Fine Gael, Labour agree to form coalition government


Fine Gael and Labour have agreed to form a coalition after delegates from both parties today approved a programme for government that was finalised late last night.

Edna Kenny said the plan had received unanimous support at a meeting of the Fine Gael parliamentary party.

Eamon Gilmore said more than 1,000 attendees at a Labour Party special delegate conference in UCD, in Dublin had backed the plan, although there were dissenting voices.

Mr Gilmore said there were urgent issues facing the country and both parties were keen to begin work to address them. The Dáil resumes on Wednesday.

Under the programme for government the parties plan to set up a new economic super-ministry that will seek a renegotiation of the EU/IMF bailout.

It also calls for the Department of Finance to be split in two.

The new minister for finance would look after budgets and taxes while a minister for estimates and public service reform would take control of spending and the overhaul of the public sector.

Both these ministers along with two others, one from each party, would form an economic council - effectively a super-ministry - within the cabinet.

The council would not be answerable to the Taoiseach and would have supreme power over the country’s economic direction as it struggles to recover from an historic crisis.

Labour’s negotiator Brendan Howlin said a renegotiation of the EU/IMF rescue package would be key to the strategy. “We have to repair broken bridges across our European partners, to build up an understanding of our position,” he said.

“It’s in everybody’s interests, not only the national interest of Ireland, but in Europe’s interest and in the interest of maintaining the euro, that we have a path that is sustainable out of the economic hole that we find ourselves in now.”

Under the coalition deal, Labour’s proposed strategic investment bank would be set up, borrowing money from European Investment Bank and other sources, to fund businesses being turned away from high street banks.

Money would also be used from the National Pension Reserve Fund and the sale of “non strategic” state assets - thought to be energy companies ESB and Bord Gáis - to rebuild the economy.

Both parties have agreed on a home improvement grant to boost the construction industry as part of a series of stimulus initiatives.

There has also been a compromise on the target for slashing the deficit to 3 per cent of GDP. The parties said they would now aim to make the cut by 2015.

Fine Gael had preferred 2014 while Labour wanted to push it back to 2016.

Fine Gael’s Phil Hogan said there would be no income tax rises under the partnership.

“We are quite satisfied that the emphasis is going to be on cuts in expenditure, cutting quangos and making sure there is no income tax increases on work,” he said Mr Hogan.

The parties have also agreed to make no changes to this year’s Budget and have accepted the need for a further €3 billion in cuts and savings next year.

They would then review cost-cutting measures in 2012.

Mr Howlin said a €9 billion austerity package, favoured by Fine Gael, was off the table.

Further compromise on public sector lay-offs will see between 18,000 to 21,000 voluntary redundancies in the next two years with a further 5,000 sought after that. Fine Gael had been pressing for 30,000 jobs to be axed by 2014.

There would be no changes to child benefit or social welfare payments while proposals for a graduate tax have been binned in favour of a new funding scheme for third level education, that would not deter prospective students.

Branding the plan a programme for “national government”, the two largest parties have committed to reverse cuts in the minimum wage.

They would also abolish the travel tax on air fares, as part of a deal with airlines to restore axed routes.

There would be a minimum 30 per cent income tax rate for very high earners and tax shelters would be curtailed.

Tax exiles would be forced to make a “fair contribution” to the exchequer, the prospective coalition partners have vowed. They have also agreed to review the Universal Social Charge.

The parties have vowed to introduce a new universal health insurance system, making it compulsory for everyone to be insured.

Under the proposals, to be implemented by 2016, there would be equal access to healthcare for all, GP fees would be scrapped and the Health Service Executive would be phased out, with power and responsibility passing back to the health minister.

The coalition will also hold a referendum to abolish the Seanad and increase parliamentary investigative powers.

Further political reform would include the consideration of reducing the number of TDs, cutting their salary, expenses and pensions and a ban on corporate donations.

The plan calls for the Dáil to sit four days a week - as opposed to the present three - and a reduction in holidays.

Additional reporting PA