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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 moving
towards a balanced budget. We propose a budgetary adjustment of 220m
for 2015.
The priority areas at this time for any available resources should be
education, 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 happen
after the recovery is further cemented and only as resources allow.
The reform of taxes and charges should encompass a greater focus on
ability to pay.
We are in the midst of a major housing crisis which demands a radical set
of policy responses.
There is a significant social and physical infrastructure deficit emerging
across the economy which needs to be confronted to prevent both social
and economic problems in future years.
Irelands enterprise policies need a radical shake up. Domestic
entrepreneurs should be incentivised and given the same priority as is
afforded 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 direct
investment.
Greater savings and efficiencies for the taxpayer through better public
procurement 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 buisad
comhardaithe.
Na achmainn at ar fil anois, ba chir iad a chaitheamh ar Oideachas,
Slinte, Cnamh Leana, Seirbhs do Dhaoine Aosta, agus Tithocht
Soisalta. Sa bhealach seo, tgfaimid comhphobail cothrom chinelta.
Ni bheah s ceart fillead ar pholaitoacht na gceant. Tiocfaidh sli cin tar
is don ghnth beith bunaithe nos m, agus mar at achmainn ar fil.
Is fu aird speisalta a dhir ar cumas ochaochta i gComhtheacs
athchiru cnach agus till.
Timid i lr garhchim tithochta agus t polasaithe radacilacha ag
teastil.
T easnamh sntasach le feiscint san infrastructr fiscul agus soisialta ar
fud n tire. Cathfear dileal leis na fadhbanna seo chun deacrachta a
sheachaint 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 fil
ag na Comhluchta a thagann isteach anseo.
N amhin go gcaithfimid r neamhsplechas a chaomhn maider le crsa
cinach, ach caithfimid feabhas a chur ar c chomh tarraingteach is at
muid do comhluchta idirnaisinta at saor agus solbhtha le dul aon ait.
Is feidir a ln airgid a shbhil trd a bheith cronna nuair atimid ag
ceannach 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 the
nature of Irish society for many years ahead. While the budget presented by the
government may be fiscally neutral, it is unlikely to be socially balanced. We are
presenting an alternative which emphasises the urgent need to improve services for
our citizens. We believe the principle of ability to pay must be enshrined in taxes and
charges. The hallmark of this government to date has been a series of regressive
budgets.
It is important to remember that the government are taking 300m from families in
2015 through the introduction of water charges and there will be further cuts to family
incomes from the phasing out of mortgage interest relief, restrictions on tax relief for
medical insurance and changes to the one parent family payment. Fine Gael and
Labour 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 efficiency
savings in the public sector of a further 290m and immediate action to secure a
reduction 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 would
result in the deficit falling comfortably below 3%.
The immediate need to improve public services must take priority over tax cuts. We
have identified the pressure on working families, medical costs and housing as the
priority 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 tax
credits, addressing anomalies in respect of low paid workers and the self-employed
as resources allow.
A reduction of 1 point in the pupil teacher ratio at primary level and a reversal of
the 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 unemployed
persons 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 those
who 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 the
fuel allowance and measures to help low income working families including those
on Family Income Supplement.
Help for people who are forced by employment or family circumstances to rent
out 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 system
more equitable. This would occur over three years. In the first year, the only
adjustment we propose is 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 assisting those who are continuing to struggle with high mortgage
payments. We are setting out our six priority areas for tax reform.
Marginal rate relief for pension contributions should be maintained. We are
proposing a modest reduction in the maximum allowable contribution to pensions
for tax relief purposes.
A new levy on sugar sweetened drinks should be introduced to tackle childhood
obesity. Excise duty on tobacco should be increased as part of the drive to make
Ireland smoke free by 2025.
The Local Property Tax currently takes no account of ability to pay. We are
initiating 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 of
apprenticeship places.
Expand the role of the Strategic Banking Corporation of Ireland to allow it to lend
directly to SMEs.
Require the Central Bank to publish and implement targets for all banks in
respect of dealing with legacy debt of SMEs.
Incentivise entrepreneurs to set up new businesses by providing tapered relief
from 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 capital
investments to SMEs.
Establish a pilot scheme 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
Extend PRSI benefits to the self-employed on a voluntary basis.
Address the disparity in tax treatment between the self-employed and PAYE
sector, particularly at lower levels of income.
As a matter of urgency require energy firms to implement measures to reduce
energy 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 in
employee headcount.
Ensure enterprise policy tackles the disparity in employment opportunities
between Dublin and areas outside the capital.
Reform the commercial rates structure to align it more closely to the economic
reality facing firms.
There is over 2.5bn in cash sitting in the Ireland Strategic Investment Fund. We
are proposing an investment of 1bn in 2015 to build 6,500 social housing units
which will be available to local authorities and voluntary housing partnerships on
a long term lease arrangement.
Reduce the windfall tax on development land from 80% to 40% to encourage the
release of more housing units.
Provide increased resources for the Housing Adaptation Grant for people with a
disability, 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 a
way 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 and
services provided by domestic Irish contractors.



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While economic growth is improving at an overall level, this is largely confined to the
Dublin region and particular industry sectors. Outside Dublin, the economy remains
largely flat.
An improvement in GDP numbers has not translated into a commensurate
improvement in the number of people at work. While the government regularly talk
about the creation of 1,000 additional jobs a week, the reality is that, according to the
Quarterly National Household Survey, there were just 5,500 more people at work in
the first half of the year. This is well below the rate at which jobs need to be created
to make a serious dent in unemployment and gives rise to concern that the recovery
is not translating into real jobs.
It is less than 12 months since the Troika left and a sense of complacency is
apparent in terms of the governments management of the economy. It appears to
have all but given up on a deal on legacy banking debt. No progress has been made
on dealing with the cost to banks of loss making tracker mortgages. The Medium
Term Economic Statement lacked strict deadlines for the achieving of targets.
The government have proceeded with the sale of Bord Gis, massively undervaluing
it while the projects the privatisation programme is supposed to fund, such as the
new National Childrens Hospital, are stalled. The National Pension Reserve Fund is
sitting 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 the
properties it identified for social housing have been turned down by local authorities.
The agency appears content to focus solely on disposing of its portfolio without
giving full consideration to the long term implications of decisions on the wider
economy.
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 been
forthcoming to date. The policy response has been piecemeal and more focused on
optics than real delivery. Ireland appears to remain tied to a Europe-wide austerity
policy which is leaving the Eurozone lagging behind the rest of the world in terms of
economic recovery. While the ECB has taken a more expansionary monetary
stance, a corresponding fiscal response has not been advanced. There is a strong
case to be made for a Europe-wide stimulus plan which would stave off deflation and
tackle unemployment which is still close to record levels. Ireland is currently
vulnerable 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 Budget
2015. It rightly points out that the level of national debt at over 200bn is now five
times higher than when the crisis started in 2008. This makes Ireland vulnerable to
any renewed economic difficulties and the government cannot throw caution to the
wind as it seeks re-election.
The tone of the governments response to the recent assessment report of IFAC was
dismissive with suggestions that it would be for future governments to follow the
advice of IFAC. While the government is within its rights to disagree with the advice it
receives, it should issue a detailed response setting out why it is taking a different
course 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 a
restatement of the GDP figure. This was a purely statistical change rather than any
specific improvement in the underlying state of the economy. It reduced the deficit by
1.6% and has made the Ministers task considerably easier.
We disagree with the Fiscal Council in its recommendation that a 2bn adjustment
be made in Budget 2015 though we fully acknowledge that the points they make are
valid and worthy of careful evaluation. The government should have allowed the Dil
to debate in full the recommendations of the Fiscal Council. It is our belief that, after
six 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 to
choke off the recovery. We believe that a budget adjustment of just over 200m will
comfortably achieve a deficit below 3%.
As well as the general buoyancy in tax revenue indicated in the recent Exchequer
returns, there are also other potential positives which could further improve the
financial position of the state in the year ahead. The most significant among these is
the potential to reduce the interest bill on the national debt by an early repayment of
the IMF loans under the EU / IMF programme. The IMF calculate that, based on an
assumption 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 2.1bn
over the next ten years. It is our contention that, at a minimum, 300m of saving can
be 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 improving
public services and reversing some of the most damaging cuts while at the same
time outlining a pathway to reform taxation over the next three years. Our core belief
is that spending on public services such as education, health, social protection and
childcare is progressive in nature as it benefits everyone in society but particularly
those 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 recent
years. Cuts of some 3bn have been imposed and resources have been stretched to
the limit. Health service staff deserve enormous credit for working under these
pressures.
The health estimate that was introduced for 2014 was considerably underfunded and
the government should have known at the time that there would be yet another
budget overrun. While we believe it is essential that the health service continues to
look for the most effective way to use resources, there is also a clear need for
additional funding to be provided to meet the most urgent patient needs.
Fianna Fil believes that any available resources should be prioritised for services in
mental 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 many
organisations, volunteers and professionals working in the area of suicide prevention
the statistics sadly underline the scale of this problem. In Ireland, 554 people died
from suicide in 2011. The scale of loss of life through suicide is the same as losing
the 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 attitudes
to mental health and to reducing the incidence of self-harm and suicide. This policy
needs a permanent increase in funding for mental health services. The initial cost of
establishing the authority would be approximately 5m with an additional 5 million
funding in the first year, increasing in subsequent years.
Amongst other measures this would allow for the establishment of out-of-hours
emergency social worker teams throughout Ireland and an increase in the number of
Resource Officers for Suicide Prevention
The plight of people with chronic medical conditions who have either had their
medical card removed or have been denied one has caused considerable disquiet
over the last twelve months. This is particularly the case with terminally ill children
and people who are battling cancer. Ireland needs to have a responsive health
service 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 discretionary
medical 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 of
a medical card is 1,130. We need to rebuild trust in the system by making adequate
resources available for a minimum of 20,000 additional discretionary medical cards.
Waiting times for both assessments and services for essential therapies are
unacceptable. This covers a wide range of groups including children with speech and
language needs, physical therapists for stroke victims and occupational therapists for
people with life challenging conditions.
There is a chronic shortage of resources at the moment across the full range of
these services and the recruitment of an additional 500 therapy staff should
commence in 2015.These therapists would be recruited in the health and education
sectors. This would prevent children having to wait more than two years for a much
needed appointment.
The Programme for Government commitment on the expansion of BreastCheck to
65-69 year old women must be honoured in 2015. Lives are saved by extending the
age category and it cannot be delayed any further.
In the wake of an alarming increase in waiting times in 2014, we propose a waiting
list initiative to reduce the current waiting times along the lines of the original
National Treatment Purchase Fund. Where it is not possible to treat patients within a
reasonable period, the HSE will make arrangements under the treatment purchase
fund 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 would
provide 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. We
propose the reduction of the threshold for the drug payment scheme from 144 a
month to 120 a month. This will particularly benefit families who fall outside the
income guidelines for a medical card but may be incurring significant medical
expenses on a monthly basis. Approximately 200,000 per month benefit from the
scheme 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 the
world for childcare, with the average family with two children spending 40 per cent of
their 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 when
children are under school age and to give children from lower socio-economic
backgrounds supports to succeed on an equal level. The basic principle is a tapered
series of subsidies to help with childcare for low income families: 67% subsidy for
long term unemployed people returning to work, 50% for people on Family Income
Supplement and 40% for those just above the Family Income Supplement limits.
Costings are based on the Indecon report on support for childcare for working
families and implication for employment, November 2013.
Incentives are required to target specific groups where childcare costs are a barrier
to labour market participation. We propose to provide assistance for 67% of
childcare costs subject to certain limits and would be aligned with the current
Community Childcare Subvention Programme (CCS) level of incentives. It would be
of 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 a
childcare allowance currently available to FIS participants using the CCS scheme
amounting to up to 67% of eligible expenditure. However, CCS provision is not
available in all areas and it also may not meet particular family requirements. To
incentivise individuals to remain in work, a subsidy of 50% of the cost of childcare
would be provided subject to specified limits and eligibility criteria. This would also
strengthen the sustainability of private childcare services and eliminate the
segregation of children on grounds of family background.
The childcare tax incentive would provide a subsidy of up to 40% of childcare costs
for families in employment and are earning at or below the industrial wage but are
not eligible for FIS. Families would only be able to avail the tax break subject to a
maximum 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 special
needs. 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 in
education pays a huge dividend in the long run. Spending at primary level is
particularly 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 to
develop a new phase of investment in our schools and universities.
The issue of overcrowded classes at primary level must be addressed. As a first
step, Fianna Fil proposes a reduction in the pupil-teacher ratio at primary level from
28:1 to 27:1 with effect from 2015/16. The full year cost of this would be 15m.
In addition we believe the 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 cent
of Special Education Review Committee recommended allocation levels to 92.5 per
cent from 2015/16. The full year cost of this would be in the region of 29m. We also
believe that additional resource teaching hours should be made available for children
with Down Syndrome and that it should be listed as a low incidence disorder. We
would cost this in the region of 1m.
The Education Act 1998 provided a legal obligation on schools to provide
appropriate guidance. Fianna Fil believes guidance counsellors are the only
persons in a school setting professionally qualified to provide guidance counselling
to students. This was underscored by a 2009 report from the former Chief Inspector
of the Department of Education which outlined that best practice involved the
appointment of fully qualified guidance counsellors. It is our belief provision must be
made for this vital resource. This would cost 30 million in a full year.
Fianna Fil proposes that the grant, which provides funding for maintenance and
upgrade works be placed on a permanent footing. This grant is essential for the
upkeep and maintenance of schools right across the country. Many schools have
been forced to run up huge debts over the past two years to pay for essential works
like roof repairs and toilet upgrades after the grant was rescinded. There may have
been a one off rebate this year, but now these schools are back to square one and
will 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 the
Household Benefits Package. The cumulative impact from four rounds of cuts is to
undermine 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 solidarity
and inter-generational support.
The most intractable problem in relation to unemployment currently is the number of
people out of work for over a year with 180,000 in this category. We want to help
ease the transition for people who are long term unemployed and who face losing a
number of benefits on returning to work. The estimated full year cost of allowing
persons in receipt of jobseekers allowance for more than a year to retain increases
in 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 burden
associated with not having an immediate family member with whom to share the cost
of running a household. It is currently an additional payment of 7.70 per week made
to people aged 66 years or over who are in receipt of certain social welfare
payments, including State pensions, and who are living alone. A 5 increase in the
Living Alone Allowance would cost 48m in 2015.
The introduction of water charges is going to impose a very significant burden on all
households. We have committed to an examination of the structure of water charges
to introduce a greater degree of fairness and recognition of ability to pay. As the final
tariff structure for Irish Water was only announced the day before charges were
introduced, 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 the
household benefits package. As an interim measure we propose extending this to
the 211,000 recipients of the fuel allowance payment at a cost of 21.1m. Our review
of the structure of water charges will focus on how to help low income working
families including those in receipt of Family Income Supplement. We will also
address the high cost that is likely to be borne by families with dependent children
aged 18 or more still living at home. We are providing a total of 60m to moderate
the impact of water charges.

We propose a 2 a week increase in the fuel allowance from 20 to 22 for 26
weeks 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 a
normal housing market. Transactions are at historically low levels and there are a
number 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 on
the waiting list. This issue is made worse as there is massive pressure on the private
rental 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-heated
announcements. The failure to accelerate the transfer of NAMA units has also
exacerbated 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 the
private rented sector. One of our greatest achievements historically as a country was
the large scale provisions of housing to meet the needs of the community. This was
done 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 Ireland
Strategic Investment Fund is sitting on be immediately allocated for the construction
of social housing. Data provided in the Dil indicates that the average cost of
construction of social housing units is 152,000. This indicates that upwards of 6,500
units could be made available under this proposal.
The Strategic Investment Fund operates to a commercial mandate in that it must
achieve an appropriate return on investment. This condition can be fully met by local
authorities entering into long term lease arrangements with the ISIF for the houses
constructed. The Fund would be in a positon to earn a return of 4-5%, considerably
greater than it is getting at the moment from sitting on a large amount of cash, while
the local authorities would have an additional stock of housing to tackle chronic
waiting lists provided to it at a fair price.
From the States overall point of view, it would be maintaining a valuable asset rather
than simply paying rent to private landlords while at the same time getting to grips
with providing much needed homes to families across the country.
In addition to the provision of additional social housing units through the Strategic
Investment Fund, there is a need for increased provision through the local authorities
themselves. The recent comptroller and auditor general report shows the massive
reduction in social housing spending under this government.
We are proposing an additional 100m be allocated for social housing through the
local 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 be
deployed 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 is
putting many families in danger of losing their home. It is important that a balance is
struck between ensuring that short term housing needs are met and the risk of the
state assisting in driving up private rents.
We are proposing a 5% upward revision of the rent cap in Dublin, Cork and Galway
to take the immediate pressure off the rent supplement scheme. If problems arise in
other areas, the Department of Social Protection should be willing to intervene and
review 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 Older
Persons and Mobility Aid schemes. An additional 23m is required to restore these
to previous levels and to tackle a significant backlog in claims.
There is another group of people in addition to those who have actually fallen behind
in their mortgage payments who require help. It is often couples with young children
who 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 family
circumstances mean that tens of thousands of people are living in homes that no
longer meet their needs. Negative equity is preventing many of these people from
being able to sell their home.
In such circumstances the only option may be to rent their home and in turn rent a
new property for themselves. Anyone that takes this course of action faces an array
of charges including income tax, universal social charge, fees to the Private
Residential Tenancies Board and PRSI on rental income. They also face losing their
mortgage 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 to
subsidise a mortgage on their home as well as facing significant income tax bills. A
family with a 300,000 mortgage on an apartment earning rent of 1,200 a month
could 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 who
bought their house between 2000 and 2009, who have now moved out and are
themselves 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 on
their 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 in
the 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 disincentive
to putting potential development land on the market as any gain may be taken by the
state. A reduction of the rate to 40% would continue to act as a curb on speculation
and ensure that added value is captured from re-zoning without unduly restricting the
supply of land on the market. No windfall tax revenues have been taken by the state
to date. Therefore it will have no immediate impact on exchequer revenues.
There is an acute shortage of family homes particularly in the Dublin area. Many
older 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 to
persons 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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During the last general election, Labour ran a campaign called Every Little Hurts in
which they warned what Fine Gael had in store for people. All six of those measures
are now in place with Labours agreement.
While claiming they have not increased income tax rate since coming to power, this
government have made 13 separate increases in tax on income.
Increased tax on income under FG / Labour government

m
2012 USC put on cumulative basis 47

Increase in DIRT to 30% 50
2013 Maternity benefit taxed 40

Top slicing relief on redundancy payments reduced 10

Increase in Dirt to 33% 64

Full USC applied to over 70s earning > 60k 38

Abolition of PRSI allowance 289

Increase in minimum PRSI for self employed 18

Abolition of PRSI block exemption for income from trade or
profession 32
2014 One parent tax credit only available to principal carer 25

Restriction on tax relief for medical insurance 127

Abolition of top slicing relief 22

Increase in DIRT tax to 41% 140

902

In all, there were 10 tax increases announced in 2012, 20 in 2013 and a further 10 in
Budget 2014. Budget 2014 had four separate effective income tax increases
including the reduction in Medical Insurance Tax relief.
DIRT tax has been increased by a massive 14% with an additional 4% PRSI also
applying. Any single pensioner earning over 18,000 (or 36,000 for a couple) is
liable for DIRT at the full rate of 41% even if they are only subject to income tax at
20%. For low income families under 66, the thresholds are even lower. The
government is planning another major tax increase with the abolition of mortgage
interest relief which will take 350m a year from hard pressed families.
Everyone agrees on the need to reduce the tax burden particularly on struggling
families. However we are still at the early stages of economic recovery. Across the
board income tax reductions at this early stage would not be prudent.
The focus in the first instance must be on restoring and enhancing services. As the
recovery is further bedded down there is likely to be scope in future years to initiate a
programme of tax reform.


18
We are outlining a series of six priority areas for tax reform to be implemented over
the next 3 years as resources allow. We do not propose to repeat the mistakes of the
past by engaging in large pro-cyclical tax cuts at this stage.
We believe it is more prudent to wait twelve months before introducing significant
changes to the tax regime. This should be targeted to ensure that employment is
supported and people facing the largest burden in terms of household expenses are
supported.
There is a need to simplify the tax system. Employees currently face three separate
deductions from their pay: income tax, PRSI and USC. Each has a different entry
point as which you start paying the tax, 10,000 for USC, 16,500 for income tax
and 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 more
will pay an effective tax of 9.25% as all their income becomes subject to PRSI. This
is a disincentive to employers to increase wages, or for employees to accept extra
hours of work or a promotion.
Over 120,000 employees earn between 17,000 and 20,000 a year and are
potentially affected by this problem. The way to tackle this situation is to allow a
partial PRSI refund for people earning just above the current level at which employee
PRSI 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 local
property tax and water charges take no account of ability to pay. In many instances
they represent a regressive burden on family incomes. The combined revenue from
the two measures will be over 850m in 2015.
Political parties who suggest that they can simply abolish them without any negative
consequences 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 water
charges 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 water
charges to the 211,000 households in receipt of the fuel allowance payment.



19
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 income
level and that taxpayers on income of 16,016 are expected to pay the same rate as
those with income of 100,000 or more. As resources allow, the lower rates of USC
should 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 provided
the increase in the credit is not more than their current income tax bill. In simple
terms a 100 increase in tax credits has the same monetary value on an annual
basis to someone on 20,000 as it does to someone on 200,000. We will prioritise
increasing 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 the
personal tax credit, they cannot claim the PAYE allowance, both of which are
currently 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 tax
and PRSI as an employee on the same income. There is a strong case for
addressing the unfair treatment of self-employed particularly those at the lower level
of 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 or
inheritance 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 values
generally. The government also increased the CGT rate to 33%.
There is an urgent need to review the current thresholds so that they more
accurately 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 property
they inherit in order to be able to meet their capital acquisitions tax bill.


20
We are setting out a programme for tax reform over three years. In the first year we
propose 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 assisting
those who are continuing to struggle with high mortgage payments.
We propose retaining the two Universal Social Charge measures which were due to
lapse at the end of the year, pending a full review of the USC. These are the
additional 3% for self-employed earners over 100,000 and the lower 4% rate for
medical card holders with an income under 60,000. The yield and cost are 123m
and 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 this
strikes a balance between the need to encourage employees to make provision for
their future income needs without unduly depriving the State of income tax revenue.
A recent survey indicated that 87% of the population believe that sugar sweetened
drinks contribute to obesity among children and young people. Sugar sweetened
drinks have both a high calorie content and very low, if any, nutritional value. A tax
on these products can help reduce consumption over time and assist in promoting
public health. We endorse the suggestion of the Irish Heart Foundation to have a tax
equivalent to 20% on sugar sweetened drinks yielding approximately 60m.
As part of the plan to make Ireland smoke free by 2025, we propose increasing the
excise duty price of a packet of 20 cigarettes by 0.50.
It is inexplicable that the government have not yet extended betting duty to online
bets. We would do this immediately and increase the rate to 1.5% to raise 40m.
We propose abolition of building heritage relief (4million) and extension of the
option of early pension access (see section 14, 75m)
We are proposing an all party committee to examine the issue of taxation of alcohol
in particular the question of very cheap alcohol sales in off licences.
The net yield from these measures is a cumulative 361m.


21
The 374,800 people on the live register will take little comfort from the governments
claim 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 are
upwards of 85,000 people on activation schemes. In addition, the figures are
flattered by emigration and the expiration of benefits resulting in some people not
being entitled to means tested assistance.
The improvement of 31,600 in the number in employment seen in the Quarterly
National Household Survey is welcome. However, there was a significant slowdown
in the rate of job creation in the first half of the year when only 5,500 net jobs were
created.
Year Registrations Apprenticeship population
2008 3,765 26,170
2009 1,535 21,407
2010 1,204 14,801
2011 1,307 13,001
2012 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 made
the 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 student
contribution of between 833 and 1,433. Traditionally, the contribution was paid to
the colleges on their behalf by the Exchequer, but this was changed in last years
budget. Students are now liable for the charge twice during their four-year
apprenticeships.
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 should
be based on regular reviews of industry needs. For example an
apprenticeship scheme in the bar and catering trade could be of great
assistance to both prospective employees and the hospitality sector. This will
prevent the casualisation of trades.
The government must ensure that the quality of apprenticeships is such that
they do not lag behind academic qualifications in terms of how they are
perceived by both employers and prospective apprentices.


22
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 apprenticeships
and seeing it as an integral part of their industrial policy.
More online support should be given such as an apprentice vacancy matching
service, 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 lower
rate 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. This
should be linked to growth in employee headcount.
We commit to examining how to close the tax disparity between low income
self-employed and PAYE workers. As publicpolicy.ie have pointed out, a low
self-employed person can pay up to six times more income tax than a PAYE
worker with the same income.
Enhance the Employment and Investment Scheme (EIS) to make it more
attractive. Allowing full tax relief when the investment is made in a start-up
company would facilitate raising capital for SMEs.
Investigate the potential for providing access to vacant or underutilised public
property for entrepreneurs or business start-ups to use as incubation centres.
Address the lack of credit which is hampering many businesses from
expanding, through the introduction of tax relief for individuals making loan
capital investments to SMEs. In addition we propose to establish a pilot
scheme 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 central
feature of the governments recovery and growth plans for the economy in general
and for the SME sector in particular. However, overall lending to SMEs continues to
decline. In the year to the September 2014, the amount of non-property related
lending to SMEs declined by 4.6%.


23
The recently established Strategic Banking Corporation of Ireland (SBCI) will not
have a banking licence. Instead, it will provide credit to existing banks (and potential
new entrants) who will on lend to SMEs. We know from the manner in which banks
have hoarded capital over the last five years, it is likely that they will continue to take
a 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 their
business. Cheap funding from the SBCI may help the banks profitability without
improving credit flow in the economy.
The new entity falls well short of a full service, state backed bank along the lines of
the Industrial Credit Corporation (ICC) which operated successfully in the economy
for many years. This was a commitment in the Programme for Government but has
not been delivered. A fully fledged Enterprise Bank should be part of a permanent
solution to the lending gap which exists in Irish banking and would lend to any
company, regardless of sector or size, provided it can demonstrate its
creditworthiness
During the boom years, a significant number of small and medium sized Irish
companies borrowed heavily for property, premises and machinery. In many cases
the property investment was unrelated to the activities of the SME itself. Statistics
from the Central Bank show that Irish SMEs have over 30 billion in property-related
debt.
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 debt
restructuring are needed not just for the two pillar banks but across the sector. While
it is critical that SMEs have the necessary funds for working capital and plant and
equipment needed to run their core business, this cannot be separated from the
need 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 making
applications for new credit to their bank or an equity source or to restructure existing
credit 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 to
profit.
Many potential entrepreneurs have a good idea but lack the expertise to bring it to
fruition. Within the existing budget for job supports, the government should provide
growth vouchers to give entrepreneurs a helping hand at the start up and early
growth 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 Local
Enterprise Offices should encourage entrepreneurs to share ideas, support each


24
other and take a team approach to the establishment of new enterprises rather than
going solo. This could be expanded out to include a network of business angels
looking to invest in the business ideas of other young people.
Many children of entrepreneurs go on to establish businesses themselves. A US
survey found that around half of all self-employed business people in America were
second-generation entrepreneurs. By encouraging entrepreneurship from an early
age in school, we can help foster a culture of people taking the risk of setting up their
own business. Businesses need to play a more pro-active part with local schools.
Putting entrepreneurship on the curriculum and giving young people the chance to
gain practical experience selling products, controlling a business bank account and
navigating other hurdles, may help encourage them to set up their own business in
time.
It is essential for firms to be able to transport their goods to customers at a
reasonable cost. The logistics industry has become considerably more efficient in
recent years with deliveries and services supplied in shorter timescales and at lower
costs. As an island, the industry has a vital role to play in the export of Irish goods
and services to the European Union and other major markets. The state should
develop a co-ordinated national logistics strategy to help firms get goods to
customers as efficiently as possible. This would cover infrastructure, taxation
policies, environmental regulation and the overall regulatory regime in which firms
operate. Germany in particular has taken a proactive approach in supporting logistics
firms and in so doing helping thousands of other businesses in the process.
The incentive currently works by offering relief to individuals who have recently paid
Capital Gains Tax (CGT) and subsequently invest in a new business, before selling
that 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 the
original disposal or by half of the CGT due on the new sale. This is quite restrictive
and 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 of
whether they invested in a new business, up to a limit of 5m. This would create a
clear distinction between passive investment and entrepreneurial activity.



25
Fianna Fil would double the support available to the Trading Online Voucher
Scheme from 5m to 10m with a specific focus on encouraging independent retailers
to avail of the opportunities presented by the online market. This would be funded
through 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 to
a significantly reduced range of benefits when compared to PAYE workers. To be
eligible for Jobseekers Assistance, a self-employed person must undergo a means
test. 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 to
nothing because they have no automatic entitlement to Jobseekers Benefit. This has
caused unnecessary confusion among the self-employed.
Extending social welfare protection to self-employed people achieves a measure of
social justice. In addition, it reduces the risk for those entrepreneurs who wish to
start up their own businesses by providing a safety net.
To facilitate this, we propose to allow the self-employed to opt into Class A. In
addition 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-employed
as they do for the unemployed employee. For example, the level of average weekly
earnings would impact on the level of rate of Jobseekers Benefit.


26

The agri-food sector is a great success story for the Irish economy. The combination
of thriving family farms and world leading food production companies has the
potential to be a key element in economic recovery.
The abolition of milk quotas in 2015 is an opportunity to greatly expand the output
from this sector. Currently farmers can claim a capital allowance on the construction
of 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 potentially
yield economic returns into the future.
Pillar Two is a critical part of an effective CAP package. The government has failed
to provide adequate funding for the provision of resources for rural development with
only a 43/57 financing rate. A 50/50 co-financing rate will allow resources to be
targeted where they are needed and support low income farmers. 50/50 co-funding
would cost 313m per annum from 2015-2020. This is an increase of 25m per
annum 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 low
profit margins requires additional support to keep farmers in the industry. Doubling
Rural 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 of
certain social protection payments.
The beef crisis is threatening the financial viability of thousands of beef farmers. The
suckler 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 bolster
beef farmers income in the short term while an enhanced framework is put in place
to protect a sustainable beef industry. This special payment will be drawn from the
Rural Development Program under 50/50 co-financing with an additional 2015 top up
of 7m.
The Targeted Agricultural Mechanisation Scheme is an important process in
upgrading farm infrastructure. Enabling farmers to increase their productive capacity
is a vital part in achieving Food Harvest 2020 targets. It is also important in
facilitating farmers in addressing greening demands under the new CAP
arrangements. We propose expanding the scheme by an additional 5m.
The total cost of these measures is 47m.



27

Irelands corporation tax policies are currently under the international spotlight. As a
country 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 with
OECD guidelines on taxation.
In the face of a sustained international campaign to mis-represent our corporation
tax rules, it is important that we re-emphasise the following points:
The headline corporation tax rate is only one consideration in assessing a
countrys 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 by
multinationals 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 all
companies regardless of size. Other EU countries not subject to as close scrutiny as
we face do not have the same level of transparency. It will come as no surprise that
there are many in the European Commission who would like to puncture a hole in
Ireland'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 from
countries whose motivation is their own national advantage.
Ireland has historically used its tax policy in a manner designed to attract and retain
multinational investment in the country. At the end of 2013 there were 166,000
people employed in IDA Ireland supported companies. While not all of these jobs
can be directly attributed to the impact of Irelands corporation tax regime it remains
a vital part of our offering to prospective FDI investors.
We cannot merely take a defensive role in relation to corporation tax. The
international environment in which we compete is evolving rapidly. While we have a
strong track record in offering a competitive tax regime to potential investors, the
level 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 is
considerably more favourable than ours.
It is important to acknowledge that in recent years the attractiveness of Irelands
offering has declined relative to that of the UK and other competitor countries. A
number 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%


28
Bringing non domiciled persons within the scope of Irish gift and inheritance
tax if they live here for five years.
While these measures were introduced in the context of an exceptionally difficult
budgetary environment, they must also be viewed in the context of the actions being
undertaken by our nearest neighbour who have taken a very deliberate policy
decision 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% in
2013 with a stated intention to reduce it to 20% by 2015.
A change in the way the UK taxes overseas profits to concentrate on taxing
profits from UK activities
The introduction of a patent box, which attributes a 10 per cent corporation tax
rate 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 for
mobile talent clearly improves the attractiveness of a location when a company is
deciding where to invest. Bringing in project champions who have familiarity with
key 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 and
has had negligible take up. The criteria on which a scheme like this should be judged
include its ability to boost employment without an unacceptable loss of revenue to
the 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 without
the current earnings cap. Consideration should also be given to removing the
restriction on the individual carrying out some of their employment duties abroad and
the 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 assignee
cannot have been resident in Ireland in the 5 years prior to their arrival limits the
flexibility of the scheme.

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


29
be extended to all jurisdictions outside the EEA and consideration given to removing
the 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, we
want to see a lower rate of capital gains tax apply in such situations. This can also
help attract mobile foreign entrepreneurs with good business ideas to set up here. A
further enhancement could be in the form of a lower rate of tax applying to the
dividends paid to entrepreneurs from qualifying companies. This would reflect the
inherently greater risk associated with entrepreneurial activities.
We have an excellent base from which to make further progress. Two thirds of
Irelands R&D is in the private sector, creating new product and service innovations.
Currently the R&D credit is a function of increases in expenditure using 2003 as the
base year of comparison. The incremental approach needs to be reviewed in light of
the 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, subject
to EU competition approval.
To help attract additional R&D investment into Ireland, a pre-approval mechanism
should be put in place to enable firms to agree in advance the percentage of an R&D
grant-aided project that qualifies for the tax credit.
We propose a specialist dedicated unit be established within Revenue to deal with
specific R&D tax matters, as well as handling technical appeals in a more
streamlined manner. In addition we should broaden the relief to enable loss-making
companies pass on the benefit of their R&D credits to their key research staff.
Employee share incentive schemes encourage employee loyalty and participation
through long-term equity incentive awards. The current tax relief for employees who
acquire shares in their company has a number of drawbacks. As an initial step to
widening the employee share scheme, the definition of shares should be widened
to include restricted stock units and options over shares.


30

Investment in our national infrastructure is vital to sustaining economic recovery and
underpinning the provision of public services in the year ahead. At this stage, the
capital 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 treatment
facilities, broadband, waste management, renewable energy and flood remediation.
The sale of public assets such as Bord Gis Energy is of dubious long term value. In
this context, the minimum that the public expects is that the revenue raised would be
put to use in new capital projects. However, major pieces of infrastructure such as
the new National Childrens Hospital are stalled.
A reduction of nearly 70% in the capital budget since 2008 has contributed to
massive emigration of skilled employees. Record low interest rates and identified
deficiencies in our capital infrastructure mean now is the time to begin rebuilding the
states investment programme.
The national broadband network has improved considerably but significant gaps
remain particularly in rural areas. In addition, 4G mobile phone coverage needs to be
considerably improved.
Our national road and motorway network is generally in good shape. However there
are obvious gaps which should be addressed in the years ahead. Specifically the
road system should be improved by linking the cities of Cork, Limerick, Galway and
Sligo. The long stalled A5 motorway should be completed.
The regional airport network is a vital component in ensuring balanced development
across the country. It is essential that Ireland Airport West, Knock, Waterford, Kerry
and Donegal airport are supported as part of the policy of providing maximum
employment opportunities to people outside Dublin. Greater autonomy needs to be
afforded by the DAA to Cork Airport to allow it to compete effectively with a newly
independent Shannon Airport.
Last winter showed up the risk which many communities face from flooding. Ireland
was required to prepare flood hazard and risk maps for the areas deemed at risk of
flooding by December of 2013. The vital step now is to put in place flood
management plans with clear targets for these areas. This should be done as quickly
as possible. There must be no slippage from the end of 2015 deadline to have these
plans in place. If anything, this target should be brought forward to the summer of
next year given the seriousness of the situation. The implementation of these plans
is going to require significant investment in the years ahead.
As an initial step towards rebuilding the capital budget, we are proposing an
additional 100m in capital expenditure for 2015 to be targeted at the areas which
will give the greatest immediate employment benefit and support the long term
capacity of the economy.



31
The overall State procurement budget for the supply of services each year is
approximately 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 procurement
in respect of this 12bn of 500m over a three year period. A minimum of 150m of
this must be achieved in 2015. This is an actual saving of just over 1% and it is a
very conservative estimate of what could be achieved by effective national
procurement policies.
The HSE alone has a procurement budget of 1.4bn and their recent annual report
states: The HSE does not have an automated centralised system to maintain a
register of contracts awarded without a competitive process. They are required to
disclose details each year of any contracts in excess of 25,000 which have been
awarded without a competitive process. This is one clear example of a lack of
proper procurement policy. It is unsurprising that the HSE is not always getting the
best value for money when they do not have an automated centralised approach for
dealing 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. Clearly
these issues are examples of where procurement procedures can be improved
across the public service.
Greater efficiency can be brought about by sharing services across the public
service. This will result in centralised units carrying out key administrative functions
on behalf of other sections in the public service rather than each individual unit
carrying 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 for
other frontline services.
The New National Shared Services Office must immediately assist sectoral shared
services 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 for
the entire sector
Local Authorities to complete the work for a national shared payroll and a
superannuation service


32
Local Authorities to have a shared service in relation to dealing with banks
and 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 the
system as a whole. Technological advances and more detailed case examination
can assist significantly in detecting and eliminating fraudulent claims. Attention
should also be given to more clearly communicating to claimants their rights and
responsibilities and the consequences of fraudulent activity.
The overall savings target for 2013 was 710 million. However, the actual saving
achieved was 632m. An accelerated roll out of the public services identity card
would assist with achieving savings. A greater exchange of data and information
between approved public bodies will also assist in this area such as, information
between the Department of Social Protection and the Revenue Commissioners
regarding 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 total
spent on drugs grew by 60m to 1.61bn in 2013 despite government claims of
major cost savings arising from agreements with the pharmaceutical industry. While
this partly reflects greater numbers of medical cards in issuance, it also highlights the
failure 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 three
years. The HSE is in some instances paying more for individual drugs than private
patients would pay over the counter. Certain items cost multiples of the price that
applies in the UK. A large proportion of the reimbursement costs for generic
medicines appear to go to the distribution chain.
It was reported during the summer that the HSE still does not employ a health
economist. It is our belief that the National Procurement Office should now be given
the task of managing purchasing medicines on behalf of the HSE. This must involve
direct meetings between the National Procurement Office and the relevant
pharmaceutical companies. We believe a 3% reduction in the drugs budget can be
achieved through full implementation of the 2012 agreement and action to tackle
overprescribing of medicines.
A report in September indicated that, to the end of July, the HSE cost for agency
staff was 194.3 million. This represented an increase of 63 million or 49 per cent
on the corresponding period in 2013. The cost of agency staff in the acute hospital
sector was just over 132 million compared with 86 million for the same period last
year. This is symptomatic of the mis-management of the health budget.


33
Earlier this year, evidence given to the Dil Public Accounts Committee indicated
that the HSE is paying 110,000 every 13 weeks to fill a single consultant post at
Letterkenny general hospital. A total of five consultant posts are being filled at the
hospital on a per-hour basis. A full time consultant could be hired for a year for the
same 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. The
escalation of the bill for agency staff must be reversed and the cost substantially
reduced through direct hiring of staff as determined by patient need. This will both
save money and improve the quality of care provided.
The State Claims Agency has responsibility for the management of personal injury
and property damage claims against the State. The total paid out in respect of all
claims in 2013 amounted to 140 million. 93 million of this related directly to awards
and 47 million related to legal and professional fees. The situation whereby these
fees constitute 50% of the amount paid out in awards is unacceptable.
At the end of 2013, the State Claims Agency reported that the estimated potential
liability in respect of all active claims was 1.22 billion. 1.04 billion of this is in
respect of clinical personal injury claims while around 186 million related to other
forms of claims.
Currently, if someone receives an award following a medical negligence claim, the
payment is made in the form of a once off lump sum. The Working Group on Medical
Negligence and Periodic Costs concluded that system should be replaced with one
of periodic payments. This would reduce the upfront financing cost to the state while
not impacting on the quality of life of the recipient. In February 2014, the Minister for
Justice promised to bring forward legislation on periodic payments but this has not
yet occurred. The legislation should be introduced as a matter of urgency.
In August 2012, the State Claims Agency announced a new procurement structure
requiring barristers to engage in a competitive tendering process under which their
fees were capped at up to 25% below prior levels. However the total amount spent
on 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.



34
The Minister for Finance compounded the inequality of the levy on private pension
funds 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 and
extended in to 2015. The levy has done considerable damage to the incentive of
employees to save for their retirement. Individuals and companies are naturally less
inclined to put money aside for future pension needs when they see the Minister can
dip 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 the
State and will yield 2.2bn by the time it is due to end. The levy was to fund job
creation measures in the hospitality and service sectors but it was only under
sustained 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 was
a revenue raising exercise at the expense of current and future pensioners. The
government 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 their
pensions have one-off access to take back up to 30% of these contributions.
Drawdowns are subject to marginal-rate income tax.
Only 75m in tax revenue had been generated from the measure to date, well below
the expected 200m over 3 years. This is not surprising given the restrictive nature
of 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 pension
assets that could be accessed before retirement to include those in Defined
Contribution 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 people
availing of the early draw down option should pay a rate of tax 5% below their
marginal rate for the first 20,000 and the marginal rate on any additional amount.
We estimate an additional 75m can be raised from these measures in 2015.



35

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 21
Reduce earnings cap for pension contributions from 115,000 to
60,000 149
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)


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
OCTOBER 2014
BUDGET
2015
A MORE CARING SOCIETY
Fianna Fil Headquarters
ras De Valera
65/66 Lower Mount Street
Dublin 2
+353 (0) 1 676 1551
info@annafail.ie
www.annafail.ie