The row between Fine Gael and Labour over their respective financial plans continued today following the launch of the Fine Gael election manifesto.
Labour’s justice spokesman Pat Rabbitte said he did not believe any party could now present itself as a “low-tax” party. But he indicated there were “hugely important matters” on which the two parties were “in broad agreement”.
He said there were a number of areas in the Fine Gael document where people would be hit by cuts or taxes, including child benefit, car tax, health insurance and water charges.
“I don’t believe the low-tax party slogan that Michael Noonan and his colleagues have put on Fine Gael,” he said. “We now have a marginal tax rate of 52 per cent or 55 per cent if you are self-employed. So nobody can present themselves going into this election as a low-tax party.”
Mr Rabbitte repeated assertions by Labour at the weekend that there was a “black hole” in the Fine Gael document, which meant it would have to find an additional €4.5 billion to €5 billion between now and 2014 in order to reduce the deficit to 3 per cent of GDP.
He said this had been highlighted by a European Commission document which said that if this target were to be reached it would “risk choking the recovery and further weakening the banking sector, possibly resulting in additional budgetary costs”.
Fine Gael’s finance spokesman Michael Noonan said it was a “bizarre claim” by Labour that showed “a misunderstanding of the figures”.
Mr Noonan said Fine Gael’s figures were “based on growth assumptions”. The assumptions from 2011 to 2014 were based on Department of Finance figures that had been agreed by the IMF and EU, he said.
He said the budgetary adjustment was to be €15 billion. Some €6 billion had been taken care of by the outgoing government and that meant €9 billion remained.
“Europe says that if we do the €9bn, we will be well on our way to getting 3 per cent by 2014.”
Speaking on RTE's News at One, Mr Noonan said when the figures were worked through, the Labour figures were broadly similar to Fine Gael's.
“We are on the same growth predictions except the way they build it up is different. They [Labour] have lower growth for 2011 and 2012 than we have, but they have higher growth for 2013 and 2014," he said.
“The whole thing is about the debt/GNP ratio. If you look at GDP at the end of the period, on the basis of the Department of Finance figures, GDP is €183.5 billion. That’s our figure as well. On the basis of the Labour figures, it’s €183.2 billion. There’s only €300 million between us. So there isn’t a black hole – this is totally bizarre.”
Mr Rabbitte said that if the outcome of the election was a Fine Gael/Labour government, there were “hugely important matters on which we are in broad agreement”. These included the reform of the health service as well as “going to Brussels to mend fences and start the multilateral renegotiation of the EU-IMF deal”, he said.
“Big matters. But if the two parties have to sit down together, there will be a necessity for considered negotiation on this issue of the economic framework for the next four or five years," he said.
Mr Rabbitte said Labour had committed to 3 per cent by 2014 when it had been necessary to "pull on the green jersey” to help keep Ireland in the international bond markets. Mr Rabbitte said this had failed and the negotiations had been handled in a “ham-fisted” way by the Government, which had committed to a four-year plan to meet the EU-IMF targets.
He said we were now in a situation where if we proceeded at the pace Fine Gael wanted to with cuts, it would “choke the economy and drive it into a deflationary spiral”.
Mr Noonan insisted Labour’s plan to cut the deficit through a combination of 50 per cent tax increases and 50 per cent in savings elsewhere would require “a lot higher tax” if it went ahead, and it would mean government borrowing.
Mr Rabbitte said there would be additional borrowing only if the terms of the bailout deal were not renegotiated and the “corollary” of higher taxes was high cuts. “And people have taken about as much hardship as they can take.”
He said €20 billion had already been taken out of the public finances “and families out there are hurting and are in pain”.