AN INCREASE in property tax on second homes, a pension levy for public servants and the establishment of a national recovery bond are all on the table in crucial discussions between Government, employers and unions which resume this morning.
Government sources said the question of property tax was “very much on the cards”. Initially this is likely to be confined to second homes.
In last October’s budget, a tax of €200 per annum was imposed on owners of holiday or second homes. This established the principle, and an increase in the amount to as high as €600 has been suggested. Any proposal for a tax on principal homes is likely to be made initially to the Commission on Taxation. The Government is conscious the issue of ability to pay would have to be confronted.
The proposal for a national recovery bond initially came from the Irish Congress of Trade Unions. It sees it as an innovative way for the Government to raise funds from members of the public. Government sources said last night: “We are talking about that. It’s an interesting idea. It has attractions.”
The notion of a pension levy on public servants rather than a pay cut was also described as having “some attractions”. Rather than the stark option of a pay cut, public sector union members would be faced with the prospect of making a contribution to the stability of their pensions. Government sources are conscious of the fact that it would still mean a cut in take-home pay – and that this creates difficulties for the unions.
However, public service pay cuts were not ruled out. Speaking on RTÉ's The Week in Politicslast night, Minister for Justice Dermot Ahern said: "Everything is on the table, that is the reality. It costs €60 billion to run the country annually and only €40 billion is available from tax."
In the talks starting at 11am today, the Government will be providing “more developed ideas on how an agreement might look”. But it is highly unlikely that there will be “specific proposals on pay”.
Today’s talks will focus on a framework and ensuring that all sides are in broad agreement on general principles. The Cabinet meets tomorrow, but the critical issue of pay will not be dealt with until later in the week.
The union side is highlighting serious concerns about security and viability of private sector pensions, and insisting this must be addressed by the Government. Unions are stressing the need for a long-term deal or social solidarity pact covering the next five years or so.
The Government needed to realise it was not a question of getting “substantial” concessions from unions, but of making “minimal changes” to the rest of society, union sources said. There was more at stake than “the soundbite over pay cuts”.
On RTÉ last night, Mr Ahern also spoke of the need to broaden the tax base. “One of the aspects that could be looked at is, for instance, the second homes. There are plenty of people in this country who had the money over the good years to buy second houses.”
Government sources emphatically rejected any suggestion that a rise in income tax was under consideration: “If you raise tax, you get less tax in. You’re killing confidence.”
Taoiseach Brian Cowen met with four senior trade union leaders on Saturday in an attempt to advance the process. Union leaders had expressed surprise that the Government failed to produce its own proposals for reducing public expenditure by €2 billion this year at talks involving the social partners on Friday.
One highly placed source said that there had been “frank discussions” between the Taoiseach and the union leaders at the meeting on Saturday. “Everyone is now clear what the ingredients will be if there is to be a deal,” the source said.