FF seeks to cut private pension relief

Fianna Fáil has proposed a fifty-fifty split between cuts and taxes to reach an adjustment of €3.5 billion in its pre-budget submission, a marked departure from the Government's ratio of two to one.

The party's document, a Fairer Way to Recovery, was launched today by finance spokesman Michael McGrath, public expenditure spokesman Sean Fleming and jobs and employment spokesman Dara Calleary.

Most of the increased taxes are focused at higher earners and the proposals do not include a property tax, the central plank of the Coalition's tax proposals.

The €1.4 billion new taxes include an increase of 3 per cent in Universal Social Charge for those earning over €100,000. That will bring the effective tax rate for those earners to 55 per cent for PAYE workers and 58 per cent for the self-employed.

The plan also proposes reducing reliefs available for private pensions, bringing down the earnings cap to €70,000 fro €115,000 and reducing the rate of relief from 41 per cent to 30 per cent.

There are also new levies on off-licence alcohol; an increase of 75c on duty on a bottle of wine; price increases for tobacco; and a new 'sugar and salt' tax.

"The overall theme is a fairer way to recovery," said Mr McGrath.

He said that there were 2 million people living on less than €100 a month after paying off all bills.

"Do we reduce [their incomes] or ask those on €120,000 or more to make more contributions? For me there is no contest," he said.

Mr McGrath said the impetus was to fully protect education, mental health and disability. He said the Budget was also "supporting enterprise by not adding to the cost of employing people in the country.

"We have a progressive approach to the Budget," he said and said that the Government's Budget last December was the first in recent years to hit the lowest income groups the hardest.

He said people had made "enomrous sacrifices in the past four years and more will be asked in two years

"I am not saying there is an easy way to come up with a tax and cuts package of €3.5 billion," he said.

Mr Fleming also said document proposed to cut the public sector pay bill by an additional €350 million next year through a deferral of increment payments, cuts in allowances, changes in work practice and and an acceleration of the redundancy programme recently announced by the Government.

There are also proposals to reduce higher pension payments of retired public payments earning over €75,000. When it was put to Mr McGrath that this would reduce the pensions of former taoisigh Bertie Ahern and Brian Cowen (who put get paid circa €160,000 per annum) by €10,000, he replied that it was the most that could be done without the threat of a legal challenge.

Some 90 million has been set aside in the Fianna Fáil proposals to reverse what the party described as the "most unfair cuts" imposed by the Government to date.

They include row-backs on cuts to third-level student grants; guidance teachers; home help hours; the DEIS rural school scheme. Fianna Fáil also want to lift the ban on garda recruitment.

Other new proposals are an increase on DIRT on savings to 35 per cent (a move designed to encourage spending) and the provision of free GP cover for every new born child from 2013 onwards.

Mr Calleary said the party would oppose any proposals to make employers pay for sick pay. He also said that a change of approach was needed to ensure that small businesses were getting credit from banks. He said it should be measured on loans drawn down and not those approved.

He said that AIB had disclosed at a recent meeting of the finance committee that only €600 million in loans had been drawn down by small and medium firms under credit review.