FG and Labour row over Budget focus – jobs or cuts to welfare
Coalition wants to ease back on planned €3.1bn austerity package
FINE Gael and the Labour Party are split over the level of social welfare cuts in the next Budget.
The coalition partners are both pushing against the Troika for an easing-up on austerity in Budget 2014. The parties want to pull back on the planned €3.1bn package of cuts and taxes.
The Government wants to avail of the extra funds available from the Anglo promissory note deal in the Budget.
But the parties are at loggerheads over whether the money should be used to reduce the level of cuts to social welfare or put entirely into job creation measures, the Irish Independent has learned. Labour is demanding that the planned €440m worth of social welfare cuts be scaled back. The party is also in favour of investing a portion of the money in job creation.
But Fine Gael wants to stick to the social welfare cuts target and put all available funds into a jobs package.
A senior party source said: "We're better paying people to be at work than paying them to be idle. Labour are well aware of our position. Creating jobs and reducing unemployment are our top priorities."
Following the abortion legislation saga, ministers are returning the focus to the economy. Meetings are ongoing with the troika, who are in Dublin for the latest bailout report.
And the Cabinet is holding a special meeting on jobs this week as the negotiations on October's Budget heat up.
The gradual improvements in tax returns and money from the Anglo promissory note mean cuts are not expected to be as severe as originally planned.
But the squabbling has already begun between the two parties over how to use an estimated €600m in savings.
Fine Gael insists it would be better value to put any extra money into a job-creating stimulus package rather than "backing off" on social welfare cuts.
A party figure said that rather than easing off on the cuts, the equivalent should be put into new capital projects, which would generate an extra 8,000 jobs.
But there has been a furious response from Labour, which knows that going ahead with the full range of social welfare cutbacks could spark a huge backlash against it.
A source said €6bn was already available for capital projects from the National Pensions Reserve Fund, with more from the sell-off of state assets.
"It's a false choice. You don't have to screw the poor to find money to invest," said the source.
The ground has already been prepared for a stimulus package, with the major capital spending departments – Education, Environment, Transport and Communications – preparing options for additional spending next year.
But Fine Gael and Labour are united in wanting to force the troika to agree to dropping the €3.1bn cuts and spending targets in the Budget.
Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin are expected to meet EU-IMF-ECB officials this week.
The split emerged as Tanaiste Eamon Gilmore mounted his strongest ever attack on the troika, telling it the Government will soon no longer be taking instructions from it.
"What has happened in this country over the past five years has had a huge impact on the lives of people, on households," he said. "I think it's important that the institutions we are dealing with understand that."
In a sign of a hardening of attitudes within Labour towards the bailout lenders, Mr Gilmore's spokesman said the country's relationship with the troika was changing.
"We're rapidly getting to a situation where we can take their advice as advice and not as instructions," he added.
Labour is particularly angered by the troika's insistence the €3.1bn target must be maintained in the Budget.
The Department of Finance has estimated that the official target of getting the deficit down to 5.1pc of gross national income next year could now be met with a Budget adjustment of €2.5bn instead of €3.1bn.
That means there is up to €600m available to either reduce planned cutbacks or boost capital spending. But the troika is now insisting on sticking to the €3.1bn figure.
But Fine Gael Junior Minister for Public Expenditure Brian Hayes said the Government would have to be careful not to do anything that would endanger the country's full return to the markets in January.
"Obviously we're looking for leeway, but it's really important that we don't take the foot off the pedal," he said.
Fianna Fail finance spokesman Michael McGrath said: "Our belief is that people should be given some respite from austerity."
One of the measures being considered is the means-testing of home-help packages, speech therapy and physiotherapy for people with disabilities. These are currently free.