At the first reading of their Programme for Government, the difficult bit, Fine Gael and the Labour party have succeeded impressively in closing most of the gap between them on tax and cuts. Not that they had much choice. They will implement the €6bn of tax rises and spending cuts announced in December’s budget by the outgoing Fianna Fáil government. A further €3bn of public spending cuts and tax increases will be introduced in 2012,
A compromise was struck between Fine Gael’s target of d 30,000 “voluntary”job cuts s by 2014 and Labour’s 18,000,a gap that had differentiated the parties during the campaign..
The figure now agreed by the two parties is between 18,000 and 21,000 within the same period – with a further 4,000 positions to go by 2015.
But big questions remain to be answered to transform it into more than wish list. Where will the money come from to create thousands of new jobs and several new programmes? To expand on that.
Moreover these must be offset against cutting public sector jobs by almost 10 percent – between 18,000 and 21,000 by 2014, and an additional 4,000 by 2015. University fees they leave for later.
The argument is well made but what are the real prospects for a partial renegotiation of the bailout? The Programme does not reveal a negotiating position. I leave the hefty section on political reform to later.
The Irish Times summarises the main fiscal and financial elements of the deal.
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.
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.
The 64 page Programme begins with high rhetoric and a ringing declaration.
The Government for National Recovery faces an historic challenge. The trust of the nation has been invested in it. It is committed to honouring that trust. At all times it will meet each task guided and informed by some words first spoken by Albert Einstein:
“Learn from yesterday, live for today, hope for tomorrow.”
The new Government supports the objectives of the EU/IMF Programme of Support i.e.restructuring and recapitalising the banking system, achieving fiscal stability and returning the Irish economy to growth.
However, it is observable to all that the Programme of Support has – to date – failed to restore confidence in the Irish economy.In our engagement with the lenders, we will pursue a number of different strategies to achieve this end.
We will seek a reduced interest rate as part of a credible re-commitment to reducing Government deficits to ensure sustainability of our public finances.
We will re-commit to structural reforms required to accelerate growth, job creation and debt sustainability.
We will attach the utmost priority to avoiding further down-grades to our sovereign credit rating by setting further capital spend by the State on bank re-capitalisation at a level that is consistent with national debt sustainability.
In this regard, we will defer further recapitalisation of the banks until the solvency stress tests are complete and known to the new Government. Earlier recapitalisation in advance of publication of the stress tests will not contribute to market stability and confidence.
We remain committed to a smaller banking system that reduces its reliance on funding from the Irish and European Central Banks and volatile market sources. In order, however, to limit further calls on the State to cover bank losses from distressed asset sales,bank deleveraging must be paced to match the return of more normal market conditions.
As an interim measure, we will seek to replace emergency lending to our banks with medium-term, affordable, official financing in a way that can restore confidence among other potential lenders in the liquidity position of our banks.
We will end further asset transfers to NAMA, which are unlikely to improve market confidence in either the banks or the State.
We will ensure that an adequate pool of credit is available to fund small and mediumsized businesses in the real economy during the re-structuring and down-sizing programme.
We will introduce a comprehensive special resolution regime for dealing with bank insolvencies.
The Government accepts that enabling provisions in legislation may be necessary to extend the scope of bank liability restructuring to include unsecured, unguaranteed senior bonds.
The new Government will seek to dispose of the public stakes in the banks as soon
We will – within the first 100 days – resource a Jobs Fund which will:
Provide resources for an additional 15,000 places in training, work experience and educational opportunities for those who are out of work;
Cut the 13.5% rate of VAT to 12% up to end 2013;
Halve the lower 8.5% rate of PRSI up to end 2013 on jobs paying up to 356 euros per week;
Reverse the cut in the minimum wage;
Within this total, we will provide 30,000 additional training places across the education and training system, distributed in line with the recommendations of the Expert Group on Future Skills Needs.
Adds I’m relieved to see that Deaglán de Bréadún’s far more authoritative verdict is not dissimilar. H’es impressed at the speed of producing the document but identifies ” plenty of fudge.” What will Fintan and Vincent say? Put on your tin hats.