Irish Economy and Budget Watch / / /Emergency Budget Announced for April 7th

cactus flower wrote:

In the meantime, 8 million euro to be spent on doing up rented offices for the Financial Regulator - annual rent to be about 2.5 million.

http://www.tribune.ie/news/article/2009/mar/01/central-bank-and-regulator-to-spend-8m-on-new-offi/

Does this belong on one of EVM's "vote" threads?

Yep - and they didn't take the lowest tender either ..

Cut to Department of Finance Vote ??

From the Terrorgraph - They give a rough overview of figures you'll find in the final days of the celtic tiger:

http://www.telegraph.co.uk/news/4864532/Breaking-point-for-the-eurozone.html

Quote :

In 2006, Ireland (population 4.2 million) built 88,000 houses, compared with 150,000 in the UK (population 60 million). At one point, a fifth of the workforce, swelled by tens of thousands of immigrants, worked in construction.

Irish families on middle and even low incomes cashed in their pensions or borrowed heavily to buy second, third or even fourth properties, believing they could rent them out to the migrant workers who had caused net immigration for the first time in Ireland's history. They could borrow from banks that enjoyed one of the loosest regulatory regimes in Europe, and which shipped in money from abroad to further stoke up the boom.

Ireland now has up to 350,000 empty homes – more than its entire private rental market – many of them simply abandoned as builders went bust. House prices are expected to fall by 80 per cent.

It says the weakening of STG and the Dollar makes our labour force starkly more expensive which translates into uncompetitiveness i.e. Dell pulling out and they talk about our powerlessness over the currency we use and how the UK can inflate their way out of it (they'll have pain later though, we should take the pain now)

Quote :

While the Bank of England could cut interest rates to one per cent and plans to devalue sterling with "quantitative easing", the Irish have had to resort to desperate measures to reduce their budget deficit, such as the public sector wage cuts which led to the mass demonstrations.

Some mad figures here :

Quote :

Thousands of workers who have lost their jobs in other sectors have been allowed to set up as cabbies, meaning that Dublin now has 16,000 licensed taxis. New York, with a population 17 times as large, has 13,000.

Andy Doyle, a cabbie for 20 years, said: "There are so many taxis now that you can be waiting two-and-a-half hours on a rank before you pick up a fare. Yesterday I waited an hour and three quarters for a 6.20 euro fare. You just can't live on that. But the government is happy to let it go on because it keeps the unemployment figures down. It's madness."

Sock trolls on the Pin or genuinely concerned ?

Mike wrote:

I am a public service worker.

The Govt have taken back the benchmarking award.

Thats fair enough in my book as job security and my pension set up is priceless now.

It is depressing listening to the ill informed at work talking crap about how put upon they are.


For the first time in my 30 years working in the public servise I am worried that I may not get paid towards the end of this year as the Govt may run out of cash and may not be able to borrow.

Mike wrote:

I do feel sorry for the twenty somethings who bought at the top of the property boom and now face a cut in wages and tax hikes.

I bought in the mid 80s when interest rates were 16%.

Cowen should have started with the DAIL and cut all junior ministries and limited all expenses to 15k per year for Tds.

it wouldnt save much but it would have shown leadership.

I see no option but to cut 50000 people from the public service.

In 15 years the number of civil servants and guards has remained static.

The huge increase in numbers went into health and education.

Those areas must be rationalised

http://www.thepropertypin.com/viewtopic.php?p=217438#p217438

Accountancy Head of Consultative Bodies - the rep. of 96% of all accountants in the country was on Morning Ireland calling for that early budget now. He was saying on Morning Ireland that businesses are feeling it now - that revenues just aren't coming in and people are spending very very conservatively.

He was asked if a hike in the lower tax rate to 22% wouldn't crush demand even more but he simply said that tax increases will be necessary in 2010 anyway and it would be better to get some pain over now


For every increase in lower rate - for every 1% = 600million, increasing upper rate to 45% would get 300 mn all together €2 bn euro would be recovered. So, 20% -> 22%, 41% -> 45%.

What effect would that have?

Three quarters of year of extra tax take but this measure needs other measures like cost cutting so overall burden is distributed.

Tax commission are revising loads of issues at the moment (which is a good thing) but there's an urgency now and we can't wait for their recommendations in their report next year.


--Are we going to pay heed to this guy ?????

http://www.rte.ie/news/2009/0302/morningireland_av.html?2499618,null,209

The key question here seems to be to what degree tax increases would materially affect domestic demand. The UK dropped VAT and it had no discernible affect on consumption. It was a wasteful sacrifice of a revenue stream. If the tax comes out of money that would otherwise be put into savings then that it is not so bad.

If the negative effect on demand is less than the positive effect on consumer confidence and economic stability then it should be done as soon as possible. Who is positioned to give us a best guess on this? In the age of the machine instincts have been devalued. Is it at all possible to conduct quantative analysis to give a definitive answer? If not, is qualitative analysis any use in the absense of knowing how the media would treat such a move? As for anecdotal evidence, the past experiences of individual countries might no longer be applicable given that the financial crisis is global.

My own instinct is that income tax increases (subject to review when the commission on taxation reports) would inspire confidence domestically and internationally.

Another side-question occurs to me: would an increased revenue stream make it harder to implement cuts in the public service? Everybody says proceed with the cuts but don't cut my benefits or rights or income. Everybody is saying, "I didn't cause this" and "you could save that money another way". Maybe they would hide behind tax increases as well saying "I'm already paying extra tax - you can't cut my benefits now."

You are right Zhou, it is going to be a particularly ardous, though necessary, task to both cut spending and increase taxes. Generally people would be expecting an increase in taxes to result in an increase of services but that simply isn't going to be the case right now - it is merely trying to avoid destruction rather than severe deterioration.

Good points Zhou - tis a bit of a fine balancing act alright and good judgement is required by politicians in this. There are people who will suffer more than others and would it be out of the question to suggest that the Govt. come up with a way of offering a career break to a ton of civil servants who may not be working as wickedly as others now - there are surely plenty of them who are as idle as the private sector workers are becoming - and doesn't one side reflect the other, often ?

A career break for two years or the equivalent of the dole for two years to a host of civil servants - many of whom may have a desire to start up some kind of business of their own... You'd want to be looking at letting go 20,000 of them though at least - maybe 50,000 ?? There must be a rake of them who would jump at that - or give it conditions - they can get the equivalent of the dole for a year then three quarters, then a half as the three year go on (I've moved on to three years now) and they will be assessed afterwards as to whether they'll keep their jobs or not in terms of new skills they might have picked up.

Maybe that's too fascist but something has to be done and it's going to break a lot of people's chops to take a tax cut.... Maybe if household or other costs were lowered some way - this would make the tax cut more tolerable. If electricity was cheaper for instance - or if food was rock bottom in price. Why don't local councils open up council land to rentable allotments - this would bring in a couple of quid per year for the local council, contribute to the availability of local produce which would often be given away if you know eager growers, which would lower costs modestly, promote a community spirit and help the unemployed to keep their idle hands doing something. It would also help to educate people and give them skills. People might spend on garden centres too then. Surely councils have lots of land handy around the place ?

Anything simple like that to reduce costs and provide an industry simultaneously, however modest because this depression could last two or three years and even if it doesn't you're fooling yourself if you think the Tiger will be magically defrosted from cryogenic suspension in 2010 or 11. It won't - the economy will be depressed for 10 years now - the best we can hope for in fact and that's what happens when there's over production on such as scale as we saw.

I'd also suggest introucing a declining scale of ESB charges and I'd try to have the balls to introduce water charges, simultanously gearing up industries which would help people domestically to cut down costs - solar panels, power of one campaigns etc. There could be 400,000 people unemployed by July for all we know - maybe more - so there is a load of hands around which could be redeployed productively without wanting to go way too over the top all of a sudden. The forestry industry could potentially employ 30,000 people for example while AIB employs 13,000. Let's use the land.

The Government needs to go on a concerted an insidious campaign of scare mongering now as to what the worst might be and what the best we can hope for is.

Auditor #9 wrote:

The Government needs to go on a concerted an insidious campaign of scare mongering now as to what the worst might be and what the best we can hope for is.

No need, that's what the web is for.

Did you hear Minister Dempsey last night on with O'Rourke ? He more or less said they didn't know what was going to happen from month to month, that they were playing it by ear etc. before they'd introduce any budget or make any kind of shapes to that effect.

It doesn't look like there's any rush on them at all while at the same time there are meetings propping up all over the country now every week full of people wondering what's going on and they don't come with a single issue either. Other people are blithely going around as if there was an endless supply of Euronotes coming into the country every month. There isn't. What are we going to do - borrow for the next 9 months and then still see what happens.

What's the plan.

Auditor #9 wrote:

Did you hear Minister Dempsey last night on with O'Rourke ? He more or less said they didn't know what was going to happen from month to month, that they were playing it by ear etc. before they'd introduce any budget or make any kind of shapes to that effect.

It doesn't look like there's any rush on them at all while at the same time there are meetings propping up all over the country now every week full of people wondering what's going on and they don't come with a single issue either. Other people are blithely going around as if there was an endless supply of Euronotes coming into the country every month. There isn't. What are we going to do - borrow for the next 9 months and then still see what happens.

What's the plan.

The plan is that the 4 billion of cuts & taxes already introduced for this year will be enough until Decmber's budget IF the tax take holds up, which no one will know except by watching it month by month, IF it doesn't hold up then the situation changes and a mini budget is on the cards.

It is hard to know. The three inter-linked priorities seem to be (1) avoid sovereign default, (2) avoid a bank collapse, and (3) minimise job losses.

The tax question is complex and they need to hear from the commission on taxation. However, it might be prudent to find out what income tax changes can be made without jeopardising jobs.

I think that the Government might also be waiting to see wether the lip-service people are paying to "taking the hit" will crystallise into a real willingness. They need popular support for the drastic measures to be fully effective.

So there could be a mini-budget on the cards then depending on unemployment and tax take at the start of this month ?

There were 35000 jobs lost in January - would it have to be around that again in order for a budget to be triggered? What's the damage that can be taken ?

Auditor #9 wrote:

So there could be a mini-budget on the cards then depending on unemployment and tax take at the start of this month ?

There were 35000 jobs lost in January - would it have to be around that again in order for a budget to be triggered? What's the damage that can be taken ?

Costs within budget & taxes down overall by 10%/15% on last year.

tonys wrote:

Auditor #9 wrote:

So there could be a mini-budget on the cards then depending on unemployment and tax take at the start of this month ?

There were 35000 jobs lost in January - would it have to be around that again in order for a budget to be triggered? What's the damage that can be taken ?

Costs within budget & taxes down overall by 10%/15% on last year.

If/when the damage reaches 10% -15% of last year then an emergency budget will kick in ? The tax take for January was 3.7billion, last year it was 4.6 billion .... that's 2% for the year down (on avg - probably less for the whole year). So if February is the same then it's going to be 5 more months before you kick in a budget.

Any ideas of the figures yet for February ? The figures for February last year were a lot higher than January's figures (~8bn tax take) - is the low Jan. figures due to a Post-Christmas lull or something ? If it's 7bn this month then that's going to go a lot farther than the 3.7bn of last month ...

http://www.finance.gov.ie/documents/exchequerstatements/2008/Feb08.pdf

Zhou_Enlai wrote:

It is hard to know. The three inter-linked priorities seem to be (1) avoid sovereign default, (2) avoid a bank collapse, and (3) minimise job losses.

The tax question is complex and they need to hear from the commission on taxation. However, it might be prudent to find out what income tax changes can be made without jeopardising jobs.

I think that the Government might also be waiting to see wether the lip-service people are paying to "taking the hit" will crystallise into a real willingness. They need popular support for the drastic measures to be fully effective.

The figures this week will give it a bit more of a perspective - assuming they're correct - weren't last year's figures all added up wrong ? If a trend gets spotted that says there's a precipice ahead then surely the PSU will cop on to it too.

Th accountancy chap on Morning Ireland today indicated that he anticipated that tax take would be well behind forecasts again. In fairness, it would be a shock if anyone in the Dept of Finance could accurately forecast tax revenue. If they couldn't do get it right during 10 years of steady growth we can hardly expect them to be accurate in times of extreme flux!

It's fluxing one way Zhou, though - that's the problem.

How about we tax teenage girls who babysit. My girlfriend's little sister is onto a tax free cracker with this. She has far more money than I have and she makes it by watching television for a few hours each weekend when the kids are already put to bed before she gets there! What is with good kids these days, I gave my babysitter such hell she deserved her payment .

Some very creative thinking is needed. As the country with the highest per capita debt in the EU, a lot of people will default on debt if they are taxed more. This will clearly have a knock on onto the wider economy.

Devil and deep blue sea

Stopping all new capital spending projects may well be the least damaging option (and on its own wont be enough to stop default. This would hurt the construction sector most, so is not likely to happen with a FF government.

I think it may be time to start a "Default thread" and see what has happened to countries that have done it in the past.

Tax Revenue down by 1.8 bn on last year ....

http://www.finance.gov.ie/documents/exchequerstatements/2009/excheqstatfeb09.pdf

Quote :

The Taoiseach has told the Dáil that more Government spending cuts and/or higher taxes will be announced before the end of the month.

http://www.rte.ie/news/2009/0303/economy.html

Auditor #9 wrote:

Tax Revenue down by 1.8 bn on last year ....

Quote :

The Taoiseach has told the Dáil that more Government spending cuts and/or higher taxes will be announced before the end of the month.

http://www.rte.ie/news/2009/0303/economy.html

Lets hope they get it right this time

tonys wrote:

Auditor #9 wrote:

Tax Revenue down by 1.8 bn on last year ....

Quote :

The Taoiseach has told the Dáil that more Government spending cuts and/or higher taxes will be announced before the end of the month.

http://www.rte.ie/news/2009/0303/economy.html

Lets hope they get it right this time

Time to speculate:

lower band to 22%
higher band to 45% maybe 48%
introduction of lower band / super high band ??
tax on social welfare
carbon tax

tonys wrote:

Auditor #9 wrote:

Tax Revenue down by 1.8 bn on last year ....

Quote :

The Taoiseach has told the Dáil that more Government spending cuts and/or higher taxes will be announced before the end of the month.

http://www.rte.ie/news/2009/0303/economy.html

Lets hope they get it right this time

Even you're only down to "hoping" now Tonys

Lordy - another U turn -was definitely not on Cards last saturday night according to Biffo! - even tho everybody who choose to see , could see that early Budget was on the cards if the country was to avoid even more shite.

WTF do this Government have to be dragged kickin and screaming before they take action - its not the cuts and tax increases that piss me off - its the total "Jayus lads we never saw it coming to this lads -honest" attitude - Fckn hell

Please Please do it right this time and take into account the current trends and budget for worst case scenario - do not come back, like yis have been doing every 6-8 weeks now and say - we need a bit more for the banks - we need to shave off a bit more here - If we need another mini-budget in 3-4 months time - Well Brian and the Boys should do the honourable thing and resign - its getting beyond a joke
now.

Also - very noteworthy that this has been announced to the bondtraders first - not the Dail - dont know why the opposition bother going in there to be honest -

anyway - the bondmarket will make its up own mind up in regard to Lenihan - first impressions count and they are not impressed at all - it will take one hell of budget to turn that impression around - actions speak a hell of a lot louder than words.

Bad news on the tax front - good news on the promise of swift action.

It is to be noted that there was a stamp duty penalties amnesty for late stamped deeds as a result of a ruling that penalties could not be imposed without a conviction. The deadline to avail of this was in February so there should have been a substantial stamp duty boost in that regard.

I don't think it is a case of "getting it right". Things have changed rapidly since the new year. Importantly, there are increased pressures on the Eurozone leaving less room for maneuver for Ireland individually. The Government has to be ready to make tax changes as required subject to the proviso that they must protect the require degree of certainty which businesses require. This is why savage cuts may be implemented.

I note that VAT is down a lot more than income tax - 17% as opposed to 7%. I didn't subscribe to Gordon Brown's AST decrease of a few per cent and I didn't think we should mimic it to try and stop people ging north. However, I am starting to think that we should examine the merits of a substantial decrease in VAt, say by 10% on goods services and by 7% on labour. Perhaps there is room for stimulation moves with a view to bolstering income tax and encouraging people to spend.