Taxpayers will pay billions to avert pension 'time bomb'
Howlin wants public money to reintroduce pension reserve fund
The Government wants to siphon billions in taxpayers' money into a special fund for public sector workers in a bid avoid a pensions "time bomb".
Public Expenditure Minister Brendan Howlin warned that the State is facing a massive pension crisis because of an aging population which is living much longer.
Mr Howlin's warning came as the Government unveiled its €1.5bn pitch of tax cuts and additional spending measures to voters ahead of the next General Election.
Mr Howlin last night said he strongly favours a reintroduction of the taxpayer-funded pension pot - the National Pension Reserve Fund - that amounted to €25bn before it was raided during the financial crisis.
"Bluntly, I think that would be a good thing. Both Michael and I would agree that a restoration of the Pension Reserve Fund would be a good idea," he said.
Mr Howlin said the Government has already taken measures to reduce the cost of public sector pensions, with the introduction of a new single pension scheme to reduce the cost of public pensions by 35pc over time.
Speaking in the Dáil, as the Government unveiled its first Spring Statement on the economy, Mr Howlin warned the cost of State pensions will soar by €200m per year until 2026.
He also warned that people were not saving enough for their futures but insisted there is "no threat" to old age pensions.
"The Government is committed to pension provision and sustaining the value of those pensions," he added.
After weeks of anticipation, Finance Minister Michael Noonan revealed the Government could exceed €1.5bn in additional spending and tax cuts but advised there would be "no quantum leap beyond that".
He warned against returning to a "boom and bust cycle" but outlined plans to slash taxes and pump money into public services over the next five years.
However, the Government faced accusation of staging a "back slapping" event as it failed to give any detail of how it planned to spend its billion euro war chest.
Mr Noonan pledged to cut income tax and USC for every worker in the country and lure thousands of emigrants home with more favourable tax measures. In relation to the USC, he said October's Budget will see 500,000 people no longer pay the charge.
He signalled that he would use a mix of tax measures to ease the burden of personal taxation on low and middle income earners.
Self-employed and small business owners are set to be prioritised in the Budget as Mr Noonan seeks to reduce the margin of tax they pay compared to PAYE workers.
He said it's "difficult to justify the extent of the margin".
He also gave the clearest indication yet that the Government will not seek a bank recapitalisation from Europe, clearly indicating it is "tending" towards a sell-off of AIB and PTSB.
Mr Noonan said the approach of selling off the Government's stakes in banks appears likely to deliver a better deal for the taxpayer than pursuing bank recapitalisation from Europe.
While claiming a deal on our debt is not "off the table", Mr Noonan said going through the market "gives us the best return".
"While we haven't taken anything off the table and will make a decision towards the end of the year, at present we are tending towards best value in the market," he said.
Meanwhile, a Government source last night indicated that the Central Statistics Office is backing Ireland's case to the EU Statistics Service to keep Irish Water off the Government's books. "This strengthens Ireland's case for Irish Water to borrow without increasing the national debt," the source said.
Meanwhile, Mr Noonan pledged to "reduce the anxieties" around the potential for spiralling property tax bills.
He said measures will be introduced in time for the Budget after he examines an expert report from Dr Don Thornhill.
"Whatever the solution is, it will be a solution designed to reduce the anxieties," he said.
Mr Howlin said everyone would benefit from the "fruits of economic growth" and promised to invest in social welfare, education, health and childcare, while also increasing public sector pay.
Spring statement: the main points
- The economy will grow by 4pc this year and by 3.75pc every year until 2020.
- There will be €1.5bn - split evenly between taxes and spending - available in October's Budget.
- The Government will introduce an "expansionary Budget" this year and every year until 2020.
- The European Commission has allowed greater flexibility in how Ireland can spend its money.
- Taxpayers' money invested in three of the country's main banks - AIB, Bank of Ireland and PTSB - will be "fully recovered".
- Pressure is being placed on six main financial institutions to reduce interest rates.
- The country must never again be allowed to become so reliant on transaction property taxes.
- Employment is expected to go beyond two million next year, with all jobs lost during the recession to be replaced by 2018.
- Measures to address mortgage crisis are due in the coming weeks.
- Brendan Howlin to open talks with public sector unions on pay.
- The Government will pump €750m into social welfare, education and health.
- There will be a need for an extra 3,500 primary and secondary school teachers by 2021.
- An effective childcare policy is another issue the Coalition will address in the coming months.
- Cost of State pension payments will rise to €200m a year by 2026 - but there would be "no threat" to payments.