YFG_Pre Budget Submission 2015

SEPTEM

BER 2014

PRE BUDGET SUBMISSION 2015Young Fine Gael

HOPE FOR OUR GENERATION

Young Fine Gael PRE BUDGET SUBMISSION

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Introduction 3

Key Recommendations 4

Our Proposals 5

Solving the Housing Crisis and Inspiring Investment 5

Freezing Prescription Charges for Medical Card Holders 5

Meeting the Promise on Mental Health 6

Protecting Students 6

Provide a Tax Cut to all Workers 7

Recycling Levy 7

Revitalising the Commercial Banking Sector 7

Removal of One and Two Cent Coins from Circulation 8

Youth Unemployment 9

Stimulating Start-Up’s 9

Excise Duty 10

Young Fine Gael

PRE BUDGET SUBMISSION 2015

CONTENTS

SEPTEMBER 2014

HOPE FOR OUR GENERATION

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The budget for 2015 must be about hope. We now have reason to believe that Ireland is now on the right track and the days of regressive budgets is now at an end. With recent economic GDP forecasts being revised upwards numerous times, most recently from 4.5% growth to now 4.7%, we now have leeway, but most of all the responsibility, to give something back.

The Government has achieved what it was elected to do - restore the economic sovereignty of this country by escorting the IMF out and having the keys to our republic now firmly within our possession. This means we now have something that we, for a number of years, had to do without - choice. We now have the choice to embark on our own fiscal policies and finally, after Fianna Fáil sent us over an economic cliff, we can decide what we want to do.

Young Fine Gael believes that this budget must be about drawing a line under our dark past and should now be about giving something back to hard-pressed middle and lower paid workers. They have had to bear the brunt of the extremely difficult decisions that have had to have been taken over the last number of years and it is time they got some relief.

But not only have workers been affected, students have had to deal with successive increases in the student contribution charge in an attempt to put a plaster over our Third Level Funding crisis. Young Fine Gael again makes the case that in order for Ireland to credibly funded education for both this, and future generations, a Graduate Tax is the only way.

Young Fine Gael is proposing a series of measures that we believe can help give our generation something they deserve, hope.

I wish to thank members of the Young Fine Gael National Executive and across all of our branches for helping to build these proposals.

Dale McDermott

President

Young Fine Gael

INTRODUCTION


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Temporarily abolish the 13.5% VAT on new-home sales.

Review building height restrictions currently in operation in our cities.

Propose a referendum on Rental Caps.

Not to increase prescription charges for Medical Card holders from the current €2.50 per item.

If any further savings in the health system are needed, they should come from Generic Substitution and Reference Pricings.

Allocate €35 million per year to community based Mental Health Services.

Freeze the Student Contribution at €2,750 and seek to implement a Graduate Tax to fund Third Level Education. No further cuts to the Student Grant.

Abolish the USC and incorporate it into the income tax system.

Reduce the Standard Rate of Income Tax from 20% to 19%.

Widen the Higher Rate Bands from €32,800 to as much as possibly allowed.

Introduction of a small refundable levy onto bottles and cans.

Reduce barriers to entry for foreign firms operating in the Irish Banking Industry.

Increase efforts to sell Government shares in domestic banks.

Removal of the one and two cent coins from circulation.

Implement the 15 recommendations included in the Young Fine Gael Youth Unemployment Policy “Exiting the Crisis, Preparing for the Future”.

Extend the policy that any relief not availed of by the start up company in the first 4 years of trading, to be carried forward for use in subsequent periods.

Increase cost of a packet of 20 cigarettes by €0.60 from €9.40 to €10.00.

Offset the increase in cigarettes by an equal level reduction being made, depending on the amount return forecast on cigarettes, on beer and wine.

KEY RECOMMENDATIONS

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SOLVING THE HOUSING CRISIS AND INSPIRING INVESTMENTKey recommendations 1-3

With a growing population in our country blended with a severe lack of supply of housing stock in Dublin, Young Fine Gael believes that this needs to be urgently addressed and fears that further inaction will leave a significant portion of our generation without a roof. YFG proposes a number of initiatives aimed at making housing more affordable for those who need it most and also to stimulate our stagnant construction sector:

1. Temporarily abolish the 13.5% VAT on new-home sales.

2. Building Height Restrictions – YFG appreciates the raw beauty of Dublin City; such as beautiful historic element to it. But we also believe that the building height restrictions that are in place in Dublin need to be reviewed. Previous concerns have been noted that international investment in our capital city is possibly being diverted due to these obsolete height restrictions that need to be changed if we are to become a real 21st Century city1.

3. Referendum on Rental Caps - A regulated rental market is essential for modern Ireland. Rental costs in line with the consumer price index currently exist in countries such as US, Italy, Netherlands, Spain and Switzerland and form part of a fully regulated rental market. The Government, however, does not have the legal authority to implement a rental cap due to the constitutional status on the matter. YFG proposes that a referendum be put to the people on the issue.

FREEZING PRESCRIPTION CHARGES FOR MEDICAL CARD HOLDERSKey recommendations 4-5

Over the last three years prescription charges on Medical Cards have brought in €142.9 million since 2011 and is projected to take in €120 million euro this year.

YFG believe that to increase charges from the current €2.50 per item (maximum of €25 per household) would be undue burden on families. The rapid increase in this charge from the initial €0.50 to the current €2.50 has proven to be a hard pill to swallow for many households. To increase this even further would put the health of many people at risk and would then put further pressure on the health services as people would be unable to pay for their medication.

YFG believes that any further savings in the health system should come from Generic Substitution and Reference Pricings. This is projected to generate savings of €50 million in 2014 and will generate further savings in further budgetary cycles due to more drugs being added to the List of Interchangeable Products by the Health Service Executive.

YFG also believes that there should be no increase on charges for those on the Drugs Payments Scheme. The current charge of €144 per month is a 70% increase on the initial rate of €85 set in 2006. For many families, especially young people, affordability of healthcare is a major concern and by not increasing these charges Government can ensure continued access to medication.

1 http://www.independent.ie/irish-news/new-docklands-plan-could-deter-major-investors-29971514.html

OUR PROPOSALS


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MEETING THE PROMISE ON MENTAL HEALTHKey recommendation 6

The Programme for Government promised to give €35 million per year to community based Mental Health Services. Under this Government has only given €20 million per year. This is once again showing how the mental health services are the cinderella of the Health System. YFG believes strongly in the implementation of ‘A Vision for Change’ which has been neglected since its launch in 2006.

Ireland is suffering from historic under-investment in child and adolescent psychiatric services, which has resulted in services that are either sporadic or non existent. More than 200,000 children or adolescents have a mental or behavioural problem.

According to the National Suicide Research Foundation, there are approximately 550 deaths from suicide in Ireland every year, approximately 12,000 case of deliberate self harm treated in our hospitals and by our GPs every year and approximately 60,000 cases of ‘hidden’ or untreated cases of deliberate self harm every year. Men and young people in general are at the highest risk of suicide and self harm and community based services should be available to ensure that they can access services locally and ensure that they start on the road to recovery.

People can and do recover from mental illness. Ireland deserves a 21st century community based person-focused mental health service, based on the principles of recovery. One in four of people will suffer from a mental health problem at some stage in their lives. Early intervention is key and community based services as envisaged in ‘A Vision for Change’ .

PROTECTING STUDENTSKey recommendation 7

In 1995, the Fine Gael led Rainbow Government introduced free fees alongside a student contribution charge of £150 (€191). Following years of increases this charge now stands at €2,750 with an increase scheduled in budget 2015 to €3,000.

YFG believes that the Government should freeze fees at €2,750 and provide a much needed relief to hard pressed families and students.

It is YFG’s firm view that education is a right, not a privilege.

While we recognise the need to adequately fund our third level sector, YFG has long believed that this should take place through a Graduate Tax. This would lead to the abolishment of the student contribution charge over time. By breaking down the financial barrier to education that is currently in place and instead allowing students who have benefitted from third level education to make a contribution later on in life, we believe this is the fairest and most equitable way of securing the future prospects for education in our country. YFG will be launching a detailed policy proposal on this topic in the coming months.

YFG also believes that the Government should protect the student grant in the upcoming budget. With rental rates rising rapidly in Dublin and in other cities, we should not erect more barriers to third level education in Ireland. Instead, we firmly believe that the Government at this crucial point needs to ensure every student gets the support they need to successfully complete third level education.

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PROVIDE A TAX CUT TO ALL WORKERSKey recommendations 8-10

Since the beginning of the crisis, our top marginal rate of tax has risen to 52% and the introduction of the Universal Social Charge (USC) has proven itself to be a confusing and unnecessary addition to our tax system.

YFG believes that the Government should abolish the USC and incorporate it into the income tax system. USC was brought in as a temporary measure and by abolishing it, Government will be signalling that the recovery is well and truly on the way.

YFG calls for a 1% reduction in the standard rate of tax from 20% to 19%. Such a reduction would provide an important incentive to work and will go a long way to reducing the burden on many in our society.

YFG also calls for an increase in the bands on the higher rate of tax. Currently, someone who earns over €32,800 will be subject the an onerous rate of 41%. We believe that this needs to be increased by as much as the Government’s budgetary situation allows to ensure that Ireland’s squeezed middle get a much needed break.

RECYCLING LEVYKey recommendation 11

YFG is committed to the protection of the environment and this levy would see dramatic levels of improvement in recycling and in keeping our streets and public areas clean, it would also provide funds which could be used to further other recycling projects or community projects. This levy is based on a similar system in Germany and also in parts of Canada.

The introduction of a small refundable levy onto bottles and cans would encourage recycling and generate funds. A specified levy would be applied to various items on purchase, however this would be redeemable upon the correct recycling of the item.

RATES:● Large Glass bottles: €0.50● Small glass bottle, jam-jar or large plastic bottle: €0.20● Cans and small plastic bottles: €0.10

The items purchased can then be returned to the store they were purchased from or to special recycling centres in exchange for the redeemable levy. These centres would initially be set up from the profits and would also create employment.

REVITALISING THE COMMERCIAL BANKING SECTORKey recommendations 12-13

YFG call’s on the Government to increase competition in the commercial banking sector through two main measures: Reducing barriers to entry for foreign firms operating in the Irish Banking Industry, in particular for commercial banks offering personal and corporate services; and increasing efforts in the coming year to sell Government shares in domestic banks.

In recent years, there has been a noted recovery in the Irish financial services industry, which has seen companies such as Deutsche Bank increase their back office operations in Ireland2. However, this recovery has been uneven as the structure of commercial banking remains weak, particularly in terms of lending to SME's, mortgage loans and other lending facilities3. The

2 http://www.independent.ie/business/irish/boost-as-deutsche-bank-announces-700-new-jobs-for-dublin-29757269.html3 http://merrionsolutions.com/economics-june-data-set-to-show-continued-weakness-in-irish-credit-figures/


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problems of the domestic commercial sector have been exacerbated by the withdrawal of both domestic and foreign firms, such as ACC Bank and Danske Bank from the Irish market in recent years. Similarly, the dominance of Government owned domestic banks operating in a non-competitive industry has hampered the recovery of the banking sector in Ireland.4

Therefore, we would call on the Department of Finance (through its Financial Services Division) to work more closely with the Central Bank of Ireland on reducing barriers to entry for new and foreign firms and increasing competition in the commercial sector. This could be achieved through introducing measures which would allow consumers switch personal accounts more easily, and pursuing a reduction in the time taken for inter-bank transactions. The introduction of such firms could increase lending in the sector, as they would lack the crippling liabilities of many domestic banks, which is presently holding back commercial lending to businesses and individuals.

Similarly, a careful privatisation of remaining Government shares in domestic banks could see a renewed focus within the commercial sector through a change in management. This would also force a greater reliance on commercial activities and remove the present dependency on the state that exists within such domestic banks. Overall, the measures proposed above, in addition to further measures aimed at increasing competition in the commercial banking sector would help sustain the recent economic recovery of the state.

REMOVAL OF ONE AND TWO CENT COINS FROM CIRCULATIONKey recommendation 14

YFG calls for the removal of the one and two cent coins from circulation in Ireland. Estimates from the Central Bank of Ireland indicate that it costs 1.65 cents to mint a 1 cent coin, while a 2 cent coin cost 1.97 cent to mint. Since 2004 Ireland has lost over €4.5 million euro's from the minting cost of producing one cent coins.5From a practical point of view, the coins serve little purpose as they tend not to be accepted by machines and serve little practical purpose as consumers tend to hoard them rather than use them in transactions.

The removal of such coins from circulation has a precedence within the Eurozone, where they have been discontinued in the Netherlands and in Finland. Additionally, the practice of rounding up a total bill, rather than the individual cost of items has been shown to curtail any inflationary effects. Thus the total bill would be rounded up to the nearest five cent. So for example if a total bill came to €51.23, the consumer would pay €51.25, while if the total bill came to €51.22, the consumer would pay €51.20. However, if the transaction took place via debit card or any other form of payment which didn't require physical payment, then the actual bill, rather than the rounded figure would be paid.

Already, there has been a successful piloted programme for the removal of the one and two cent coins held over a nine week period during the Autumn of 2013 in Wexford town.6 As proof in point, 51% of respondents surveyed originally felt that rounding would lead to inflation prior to the trial, subsequently dropping to 2% after the trial period. On the whole, this trial programme proved that the removal of both coins was a practical and successful measure that would provide savings for the state, and could be introduced nationwide if an adequate period, in the region of three months, was provided for consumers and businesses to prepare for it.

4 http://www.irishtimes.com/business/sectors/financial-services/eight-banks-to-pay-17-6m-in-irish-stress-test-costs-1.19246595 http://www.centralbank.ie/paycurr/paysys/Documents/National%20Payments%20Plan%20-%20Final%20Version.pdf.6 https://www.centralbank.ie/paycurr/Documents/Wexford%20Rounding%20Trial.pdf.

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YOUTH UNEMPLOYMENTKey recommendation 15

In June, Young Fine Gael published a document entitled “Exiting the Crisis, Preparing for the Future”7. We believe that these policy proposals need to be implemented if we are to seriously tackle youth unemployment in Ireland. GOVERNMENT 1. That An Taoiseach should appoint a Minister of State for Youth Unemployment and

Enterprise Affairs.

EDUCATION 1. Mandatory work placement for third level students to ensure that third level students have more practical

experience leaving education. 2. More emphasis on multilingualism to help improve our students compete in a more globalised world. 3. Mandatory Leaving Cert or Leaving Cert Applied before leaving post-primary education to level the field and make

sure that all students get the best start. 4. Develop a comprehensive system in place for young people out of work based on best practice to help tailor plans

that best suit the young person.

YOUNG FARMERS 1. Incentivised funding for young farmers with a Green Cert to guarantee the highest standard of farming. 2. All funding should be accompanied by mentoring to ensure that young farmers get the most out of funding.

YOUTH ENTREPRENEURSHIP 1. Promote entrepreneurship alongside volunteering and multilingualism within the education system. 2. Ensure that those who are self-employed have equal access to the Social Welfare scheme. 3. Develop a fair business society where failure is allowed so that businesses and individuals are able to grow and learn.

WELFARE 1. Introduce a system of mutual obligation into the social welfare system. 2. Offer tax incentives to companies who hire long-term unemployed young people.

TAX SYSTEM 1. Lower businesses costs by introducing an Earned Income Tax Credit for low paid workers.

CHILDCARE 1. Expansion and full investment in the Teen Parents Support Programme 2. Extension of the UCD Childcare scheme across the third level sector

STIMULATING START-UP’SKey recommendation 16

Finance Act 2013 amended the legislation to allow any relief not availed of by the start up company in the first 3 years of trading, due to losses or a shortage of profits, to be carried forward for use in subsequent periods. However, the amount of the relief allowed in any subsequent year cannot exceed the employers’ PRSI contributions of the start up company for that particular year. As before, the relief for employers’ PRSI contributions is capped at €5,000 per employee, and the maximum tax that may be relieved is €40,000 in any one year.

YFG proposes that this be extending to the first 4 years of trading as a way to further support our start-up companies.

7 Young Fine Gael Policy Document on Youth Unemployment, Exiting the Crisis, Preparing for the Future: http://www.yfg.ie/images/yfg_ideas.pdf


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EXCISE DUTY Key recommendations 17-18

Young Fine Gael propose that the cost of a packet of 20 cigarettes be increased by €0.60 from €9.40 to €10.00. While excise duty is always seen as a way for the Government to make a “quick buck”, we believe that in line with the Governments anti-smoking agenda, further financial barriers should be erected to smoking to provide as much as a disincentive as possible.

To offset the increase in the cost of cigarettes Young Fine Gael proposes that an equal level reduction is made to the cost on beer and wine. This level of reduction would be dependant on the amount that is forecasted to return on the increase of the cost of cigarettes. This would offer further support to our recovering tourism sector.

Fine Gael National Headquarters, 51 Upper Mount Street, Dublin 2Phone: 01 619 8444 Fax: 01 662 5046

Email: [email protected] Web: www.yfg.ie