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Labour to demand new deal on welfare payments

THE Labour Party is to press for changes to its Coalition deal with Fine Gael as the bitter fallout from the Budget negotiations continues.

Labour is under fire for cutting welfare payments and breaking election promises to protect child benefit -- without getting tax increases for higher earners.

Cabinet ministers and senior Labour sources say they have "lots of ideas" about changes to the Programme for Government -- struck after last year's general election -- which has already been stretched to its limits.

However, they are warning that welfare rates must be maintained, and any changes are unlikely to happen until next autumn.

While some in Fine Gael say renegotiation will happen, others are firing warning shots that the original agreement must be implemented -- and that public sector, semi-state and social welfare reforms must be accelerated.

The key pledge in the original document -- which married Fine Gael's demand not to increase income taxes and Labour's commitment to maintain basic welfare rates -- has caused major friction.

It led to a split in Cabinet in the lead-up to the Budget, when Fine Gael regarded a Labour demand to increase the Universal Social Charge (USC) for high earners as a breach of the agreement.

The senior party countered with a tit-for-tat proposal to cut all welfare rates, which led to Labour backing down.

However, sources say there are unlikely to be any renegotiation moves until next autumn, when Ireland's presidency of the EU is out of the way.

Communications Minister Pat Rabbitte last week said a renegotiation was not yet in his sights, but added: "I wouldn't rule out, at some stage, tweaking the Programme for Government in the light of experience."

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Labour sources say they will still guard the welfare pledge, but when asked if they would seek any move on tax, one would only say: "If you're renegotiating, you're renegotiating. I wouldn't expect it until the autumn. But the €188 a week would be important for us."

With an anticipated Cabinet reshuffle at the same time, the autumn could spell a period of major change at the Coalition's mid-term point.

"It's normal enough for a coalition to produce a revised Programme for Government at mid-term," a senior Fine Gael minister said.

Labour will be keen to extract some measures from Fine Gael, especially after a bruising first two years in office for the party.

But other Fine Gael figures were far more dismissive of any approaches, saying the original document must be adhered to.

"We still need to implement the reforms we only agreed 20 months ago," an FG source said.

"Government can add to these commitments on an ongoing basis. The Budget provided investors, businesses and families with some certainty about the road ahead and some light at the end of the tunnel.

"Reinforcing this certainty and building on the growing signs of confidence is key to accelerating recovery.

"Renegotiation of the Programme for Government has not been discussed. Our priority is to implement what has already been agreed, most notably public service, welfare and semi-state reforms needed to get people back to work."

Tanaiste Eamon Gilmore, Mr Rabbitte and Public Expenditure Minister Brendan Howlin spent the past few days steadying their party's nerves after chairman Colm Keaveney's Budget rebellion over welfare cuts.

A number of Labour senators are threatening to vote against the welfare changes this week, which could cause a government defeat in the Upper House and delay the introduction of the changes by 90 days.

Mr Gilmore yesterday failed to back Mr Rabbitte's claim that €3bn in Anglo Irish Bank debt will not be paid in March.

The Labour leader would only say he hoped a deal would be done by the payment deadline of March 31. Taoiseach Enda Kenny has also failed to back Mr Rabbitte.

Finance Minister Michael Noonan reportedly told Mr Rabbitte the promissory notes were none of his business during angry Cabinet exchanges last week.

But Mr Gilmore yesterday insisted "Pat Rabbitte and Michael Noonan aren't squabbling about anything".

"This Government is united and determined to find a resolution to the bank debt difficulty that the previous Government landed us with," he told 'This Week' on RTE Radio.

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