Tuesday, October 14, 2008
The Hangover begins…
Irish people Southerners could be forgiven for waking up with a sore hangover this morning. With tax hikes across the board, child benefits cut, and departmental budgets slashed, the days of bumper budgets are well and truly over. The collective hangover after an 18 year binge has been a long time coming, but did they really have to hit fags and wine too?
Full text of Brian Lenihan’s speech to the Dáil here. Budget main points here.
The Examiner calls it the most savage budget in a quarter of a century. Richard Bruton of FG says the budget will turn recession into depression.
But has Brian Lenihan gone too far, or not far enough?
ADDS This morning’s Indo attacks ‘vague’ Lenihan. The Irish Times says that by resorting to borrowing and postponing hard decisions, Mr Lenihan has increased the chances of an equally harsh budget next year. Kevin Myers implores us to spend our way out of the crisis.
View from abroad: the London Times covers Lenihan’s gloomy budget, the FT [subs req] mentions Ireland’s plans to dump EU fiscal rules on budget deficits, and Forbes reports that the 12.5% Corporation Tax will stay and “continue to be a central part of Ireland’s economic brand”.
Paddy McEvoy @ 08:44 PM
But there are a million and a half Irish people this budget doesn’t affect :)
Posted by on Oct 14, 2008 @ 11:21 PMchild benefits for college students - perhaps it’s true that university defers the need to accept the responsibility of adulthood. Maybe it’s best they’re cut.
Posted by on Oct 14, 2008 @ 11:58 PMDevelopers bailed out by their FF buddies, using tax payer’s money.
http://www.ashillingshort.com/
Absolute disgrace.
Posted by on Oct 15, 2008 @ 05:56 AMThat is the most right wing thing ever - a flat 1% tax on everyone. US republicans would love the Irish tax system. Take from the poor and spare the rich.
Posted by on Oct 15, 2008 @ 08:07 AMThis budget is nowhere near what would be needed to pay for the bank bailouts. It can’t be done under the old system and some new thinking is required. Any economists out there care to comment?
Posted by on Oct 15, 2008 @ 08:14 AMYeah Gary, and they should even more effing grateful than normal!
Posted by on Oct 15, 2008 @ 09:13 AMThe UK couldn’t afford Ireland’s low levels of corp tax. The tories have committed to reducing it 3p to 25% but even that seems ambitious. This isn’t rocket science. If you want good public services you have to tax to pay for them. Also, does Ireland have proper local authority tax?
Posted by on Oct 15, 2008 @ 09:15 AMTotally lacking in imagination. The 1% levy and half a per cent on VAT shows how bereft of ideas Lenihan was.
Sure it will bring in around 2 billion but a lot of that will come from the low earners.
No mention of ending the defined contribution scheme for civil servants so that time bomb is still ticking.
Jenny,
the argument is that you can’t take too much money out of the economy or it could stall even more so 2 billion is a start with probably another mini-budget in the spring to see if more can be got from elsewhere.Next up is the means testing of child benefit.
I also wouldn’t be surprised if the newly introduced 200 euro levy on second homes isn’t increased next year.
Then we’ll have hair shirt budget number two next year, followed by another in 2010.
Why am I still a UUP voter,
easy there, you’ll be trying on your very own hair shirt soon enough and it could well be an even tighter fit than our rather prickly southern one.Posted by on Oct 15, 2008 @ 09:20 AMslug,
we don’t have local rates down south or water charges, we do pay for our bins though.Posted by on Oct 15, 2008 @ 09:21 AMslug,
What is a “proper local authority tax”?
In the south there are no domestic rates, but there are business rates. I think most local authority expenditure comes via the central budget, so is ultimately funded via income tax, corporation tax, VAT, and so on.
Given that these are no higher, in aggregate, than in the north, the absence of rates would make most people in the south better off than their counterparts in the north.
Local authorities in the south maybe don’t spend as much money as in the north (does anyone know any comparable figures?), but it seems that the services are as good. Of course there may be tasks that are done by different bodies north aand south. Overall, the picture is unclear aand could do with a bit of comparative research. Andy Pollak?
Posted by on Oct 15, 2008 @ 09:22 AMUUP voter,
Indeed. 800 years of oppression and counting has to have some benefits I suppose. We get to elect our own bunch of incompetent gombeen men to screw up our affairs, safe in the knowledge that London has a big cheque book :)
Posted by on Oct 15, 2008 @ 09:27 AMEay on UUP voter
Irish people running their own affairs is clearly a terrifying prospect for him/her. Far better that an introverted Scotsman or some oily Sloane make all the decisions for them.
Posted by on Oct 15, 2008 @ 09:48 AMThe reaction so far is that (a) this isn’t going to fix the problem (b) the predicted parameters are (unemployment 7.3%, negative growth this year of 1.5% and next year 1%) on the optimistic side (c) and Lenihan has been far to technocrat in his choices - he started his answer to an elderly woman in tears with ‘Listen now!’ on the tradition post budget phone in with Pat Kenny this morning.
The Lenihan Levy (alliteration is never the politician’s friend at times like this) combined with the over 70s medical card issue has the potential to be the government’s 10% tax rate or poll tax depending on your vintage.
The other problem is that details are filtering out after the main event that just makes it look worse. Like the changes in unemployment benefit and increases in class sizes.
Posted by on Oct 15, 2008 @ 09:51 AMGeorge,
No, but that charge is going to be ringfenced to local authorities. It’s been a long time coming. And whatever the nouveau riche of Dublin think of it, it will be popular out in the west. Particularly in parts of Donegal where the public infrastructure visibly creaks every summer.
Posted by on Oct 15, 2008 @ 10:07 AMMick,
... that charge is going to be ringfenced to local authorities ...
Curiously enough, the 200 euro charge on second homes is something that concerns me, so I have given it a little thought. While Donegal, Kerry or Cork may make a bit of money out of it, there are many counties where the cost of administering it will far exceed its actual take.
Little Leitrim, for example, might have 500 ‘second homes’, each paying 200 euro. That makes 100,000 euro. And for that they will have to set up systems to register, charge, administer, follow-up, fine, summons, etc, probably needing at least half a dozen staff. It’s simply not worth it.
Cavan, with maybe only 200 ‘second homes’, would be even worse. And so on.
I expect this tax to either be unworkable, or unworked, or repealed fairly soon. Or, less optimistically, to be vastly increased once the rich have gotten accustomed to it.
Posted by on Oct 15, 2008 @ 10:16 AMHorseman, the property charge will apply to all non-principle residencies so all rental accommodation will be hit too.
Posted by on Oct 15, 2008 @ 10:22 AM200 euro - is that per month?
Posted by on Oct 15, 2008 @ 10:29 AMper year
Posted by on Oct 15, 2008 @ 10:32 AM200E a year is nothing, surely?
Takes a flat tax from the poor and a tiny annual sum from rich two-house people.
And the SDLP think that FF share their values?
Posted by on Oct 15, 2008 @ 10:37 AMGeorge
“we don’t have local rates down south or water charges, we do pay for our bins though. “In the norh DO have rates and paying for our bins is about all we get for them—-count you blessings
Posted by on Oct 15, 2008 @ 10:42 AMDoes anyone know why petrol but not diesel tax was raised? Isn’t it bad economics not to tax close substitutes similar? (Ramsey tax principles).
Posted by on Oct 15, 2008 @ 10:46 AMSlug, I’m by no means an expert, but I wonder if this would answer your question.
Posted by on Oct 15, 2008 @ 10:54 AMDec,
Are there not enough legitmate ‘balls’ in play to distract you from laying into the man!?!
Posted by on Oct 15, 2008 @ 11:24 AMDiesel is more CO2 efficient - Note I didn’t mention more environmentally friendly. :)
Posted by on Oct 15, 2008 @ 11:29 AMMick,
I don’t doubt that this 200 euro charge on second properties is being dressed up as being for the reasons you state but for me this is the first step down the road to a much more substantial property tax on second residences.Who knows it could also be a wedge for the reintroduction of rates too with the introduction of a levy on primary residences to follow in a couple of years once this is bedded down.
The estimated 80 million from this (I reckon they will get much more) is being used to plug the gap caused by the reduction in exchequer funding to local authorities.
Horseman,
As for collecting it, I’m sure the Revenue Commissioners won’t have too much trouble finding out who owns what property in the State. They can look at the Registry or the Private Residential Tenancy Board list. I believe the payment will be made to central government and then allocated back to local authorities and there is 80 million out there to be collected straight away.Posted by on Oct 15, 2008 @ 11:29 AM
