Labour Party’s budget proposes big rise in spending

The Labour Party has distanced itself dramatically from its erstwhile coalition partners Fine Gael with a pre-budget submission that proposes virtually no tax cuts and a large increase in public spending.

The party's alternative budget was launched yesterday by party leader Brendan Howlin with a spending package of €1.74 billion in 2017, far in excess of the €1.19 billion being earmarked for the coverage.

The party has claimed that it has not departed from the rules and will remain within the allowed “fiscal space” of €1.19 billion.

Mr Howlin said a third of its proposed spending (about €500 million) is capital funding directed at infrastructure and buildings. Under the European Union’s round-up rules, the spending is spread over four years and the cost next year will be no more than €135 million.

Small concessions

In addition, the party’s tax proposals propose an overall increase in tax take, although small concessions are given to taxpayers. That increase in tax revenue will also offset some of the spending.

At a press conference Mr Howlin justified his party’s decision to use all the resources on additional spending rather than tax cuts.

“It became clear to all of us that a tax cut that will barely cover the cost of a cut of coffee each week was a poor trade-off against the opportunity to make a step-change in investment in some key areas.

“You won’t find a billion in fanciful tax increases here. Neither will you find a pittance of a tax cut,” he said.

Indeed, the document envisages net revenues of an additional €400 million from increased taxes. They apply mostly to businesses and employers. The primary ones are increases in the bank levy, yielding €150million, and a small increase in the national training fund levy, yielding €67million.

There is a proposed sugar tax (kicking in in July and bringing in almost €120 million) as well as an increase in excise duties on tobacco.

PRSI benefits

The only concessions to taxpayers are more PRSI benefits for dental income and an increase to earned-income tax credit from €550 to €1,100, which will cost the State €45million.

The spending package includes big commitments to health, childcare, social welfare and education.

A total of €71million has been earmarked for increases in universal childcare. In addition the party has committed to an extra four weeks in shared parental leave and a living wage of €11.50 for all childcare workers. It has also committed to reduce class sizes at primary and secondary level.

As well as agreeing to a €5 increase in the State pension, the party has proposed a €5 increase in child benefit as well as the index-linking of all social welfare benefits.

It has also proposed ambitious spending programmes in health, third-level education, mental health, and sustainable transport.