Noonan's 'rainy day fund' plan is under attack from Labour
Published 30/01/2016 | 02:30
Finance Minister Michael Noonan's plans for a 'rainy day fund' are under attack from the Labour Party.
Just hours after Fine Gael's proposals to set aside €2.5bn from the resources available to the next government were revealed by the Irish Independent, senior Labour figures claimed Mr Noonan's sums "don't stack up".
Labour sources said Mr Noonan will not be in a position to set aside such a significant sum over the next five years, pointing out that Fine Gael's proposal to axe USC alone will cost €4bn.
"Fine Gael and Noonan have got their maths wrong; their plan simply can't be delivered," said a senior Labour strategist.
And speaking ahead of the Labour conference in Mullingar, Public Expenditure Minister Brendan Howlin said available resources over the coming five years should be used to speed up the delivery of capital projects.
While insisting the next government must be "prudent", Mr Howlin said his party was not in favour of creating a formal 'rainy day fund'.
"The notion that you could build up in five years something like the pension reserve fund - that can't be done," he said, adding the country is facing a lot of "pent up demand".
Mr Noonan's plans to put a quarter of the available cash into a "Contingency and Stability Fund" was described as a "positive development" by Fiscal Advisory Council chairman Professor John McHale.
However, Fianna Fáil finance spokesman Michael McGrath questioned if the Fine Gael minister's sums added up.
Mr Noonan says there is up to €10bn available for extra spending in the next five years, including abolishing the USC and 10,000 extra public sector workers.
But Prof McHale warned that the resources available between 2017 and 2021 may be less than previously estimated. Due to demographic pressure and existing benefits commitments, it could be as low as €3.2bn, he said.
Mr McGrath said Mr Noonan "does not seem to understand" the concept of a proper rainy day fund, which he says is "put beyond the reach of government unless specific conditions are met".
Meanwhile, Mr Howlin says too many people are "crying wolf" about the dangers of another economic downturn as he unveiled Labour's plans to abolish the Universal Social Charge.
The party is promising a worker earning €50,000 will be €2,043 better off per year under their tax package, while somebody on €120,000 will benefit to the tune of €2 per annum.
And it was revealed last night the party also plans to reduce Pay Related Social Insurance (PRSI) for low-paid workers.This goes directly against a Fine Gael plan to bring down the entry point at which workers pay PRSI from the current €18,000 per annum down to €13,000.
Fine Gael intends to have more people pay the insurance but will promise to deliver extra dental and paternity benefits in return.
Mr Howlin said Labour would also look at returning benefits if the economic situation allows but most people "see PRSI as a tax".
Asked whether the country's tax base is strong enough to withstand such tax cuts, the minister said: "Because the crash was caused last time by everybody taking their eye off the ball and nobody crying wolf, there is now a whole chorus of wolf criers on the basis that if they keep crying one of them will be right."
Up to 600 Labour Party delegates are due to attend the annual conference in Mullingar today to see Tánaiste Joan Burton deliver her pre-election pitch.
Under its tax plan, the party will abolish the USC for all workers up to €72,000.
A 'clawback' mechanism will kick in for workers earning between €100,000 and €120,000 to reduce their benefit.
Communications Minister Alex White said the USC had been the "single biggest whack" working people took during the recession. He confirmed the party was planning to use 75pc of available resources over the next five years to increase expenditure on public services and 25pc to cut taxes.
Mr Howlin said after a "very difficult period" people were now coming up to Labour politicians and telling them they "did a great job" in government.