Government making decisions and delivering
We have obtained a secure and stable mandate and we have agreed a Programme for Government which aims to deliver in the following priority areas:
restoring our public finances,
supporting the protection and creation of jobs,
restoring confidence and getting the economy moving,
fixing the banking system,
radically reforming our system of public administration, and
rebuilding Ireland’s reputation on the international stage.
Since taking office we have acted decisively and in the best interest of the country. Within three weeks of taking up office, we took firm and decisive action to reorganise and deleverage the domestic financial system in order to restore the banks to health and provide a secure financial system for deposits.
We identified priorities for action in our Government Programme and we are well on the way to delivering on these while barely more than two months in office.
Objectives of Jobs Initiatives
The intention of the measures announced today is to target resources at key sectors of the economy that can:
• Assist in getting people back to work,
• Provide opportunities for those who have lost their jobs to re-skill, and
• Building the confidence that will encourage consumers to spend.
The Jobs Initiative focuses our limited resources on measures that offer the greatest potential for expansion and employment creation in the domestic economy. It focuses on labour intensive areas that will generate jobs quickly.
The Jobs Initiative will help to support renewed economic growth. It will do so by boosting morale and helping to inject confidence back into the economy by encouraging people, particularly those with savings, to start spending again.
Economic and Public Finance Position
This year, we can look forward to positive growth after three successive years of declining economic growth. We fully expect this growth to accelerate as we move into 2012 and beyond.
We are committed to restoring sustainability to the public finances and to achieving a deficit of less than 3% of GDP by 2015. This reduction in the deficit will be done in a controlled manner so as to allow the economy to grow and create jobs while the adjustment takes place.
We need to be realistic – the Jobs Initiative will not dramatically improve things overnight but it is one of the early steps in the right direction by a proactive Government and steps that, collectively, will deliver a modest but positive improvement in the growth rate of the economy at no additional cost.
We have also reaffirmed our commitment to a 12.5% corporation tax rate.
We do not have the allure of a large domestic market or substantial public procurement to attract major international firms here, so we must use the other tools at our disposal.
How many jobs will the Jobs Initiative create?
We must differentiate between the jobs that the Government creates directly and those created by the private sector based on Government policies which incentivise private sector investment and spending.
The direct Government measures are:
• The Capital Works Scheme for schools will create approximately 2,400 and 480 indirect jobs [for the period of the works];
• Local and National Roads works will create 1000 jobs;
• The Retrofitting scheme will create approximately 2,000 jobs;
• The removal of the ceiling on the creation of non-Exchequer funded specialist post in the Higher Education Sector. This will allow the Higher Education sector to hire researchers from privately raised funds.
The Jobs Initiative will also provide almost 21,000 training and internship places which will prepare and assist jobseekers to find jobs and get workplace experience.
Jobs created by confidence building measures
As we have always said, the vast majority of sustainable jobs will be created by the Private Sector and it is more difficult to forecast how many jobs will be created in this indirect manner.
The confidence building measures are focused on the more labour intensive sectors of the economy so as to maximise the creation of jobs:
• The substantial reduction in VAT for the tourism sector will incentivise foreign visitors and also people to holiday in Ireland. Ireland already has a substantial tourism infrastructure, so this measure will incentivise people to use this infrastructure;
• The Retail and catering sector will also benefit from the reduction in VAT as it will create more economic activity in tourist destinations within the country;
• The reduction in employers PRSI will reduce the burden on employers in creating jobs.
It is estimated that 100,000 net jobs will be created between 2012 and 2015. [these jobs will be created by both the economic cycle through the return to economic growth and by the effect of Government policies.]
The following statistics illustrate the estimated return from certain policies:
• Every 1% increase in public procurement contracts won by small and medium sized firms would deliver €150 million extra in business for this crucial sector.
• Capital investment can stimulate economic activity as well as providing direct employment, with an average of 8 to 12 direct jobs being created per €1 million of capital expenditure. Well targeted investment in infrastructure can have significantly higher indirect job creation impacts in the medium term.
Comprehensive Measures to support economic and employment growth
Summary of Measures
• Halving of the lower rate of PRSI until end-2013 on jobs that pay up to €356 per week.
• Restoration of the Minimum wage.
• Reversal of decision to introduce employer PRSI on share based remuneration from 1 January 2011.
• The R&D tax credit legislation will be amended to enhance its accounting treatment flexibility.
• The tax measures announced today will be addressed in the upcoming Finance Bill which will be published 19th May.
• To support the tourism industry, a new temporary second reduced rate of VAT of 9% will be introduced with effect from 1 July 2011 until end December 2013. It will mainly apply to restaurant and catering services, hotel and holiday accommodation and various entertainment services such as admissions to cinemas, theatres, museums, fairgrounds, amusement park and the use of sporting facilities. In addition, hairdressing and printed matter such as brochures, maps programmes and newspapers will also apply at the new rate.
• The Air Travel Tax rate will be abolished.
• Short-term Visa Waiver Programme will apply to short stay visitors of 14 nationalities who ordinarily require a Visa to enter the State and will apply over a period from July 2011 to October 2012.
• In the region of 1000 jobs will be created by both the rehabilitation of local and national roads along with the implementation of smarter travel and management schemes.
• The retrofitting scheme is more labour intensive than other capital projects and the additional €19m Exchequer funding will create approx 2000 jobs.
• The Government will provide an additional €30m for school works in addition to the €41m already provided for under the summer works schemes. It will support approximately 2,400 direct and 480 indirect jobs for the period of the works.
• Relaxation of the Employment Control Framework for the Higher Education Sector by the removal of the numbers ceiling on non-Exchequer funded specialist posts funded on a full cost recovery basis, including the deferred pension cost.
Access to Credit (Temporary Partial Loan Guarantee Scheme)
• Lending targets for the two pillar banks will be fleshed out in the coming weeks. The role of the Credit Review Office will be looked at.
• Also as part of a package of initiatives we will be initiating a tendering process for the development of a temporary, partial credit guarantee scheme. The Government’s commitment will be for an initial period of one year. Further details of the scheme will be announced in June with a view to having a targeted scheme in place by the autumn.
• The Government will build on existing initiatives to promote greater access to procurement opportunities for SMEs, including through identifying and overcoming barriers to their participation in the procurement process. Every 1% increase in public procurement contracts won by small and medium sized firms would deliver €150 million extra in business for this crucial sector.
• This initiative will be piloted by IDA Ireland and is intended to complement IDA’s initiative to attract more fast-growth Emerging Companies to Ireland. Any “finder’s fee” would only be paid when IDA Ireland is satisfied that a sustainable job was in place. Any payment would have to take account of both the number and nature of the jobs and the overall cost to the State.
Microfinance Start-Up Fund
• The Government is committed to developing a suitable Microfinance Fund for the micro enterprise sector, drawing on funding from the National Pensions Reserve Fund and other sources. Arrangements for the establishment and operation of such a fund will be developed in consultation with the relevant stakeholders, with a view to formalising proposals in the context of Budget 2012.
Levy on Pension Funds
• A levy of 0.6% will be applied to the market value of assets under management in pension funds and pension plans approved under Irish tax legislation (occupational pension schemes, Retirement Annuity Contracts and Personal Retirement Savings Accounts).
• The value of the assets would be determined as at 1 January 2011, or on the last date of the accounting period ending in the twelve months preceding that date.
• The scheme will operate for a period of 4 years (2011 to 2014) with a view to raising yields of c. €470 million each year.
• The levy will not apply to the assets of pension funds in respect of the provision of retirement benefits to non-resident members.
• The levy will not apply to pension funds where the trustees have already passed a resolution (before 10 May 2011) to wind-up the fund and where the employer sponsors are insolvent and no longer in business.
• Legislative provision will have to be made to allow pension scheme trustees or administrators the option to adjust the benefits payable under pension schemes or plans.
• The chargeable persons for the levy will be the trustees or other persons (including insurance companies) having the management of the assets of the pension schemes or plans.
• The levy will be administered by the Revenue Commissioners. The levy will be payable in two tranches for each of the four years of its operation, including 2011.
Labour Activation Measures
There are four pillars to an enhanced labour activation strategy:
(i) Increased incentives for the unemployed to progress into employment, training or education
(ii) Increased levels of engagement with the unemployed
(iii) Increased and better targeted Training, Education and Work Experience places
(iv) Increased incentives for employers to create jobs
An additional 20,900 places will be made available for training, education and upskilling under the measures outlined below.
National Internship Scheme
This is a time limited scheme operating for two years only with 5,000 places. Internship placements will operate for a 6 to 9 month period with the payment of €50 per week additional to social welfare entitlements. It will operate in the private, public and voluntary sectors.
This provides 5,900 places for 3rd level places/spring board at level 6 and over of the National Framework of Qualifications. It will be targeted at those exiting sectors with structural unemployment and will commence this autumn.
Back to Education Initiative
This provides 3,000 places in back to education part time modules mainly at levels 1-4 and some at 5-6 on the National Framework of Qualifications. These places will be targeted at adults with less than upper second level education and will commence this summer.
Specific skills training (long-term)
This provides 1,000 places in specific skills long term training at levels 4-6 on the National Framework of Qualifications to be delivered by FAS. These places will be targeted at adults existing sectors with structural unemployment and will commence this summer.
Specific skills training (short-term)
This provides 5,000 places in specific skills short term training at levels 4-6 on the National Framework of Qualifications to be delivered by FAS. These places will be targeted at adults existing sectors with structural unemployment and will commence this summer.
Post Leaving Certificate (PLC)
This provides 1,000 places in PLC courses which are generally one year, full-time courses at NFQ Levels 5 and 6. PLC courses are aimed at school leavers and adults returning to education who wish enhance their employability and re-enter the labour market. These will be in place for 2011-2012 school year.
New and additional Internship, Training and Education Places and number of places to be made available under the jobs initiative
Programme/Scheme Administered by Number of additional places under Jobs Initiative
National Internship Scheme D/Social Protection/FÁS 5,000
Specific skills training (short-term) FÁS 5,000
Specific skills training (long-term) FÁS 1,000
Back to Education Initiative D/Education & Science 3,000
Post Leaving Certificate (PLC) D/Education & Science 1,000
Springboard (3rd level) D/Education & Science 5,900
Q. Will the expenditure / revenue measures in the Jobs Initiative have an impact upon our budgetary position?
A. The Jobs Initiative is designed to be cost neutral over the 2011-2014 period. The total cost of the package of measures – both revenue and expenditure – over the four years comes to about €1.8 billion. This will be funded on a cost neutral basis in order to fulfil the commitments in the joint EU/IMF programme of financial support.
Q. What measures are being implemented in order to offset the costs associated with the Jobs Initiative?
A. In order to fulfil the commitments in the joint EU/IMF programme of financial support, the cost of the measures being implemented will have to be compensated for by the implementation of offsetting measures. The cost of the measures being implemented as part of the Jobs Initiative will be offset through the introduction of a temporary levy on funded pension schemes and the reallocation of already budgeted for expenditure, thus ensuring that the overall impact is budgetary neutral.
Q. Will the Jobs Initiative have any impact upon the General Government Balance?
A. In an overall budgetary context, the Jobs Initiative which covers four years is designed to be cost neutral. Over the full four years, the cost impact will be met through the introduction of counter-balancing measures. In fact, for this year the impact of the measures would, if anything, slightly improve the position of the General Government Balance, but this is not presently being factored into the budgetary arithmetic.
Q. In light of the Jobs Initiative, will the Department of Finance be revising their tax revenue forecasts?
A. The Department of Finance does not intend to revise its aggregate tax forecast for this year. However, the Department will continue to monitor performance across the various tax heads and will, as is the norm, comment on the likely end-year outturn in the context of the mid-year Exchequer Returns. This will take on board the data for the first 6 months of the year and the expected performance over the second half of the year, including the impact of the tax measures announced as part of this Jobs Initiative.
Q. When will the Department next publish forecasts for tax revenue?
A. As is the normal practice, revised budgetary and economic forecasts will be published during the Autumn in the run up to the Budget. A decision whether or not to publish revised forecasts before then will be taken in light of emerging fiscal and economic data. At this stage there is no reason to believe that this will be necessary.
Q. Have the Jobs Initiative measures been costed?
A. In terms of the specific detail on the full range of expenditure and off-setting measures, officials from my own and Minister Howlin’s Department have worked closely with other Departments in preparing the proposals and assessing the quantitative and qualitative impacts. The yield and costs associated with the various measures being introduced are set out in detail in the summary of policy measures section of the booklet. When designing the overall Jobs Initiative package, we wanted to ensure that the compensating measures will have the least possible damaging effect on the economy. The aggregate cost of the range of measures within the Jobs Initiative is about €1.8 billion over the four years. However, this will be offset by the introduction of the pensions levy and reallocation of existing expenditures.
Q. Have the external funding partners been consulted in connection with the measures in the Jobs Initiative?
A. During the recent review mission with our external funding partners, it was agreed to include the Jobs Initiative in the revised programme of financial support. Subsequently, officials from my own and Minister Howlin’s Department briefed officials from the external agencies on the details of the Jobs Initiative.
Impact / Motivation for Jobs Initiative
Q. Why is the Government introducing the Jobs Initiative?
A. The implementation of a jobs and growth strategy is a key priority of this Government. The introduction of this Jobs Initiative within the first 100 days of the Government is an important step in this direction. The Jobs Initiative contains a range of measures aimed at assisting in employment generation – providing opportunities for those who are out of work, to restore public morale and confidence in the economy and encourage spending by consumers.
Q. What is the focus of the Jobs Initiative?
A. The aim of the Jobs Initiative is to assist in providing support to the labour market and contains a range of measures aimed at assisting in employment generation – providing opportunities for those who out of work, to restore public morale and confidence in the economy and encourage spending by consumers. The main expenditure and fiscal measures include;
* Capital Projects
- Labour-intensive, local capital projects including funding for programmes targeting home energy efficiency, school works, investment in regional and local roads & smarter travel projects totaling €135 million financed primarily through reallocation of existing resources;
* Labour Market Policies
- Halving of employers rate of PRSI to assist in the creation of jobs;
- Active labour market policies, including the creation of approximately 21,000 places in training / education / work experience programmes;
- Taxation measures aimed at primarily supporting the domestic tourism sector:-
• Suspension in air travel tax;
• New lower rate of VAT, aimed primarily at the tourism sector.
Q. How many jobs will the Jobs Initiative create?
A. The Jobs Initiative contains a range of measures aimed at assisting in employment generation and in providing opportunities for those who have lost their jobs to retrain and re-skill. The Jobs Initiative will assist in the restoration of public morale, the creation of confidence in the economy and encourage spending by consumers.
In specific terms, the Jobs Initiative contains targeted policies that seek to reduce the PSRI burden for employers and provide for 21,000 places in training, education and work experience programmes. The expenditure on labour intensive, local capital projects will help underpin employment throughout the country. Furthermore, the Jobs Initiative contains a number of specific measures focusing on the tourism sector, which itself is a relatively labour intensive sector.
Q. How will such a relatively modest package assist the economy?
A. The measures within the Jobs Initiative are designed to help lift public morale and raise confidence in the economy, provide jobs, to provide suitable job placement for unemployed persons and to encourage spending by consumers. It is intended that over its duration this Initiative will help leverage additional spending and investment by both consumers and firms.
Q. Has the Government carried out a Cost Benefit Analysis of the measures in the Jobs Initiative?
A. The Jobs Initiative is aimed at boosting employment growth and economic recovery. In cost-benefit terms, as well as social and economic terms, getting people back to work is the number one priority of this Government.
A memorandum has been brought to Government outlining details of the Comprehensive Review of Expenditure. In this regard, the process of identifying savings and reforms will commence shortly and will be completed by end-September. More generally, the Government is committed to securing value-for-money in every aspect of Government spending, and I will be taking this consideration fully into account in the context of the measures to be introduced as part of the Jobs Initiative. In line with the Government Programme, we will be developing and putting in place new mechanisms to ensure that value-for-money is achieved in a systematic and transparent way, including publication of cost-benefit analyses of major projects and proposals. This new approach will inform Government policy-making into the future. In addition, the Jobs Initiative as outlined in the Programme for Government incorporates employment-generating capital projects, which are subject to the capital appraisal guidelines and existing requirements for cost benefit analysis.
Q. When will the legislation to give effect to these measures be introduced ?
A. I would anticipate that the necessary legislation to give effect to the measures outlined in the Jobs Initiative will be contained in the Finance and Social Welfare & Pensions Bills.