| 14.9°C Dublin

Gap widens between FG and Labour on cuts policy

THE policy differences between Fine Gael and Labour widened yesterday as Labour leader Eamon Gilmore came out in favour of €2bn less in cutbacks.

He confirmed his party would be aiming for €7bn in cutbacks and tax increases to reduce the hole in the public finances over the next three budgets -- instead of the €9bn target adopted by Fine Gael, the EU and the Government.

And Labour plans to seek an extra year to bring the public finance deficit in line with EU targets, so that our deficit is reduced from 12pc of GDP to the EU target of 3pc by 2016.

The development comes as Fine Gael continues its attacks on Labour in an attempt to ensure that it is the biggest party in any coalition government between the two.

Party leader Enda Kenny yesterday declared that the country was "not banjaxed" -- in a reference to previous comments by Labour's Joan Burton -- and warned that increasing taxes more than cutting spending (a Labour policy) would "kill jobs".

"No country has ever taxed its way to economic recovery," he said.

The differing approaches between Fine Gael and Labour to tackling the economic crisis will make it more difficult for them to negotiate an agreed Programme for Government after the general election.

But the gap between the two did narrow in one crucial area yesterday, as Labour confirmed that it was dropping its two-year-old plan to impose a third rate of 48pc tax on individuals earning over €100,000 a year.

Labour finance spokeswoman Ms Burton said this was because such individuals were now paying more than that due to the Budget tax increases.

"If you take the 41pc tax rate and the Universal Social Charge, which is a tax of 7pc that brings you up to 48pc. In addition, you have PRSI, which brings you up to 52pc," she said.


Labour had been targeted on this issue by both Fianna Fail and Fine Gael, who had told voters that it would be seeking to impose further taxes on them.

Fine Gael finance spokesman Michael Noonan said Labour's comments on their third rate of tax looked like an acknowledgment that they needed to move from their previous position.

But he cast doubt on whether Labour would be able to get another year to meet the EU's 3pc deficit reduction target, given that the EU had already given Ireland an extra year, until 2015.

"I don't think there'll be any possibility of extending that to 2016," he said.

Mr Noonan said that Fine Gael and Labour had two different policy approaches, unlike in 2007 when there was a common platform. But he said there was "nothing unusual" about such parties coming together after a general election to form a government.

"It's more unusual to have a common platform," he said.

Labour TD Brendan Howlin said his party believed that it was not possible to take a further €9bn out of the Irish economy and still reduce our public deficit to the EU target of 3pc of national output.

"You can't simply shrink your economy and expect that will allow normal functioning business to continue. People are feeling the impact of their reduced pay packets already and that's having an impact in every shop and every restaurant," he said.

Irish Independent