. Negative equity is preventing many of these people frombeing able to sell their home.

In such circumstances the only option may be to rent their home and in turn rent anew property for themselves. Anyone that takes this course of action faces an arrayof charges including income tax, universal social charge, fees to the PrivateResidential Tenancies Board and PRSI on rental income. They also face losing theirmortgage 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 tosubsidise a mortgage on their home as well as facing significant income tax bills. Afamily with a 300,000 mortgage on an apartment earning rent of 1,200 a monthcould 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 whobought their house between 2000 and 2009, who have now moved out and arethemselves 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 ontheir rental income. It would only be available in respect of a property that was


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

This tax was originally designed to curb speculative land hoarding and its

subsequent impact on property prices. However, the 80% rate acts as a disincentiveto putting potential development land on the market as any gain may be taken by thestate. A reduction of the rate to 40% would continue to act as a curb on speculationand ensure that added value is captured from re-zoning without unduly restricting thesupply of land on the market. No windfall tax revenues have been taken by the stateto date. Therefore it will have no immediate impact on exchequer revenues.

There is an acute shortage of family homes particularly in the Dublin area. Manyolder 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 topersons 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.


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

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

There is a need to simplify the tax system. Employees currently face three separatedeductions from their pay: income tax, PRSI and USC. Each has a different entrypoint as which you start paying the tax, 10,000 for USC, 16,500 for income taxand 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 morewill pay an effective tax of 9.25% as all their income becomes subject to PRSI. Thisis a disincentive to employers to increase wages, or for employees to accept extrahours of work or a promotion.

Over 120,000 employees earn between 17,000 and 20,000 a year and arepotentially affected by this problem. The way to tackle this situation is to allow apartial PRSI refund for people earning just above the current level at which employeePRSI becomes payable to offset the impact of this anomaly. This will remove the

current anti-work provision which this government introduced.

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

Political parties who suggest that they can simply abolish them without any negativeconsequences 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 watercharges 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 watercharges 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 balance 7%

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

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 providedthe increase in the credit is not more than their current income tax bill. In simpleterms a 100 increase in tax credits has the same monetary value on an annualbasis to someone on 20,000 as it does to someone on 200,000. We will prioritiseincreasing tax credits over and above changes to the rates and bands.

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 thepersonal tax credit, they cannot claim the PAYE allowance, both of which arecurrently 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 taxand PRSI as an employee on the same income. There is a strong case foraddressing the unfair treatment of self-employed particularly those at the lower levelof the income scale. This should be done by means of an earned income tax credit

as suggested by the Commission on Taxation.

The level at which an individual has to pay Capital Acquisitions Tax on a gift orinheritance 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 valuesgenerally. The government also increased the CGT rate to 33%.

There is an urgent need to review the current thresholds so that they moreaccurately 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 propertythey 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 year wepropose 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 assistingthose who are continuing to struggle with high mortgage payments.

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

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 thisstrikes a balance between the need to encourage employees to make provision fortheir future income needs without unduly depriving the State of income tax revenue.

A recent survey indicated that 87% of the population believe that sugar sweeteneddrinks contribute to obesity among children and young people. Sugar sweeteneddrinks have both a high calorie content and very low, if any, nutritional value. A taxon these products can help reduce consumption over time and assist in promotingpublic health. We endorse the suggestion of the Irish Heart Foundation to have a taxequivalent to 20% on sugar sweetened drinks yielding approximately 60m.

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

It is inexplicable that the government have not yet extended betting duty to onlinebets. We would do this immedi ately and increase the rate to 1.5% to raise 40m .

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

We are proposing an all party committee to examine the issue of taxation of alcoholin particular the question of very cheap alcohol sales in off licences.

The net yield from these measures is a cumulative 3 61m.


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The 374,800 people on the live register will take little comfort from the g overnmentsclaim 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 areupwards of 85,000 people on activation schemes. In addition, the figures areflattered by emigration and the expiration of benefits resulting in some people notbeing entitled to means tested assistance.

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

Year Registrations Apprenticeship population

2008 3,765 26,1702009 1,535 21,4072010 1,204 14,8012011 1,307 13,0012012 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 madethe 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 studentcontribution of between 833 and 1,433. Traditionally, the contribution was paid tothe colleges on their behalf by the Exchequer, but this was chang ed in last yearsbudget. Students are now liable for the charge twice during their four-yearapprenticeships.

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 shouldbe based on regular reviews of industry needs. For example anapprenticeship scheme in the bar and catering trade could be of greatassistance to both prospective employees and the hospitality sector. This willprevent the casualisation of trades.

The government must ensure that the quality of apprenticeships is such thatthey do not lag behind academic qualifications in terms of how they areperceived 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 apprenticeshipsand seeing it as an integral part of their industrial policy.

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

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

Tapered capital gains tax relief for entrepreneurs. This would involve a lowerrate 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. Thisshould be linked to growth in employee headcount.

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

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

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

Address the lack of credit which is hampering many businesses fromexpanding, through the introduction of tax relief for individuals making loancapital investments to SMEs. In addition we propose to establish a pilotscheme 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.

The Action Plan for Jobs claimed the ambition to make access to finance a centralfeature of the g overnments recovery and growth plans for the economy in generaland for the SME sector in particular. However, overall lending to SMEs continues todecline. In the year to the September 2014, the amount of non-property related

lending to SMEs declined by 4.6%.


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The recently established Strategic Banking Corporation of Ireland (SBCI) will nothave a banking licence. Instead, it will provide credit to existing banks (and potentialnew entrants) who will on lend to SMEs. We know from the manner in which bankshave hoarded capital over the last five years, it is likely that they will continue to takea 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 theirbusiness. Cheap funding from the SBCI may help the banks profitability withoutimproving credit flow in the economy.

The new entity falls well short of a full service, state backed bank along the lines ofthe Industrial Credit Corporation (ICC) which operated successfully in the economyfor many years. This was a commitment in the Programme for Government but hasnot been delivered. A fully fledged Enterprise Bank should be part of a permanentsolution to the lending gap which exists in Irish banking and would lend to anycompany, regardless of sector or size, provided it can demonstrate its

creditworthiness

During the boom years, a significant number of small and medium sized Irishcompanies borrowed heavily for property, premises and machinery. In many casesthe property investment was unrelated to the activities of the SME itself. Statisticsfrom the Central Bank show that Irish SMEs have over 30 billion in property -relateddebt.

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 debtrestructuring are needed not just for the two pillar banks but across the sector. Whileit is critical that SMEs have the necessary funds for working capital and plant andequipment needed to run their core business, this cannot be separated from theneed to fix the problem of legacy debt and urgent action is needed on this issue.

Many SMEs are unable to afford the accountancy fees needed to support makingapplications for new credit to their bank or an equity source or to restructure existingcredit 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 toprofit.

Many potential entrepreneurs have a good idea but lack the expertise to bring it tofruition. Within the existing budget for job supports, the government should providegrowth vouchers to give entrepreneurs a helping hand at the start up and earlygrowth 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 LocalEnterprise Offices should encourage entrepreneurs to share ideas, support each


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

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

It is essential for firms to be able to transport their goods to customers at areasonable cost. The logistics industry has become considerably more efficient inrecent years with deliveries and services supplied in shorter timescales and at lowercosts. As an island, the industry has a vital role to play in the export of Irish goodsand services to the European Union and other major markets. The state shoulddevelop a co-ordinated national logistics strategy to help firms get goods tocustomers as efficiently as possible. This would cover infrastructure, taxationpolicies, environmental regulation and the overall regulatory regime in which firms

operate. Germany in particular has taken a proactive approach in supporting logisticsfirms and in so doing helping thousands of other businesses in the process.

The incentive currently works by offering relief to individuals who have recently paidCapital Gains Tax (CGT) and subsequently invest in a new business, before sellingthat 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 theoriginal disposal or by half of the CGT due on the new sale. This is quite restrictiveand 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 ofwhether they invested in a new business, up to a limit of 5m . This would create aclear distinction between passive investment and entrepreneurial activity.


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Fianna Fil would double the support available to the Trading Online VoucherScheme from 5m to 10m with a specific focus on encouraging independent retailersto avail of the opportunities presented by the online market. This would be fundedthrough a reallocation of resources within the current enterprise budget.

The self-employed currently pay Class S PRSI at a rate of 4%. This entitles them toa significantly reduced range of benefits when compared to PAYE workers. To beeligible for Jobseekers Assistance, a self-employed person must undergo a meanstest. 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 tonothing because they have no automatic entitlement to Jobseekers Benefit. This hascaused unnecessary confusion among the self-employed.

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

To facilitate this, we propose to allow the self-employed to opt into Class A. Inaddition 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-employedas they do for the unemployed employee. For example, the level of average weeklyearnings would impact on the level of rate of Jobseekers Benefit.


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

The abolition of milk quotas in 2015 is an opportunity to greatly expand the outputfrom this sector. Currently farmers can claim a capital allowance on the constructionof 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 potentiallyyield economic returns into the future.

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

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 lowprofit margins requires additional support to keep farmers in the industry. DoublingRural 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 ofcertain social protection payments.

The beef crisis is threatening the financial viability of thousands of beef farmers. Thesuckler 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 bolsterbeef farmers income in the short term while an enhanced framework is put in placeto protect a sustainable beef industry. This special payment will be drawn from theRural Development Program under 50/50 co-financing with an additional 2015 top upof 7m .

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

The total cost of these measures is 47m.


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Irelands corporation tax policies are currently under the international spotlight. As acountry 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 withOECD guidelines on taxation.

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

The headline corporation tax rate is only one consideration in assessing acountrys 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 bymultinationals 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 allcompanies regardless of size. Other EU countries not subject to as close scrutiny aswe face do not have the same level of transparency. It will come as no surprise thatthere are many in the European Commission who would like to puncture a hole inIreland's corporation tax offering.

In framing Budget 2015, the government should not engage in any precipitative act

in unilaterally changing Irelands corporation tax laws in the face of pressure fromcountries whose motivation is their own national advantage.

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

We cannot merely take a defensive role in relation to corporation tax. Theinternational environment in which we compete is evolving rapidly. While we have astrong track record in offering a competitive tax regime to potential investors, thelevel 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 isconsiderably more favourable than ours.

It is important to acknowledge that in recent years the attractiveness of Irelandsoffering has declined relative to that of the UK and other competitor countries. Anumber 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%


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

While these measures were introduced in the context of an exceptionally difficultbudgetary environment, they must also be viewed in the context of the actions beingundertaken by our nearest neighbour who have taken a very deliberate policydecision 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% in2013 with a stated intention to reduce it to 20% by 2015.

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

The introduction of a patent box, which attributes a 10 per cent corporation taxrate 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.

The benefit of a SARP type programme is clear. Providing an attractive regime formobile talent clearly improves the attractiveness of a location when a company isdeciding where to invest. Bringing in project champions who have familiarity withkey 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 andhas had negligible take up. The criteria on which a scheme like this should be judgedinclude its ability to boost employment without an unacceptable loss of revenue tothe 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 withoutthe current earnings cap. Consideration should also be given to removing therestriction on the individual carrying out some of their employment duties abroad andthe 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 assigneecannot have been resident in Ireland in the 5 years prior to their arrival limits theflexibility of the scheme.

Foreign Earnings Deduction relief is available to individuals where foreign work daysexceed 60 days in a 12 month period. The concept makes sense as we wantcompanies based here to be able to win new export markets. However the full yearestimated 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


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

We have already noted the importance of treating Irish entrepreneurs who establish

and successfully grow a business differently from passive investors. Specifically, wewant to see a lower rate of capital gains tax apply in such situations. This can alsohelp attract mobile foreign entrepreneurs with good business ideas to set up here. Afurther enhancement could be in the form of a lower rate of tax applying to thedividends paid to entrepreneurs from qualifying companies. This would reflect theinherently greater risk associated with entrepreneurial activities.

We have an excellent base from which to make further progress. Two thirds ofIrelands R&D is in the private sector, creating new product and service inn ovations.

Currently the R&D credit is a function of increases in expenditure using 2003 as thebase year of comparison. The incremental approach needs to be reviewed in light ofthe 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, subjectto EU competition approval.

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

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

Employee share incentive schemes encourage employee loyalty and participationthrough long-term equity incentive awards. The current tax relief for employees whoacquire shares in their company has a number of drawbacks. As an initial step towidening the employee share scheme, the definition of shares should be widened

to include restricted stock units and options over shares.


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Investment in our national infrastructure is vital to sustaining economic recovery andunderpinning the provision of public services in the year ahead. At this stage, thecapital 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 treatmentfacilities, broadband, waste management, renewable energy and flood remediation.

The sale of public assets such as Bord Gis Energy is of dubious long term value. Inthis context, the minimum that the public expects is that the revenue raised would beput to use in new capital projects. However, major pieces of infrastructure such asthe new National Childrens Hospital are stalled.

A reduction of nearly 70% in the capital budget since 2008 has contributed tomassive emigration of skilled employees. Record low interest rates and identifieddeficiencies in our capital infrastructure mean now is the time to begin rebuilding thestates investment programme.

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

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

The regional airport network is a vital component in ensuring balanced developmentacross the country. It is essential that Ireland Airport West, Knock, Waterford, Kerryand Donegal airport are supported as part of the policy of providing maximumemployment opportunities to people outside Dublin. Greater autonomy needs to beafforded by the DAA to Cork Airport to allow it to compete effectively with a newlyindependent Shannon Airport.

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

As an initial step towards rebuilding the capital budget, we are proposing anadditional 100m in capital expenditure for 2015 to be targeted at the areas whichwill give the greatest immediate employment benefit and support the long termcapacity of the economy.


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The overall State procurement budget for the supply of services each year isapproximately 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 procurementin respect of this 12bn of 500m over a three year period. A minimum of 150m ofthis must be achieved in 2015. This is an actual saving of just over 1% and it is avery conservative estimate of what could be achieved by effective nationalprocurement policies.

The HSE alone has a procurement budget of 1.4bn and their recent annual reportstates: The HSE does not have an automated centralised system to maintain aregister of contracts awarded without a competitive process. They are required todisclose details each year of any contracts in excess of 25,000 which have beenawarded without a competitive process. This is one clear example of a lack ofproper procurement policy. It is unsurprising that the HSE is not always getting thebest value for money when they do not have an automated centralised approach fordealing 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. Clear lythese issues are examples of where procurement procedures can be improvedacross the public service.

Greater efficiency can be brought about by sharing services across the publicservice. This will result in centralised units carrying out key administrative functionson behalf of other sections in the public service rather than each individual unitcarrying 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 forother frontline services.

The New National Shared Services Office must immediately assist sectoral sharedservices 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 forthe entire sector

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

superannuation service


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

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 thesystem as a whole. Technological advances and more detailed case examinationcan assist significantly in detecting and eliminating fraudulent claims. Attentionshould also be given to more clearly communicating to claimants their rights andresponsibilities and the consequences of fraudulent activity.

The overall savings target for 2013 was 710 million . However, the actual savingachieved was 632m. An accelerated roll out of the public services identity cardwould assist with achieving savings. A greater exchange of data and informationbetween approved public bodies will also assist in this area such as, information

between the Department of Social Protection and the Revenue Commissionersregarding Deposit Interest Retention Tax (DIRT) and Local Property Tax (LPT),Department of Agriculture, Food & Marine and Local Authority Housing Departments.

The state drugs bill continues to be a source of considerable concern. The totalspent on drugs grew by 60m to 1.61bn in 2013 despite government claims ofmajor cost savings arising from agreements with the pharmaceutical industry. Whilethis partly reflects greater numbers of medical cards in issuance, it also highlights thefailure 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 threeyears. The HSE is in some instances paying more for individual drugs than privatepatients would pay over the counter. Certain items cost multiples of the price thatapplies in the UK. A large proportion of the reimbursement costs for genericmedicines appear to go to the distribution chain.

It was reported during the summer that the HSE still does not employ a healtheconomist. It is our belief that the National Procurement Office should now be giventhe task of managing purchasing medicines on behalf of the HSE. This must involvedirect meetings between the National Procurement Office and the relevantpharmaceutical companies. We believe a 3% reduction in the drugs budget can beachieved through full implementation of the 2012 agreement and action to tackleoverprescribing of medicines.

A report in September indicated that, to the end of July, the HSE cost for agencystaff was 194.3 million. This represented an increase of 63 million or 49 per centon the corresponding period in 2013. The cost of agency staff in the acute hospitalsector was just over 132 million compared with 86 million for the same period lastyear. This is symptomatic of the mis-management of the health budget.


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Earlier this year, evidence given to the Dil Public Accounts Committee indicatedthat the HSE is paying 110,000 every 13 weeks to fill a single consultant post atLetterkenny general hospital. A total of five consultant posts are being filled at thehospital on a per-hour basis. A full time consultant could be hired for a year for thesame 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. Theescalation of the bill for agency staff must be reversed and the cost substantiallyreduced through direct hiring of staff as determined by patient need. This will bothsave money and improve the quality of care provided.

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

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

Currently, if someone receives an award following a medical negligence claim, thepayment is made in the form of a once off lump sum. The Working Group on MedicalNegligence and Periodic Costs concluded that system should be replaced with one

of periodic payments. This would reduce the upfront financing cost to the state whilenot impacting on the quality of life of the recipient. In February 2014, the Minister forJustice promised to bring forward legislation on periodic payments but this has notyet occurred. The legislation should be introduced as a matter of urgency.

In August 2012, the State Claims Agency announced a new procurement structurerequiring barristers to engage in a competitive tendering process under which theirfees were capped at up to 25% below prior levels. However the total amount spenton 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.


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The Minister for Finance compounded the inequality of the levy on private pensionfunds 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 andextended in to 2015. The levy has done considerable damage to the incentive ofemployees to save for their retirement. Individuals and companies are naturally lessinclined to put money aside for future pension needs when they see the Minister candip 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 theState and will yield 2.2bn by the time it is due to end. The levy was to fund j obcreation measures in the hospitality and service sectors but it was only undersustained pressure from Fianna Fil that the government actually admitted that not

all the funds raised were being deployed for job creation as intended. In effect, it wasa revenue raising exercise at the expense of current and future pensioners. Thegovernment 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.

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

Only 75 m in tax revenue had been generated from the measure to date, well belowthe expected 200m over 3 years. This is not surprising given the restrictive natureof 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 pensionassets that could be accessed before retirement to include those in DefinedContribution 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 peopleavailing of the early draw down option should pay a rate of tax 5% below theirmarginal rate for the first 20,000 and the marginal rate on any additional amount.We estimate an additio nal 75m can be raised from these measures in 2015.


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361

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

New taxation measures million

Retention of USC measures 21Reduce ea rnings cap for pension contributions from 115,000 to

6 0,000 149

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)


38/40

36

* figures rounded to nearest m.

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

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


39/40


40/40

OCTOBER 2014

BUDGET

2015

A MORE CARING SOCIETY

Fianna Fil Headquarters

Documents

Fianna Fail Pre Budget Submission Final Draft