Budget Overview

The Irish economy has been severely affected by the worst global recession since the Great Depression. This is due to unfavourable international circumstances as well as an economic slowdown at home. With less people working and people spending less, associated tax revenues have fallen dramatically.

We have experienced a serious deterioration in the public finances. We are borrowing about €420 million a week to fill the gap between what we are taking in taxes and what we are spending on public goods and services.

This is unsustainable.

Taxation

Our tax revenues have reverted to 2003 levels, but our day-to-day-spending on services has risen by 70% in the meantime.


                     Tax Revenues in € Billions

Changes in taxation over past years have been highly progressive:

· The top 4% of earners now pay 48% of all income tax;

· The top marginal tax rate is now effectively 52%

· 50% of earners pay no income tax at all.

Further increases in marginal rates would hurt competitiveness and make it harder to attract new investment and retain highly skilled workers. High marginal tax rates in the early to mid 1980s contributed to delayed economic recovery.

Expenditure

Public spending is at unsustainable levels and must be reduced. It rose rapidly during boom years when funds were available. For example, in the past five years, with total inflation of 11.9%, the basic jobseeker's allowance has been increased by 37.7%.

Tax take this year is estimated to be €32bn. If we take no action in Budget 2010, we will be spending €58 billion, a 3.5% increase in expenditure. This cannot continue. Our experience of the 1980s shows us that if we delay in tackling this problem, we will quickly get into a spiral of mounting debt and ever increasing interest costs.

Public Sector Pay

Over 1/3 of day-to-day expenditure is on public sector wages. We borrowed 25% of every public sector workers salary in 2009. This will have to be repaid in the future either by us or our children. This cannot continue indefinitely

On average public sector pay has already been reduced by 7% through the pension levy. Senior public sector officials will have to take further pay cuts. For the first time, salary rates will be benchmarked against comparable European countries

We are committed to achieving €1.3 billion in savings from the public sector wage bill.

Taking Tough Decisions

Fianna Fáil is committed to confronting the challenges before the country. All areas of public expenditure have to be looked at in making the required €4 billion adjustment.

Decisions will be based on fairness and equity. The most vulnerable in society will be protected as much as possible. Fianna Fáil is committed to restoring the economy, to providing employment and to ensuring we are in a position to benefit from the worldwide recovery when it comes.