A worse than budgeted for tax short fall of 8 billion euro.

Tonights’ RTE evening news gave a report on the remarks made by Brian Cowen about the exchequer returns to be published tomorrow. From the report:

When asked about how government can rescue the public finances Brian Cowen said no option can be ruled out. The completed exchequer returns for last year will show a worse than budgeted for tax short fall of 8 billion euro, and he acknowledged that without corrective action the exchequer deficit for next year could be 20 billion.

He also said no option can be ruled out including scrapping the national wage agreement and reducing public sector jobs will be discussed when he mets the social partners later this month and although there were difficulties lying ahead he was not concerned about FF’s prospects in upcoming local and European elections.

  • Ri Na Deise

    He could always start by reducing the numbers in the vastly over populated Dail/Oireachtas….

  • Jimmy Sands

    Absolutely. Halve the numbers of TDs. Close the Seanad (no use to man nor beast). Trouble is you’d need a referendum. One easy cut though would be Junior Ministers. No real work for them to do and not provided for so far as I can tell anywhere in the constitution. Away with them.

  • the future’s bright, the future’s orange

    aye, that will save 20 billion…

  • Mack

    So the government finally admits what every economist was saying around the time of the budget – their estimates were way too optimistic.

    At a time when private sector workers are glad merely to hold on to their jobs – giving already higher paid public servants an additional pay rise (on top of their annual service increments, I might add) is ludricous.

    To put this in perspective Google recently complained about a lack of availability of good Irish software graduates (don’t panic – they’re are brining in quality foreigners, but this is not ideal). Given that said graduates can start of on a minimum of €40k per anum teaching or working in the Institutes of Technology (or €50k + in the University. With all the associated benefits in both – pension worth an additional 30%, job for life, flexi-time build up holidays etc), why would aforementioned graduates take a risk working in the notoriously unstable tech private sector starting out on around €30k?

    http://www.tui.ie/Salary_Scales/Default.286.html#Assistant_Lecturer

    If Google are having trouble attracting graduates – we have let things seriously get out of hand.

  • eranu

    20 billion in expenses alone!

    the only thing reliable over the last year is that whatever people say, the reality turns out a good bit worse.
    housing market not vulnerable to sub prime = housing market crash.
    fundamentals of economy sound = recession.

    budget shortfall a billion or two more than was predicted only a couple of months previously = oh shit!
    you have to wonder about that 20 billion figure. what will it really turn out to be…

  • Greagoir O Frainclin

    Folks up north, it’s kinda odd that yez are so interested in the economy of the Republic of Ireland, for really you should be far more worried about your own economic plight in NI and the UK!

  • Mac the Knife

    Google may have trouble finding graduates but you will find this is mainly self inflicted – after having gone through 3 interviews last year i was told that the relevant managers were travelling in the US and could i hold out for their return in 6 weeks … eh no – i got offered a job with another large multinational within 2 days.

    Their hiring process leaves a lot to be desired and puts many people off…

  • eranu

    we are greagoir, dont worry we are!
    northern interest in the southern economy is more akin to looking at a car crash while driving by in the slow moving traffic.

    its nice to see so many southerners taking an interest in northern irelands politics and culture every day on this site 🙂

  • Peat Blog

    Folks up north, it’s kinda odd that yez are so interested in the economy of the Republic of Ireland, for really you should be far more worried about your own economic plight in NI and the UK!

    Greagoir:

    Considering that our very own wee housing bubble was driven by southern investors and international syndicates I think we do need to keep a close eye on what’s happening across the border. If people like Ben Dunne are hinting that they may be in trouble…

  • kensei

    Mack

    Surely you’d need a Phd to be an Assitant Lecturer? That would not quite be apples with apples.

  • Mack

    Mac the Knife

    That’s a fair point – their recruitment process is over the top, but Google still have an allure, if they are having trouble attracting top quality grads – who do exist – my guess is part of it comes down to money. Having interviewed for tech grad positions in recent years, my experience would concur with what John O’Herhily said.

    There is no doubt there were a lot of tech jobs in recent years – and intense competition for the best graduates. Leave it too late in the year, and your company might struggle to find competent recruits. The best graduates can earn more money, with better working conditions in the public sector. Frequent redundancies are a fact of life for tech workers – why take that risk if the public sector (and not just teaching / lecturing) is a better paid, cushier option?

    It will absolutely damage the Irish economy if the best and brightest strive to work in the protected sector rather than in the innovative part of the economy.

  • Mack

    Kensei – Nope – my sister was offered a position (Law) at a rural IT on the back of completion of her masters. This a couple of years ago – starting on 60k.

    I’ve worked with people in tech who have left to go to the public sector (some into teaching both in Schools and in the Institutes of Technology, some into protected tech jobs – one girl turning down a big promotion in her determination).

    I’ve nothing against lecturers getting paid a lot of money, but the fact I could earn more in the private sector was why I didn’t go down that route. It is after all a great life. The differential has gotten to the point it’s difficult to compete. If Google, who I would rate as the premier tech company, find it difficult to get competent grads – what does that say?

    And I would imagine the quality of the people you want working at Google would be of the same level (with a bit more practical implementation nous) as you would carrying out research (phd’s). Which would mean they are in direct competition.

  • kensei

    Mack

    I’m pretty sure it almost impossible to get a lecturing position, and one that well paid in the North on the back of just a Masters.

    As for Google, to be slightly immodest I was fairly good when I graduated at Queens (god knows I’ve settled into a comfort zone since) but I don’t recall them even being at Queen’s Careers Fair, or having their own recruitment drive. Perhaps the problem was less severe at the time.

    I’m also not entirely convinced that the best gards are going into the public sector due to money. Over the long term you are still likely to do better in the private sector, and still likely to get more interesting work. Part of the problem was that there was a dip in the number of IT applications when the dot com bubble burst IRC, and even top CompSci grads can be tempted towards financial services or consulting, both of which are extremely lucrative. I’m not sure crowding out covers it.

  • Mack

    Kensei – Google are a relatively recent arrival in Dublin. Their software engineering function has only really existed for the last one or two years in any real sense.

    I’m pretty sure you’re right about the lecturing positions in the north. The sis eventually did her phd and now lectures with research in the UK. TBH I was shocked when she told me of that offer, she didn’t take it as it the ITs offer teaching only positions.

    Over the long term you are still likely to do better in the private sector, and still likely to get more interesting work

    You would expect so, to me this is the crucial contract. In Ireland (Republic) benchmarking has inverted this somewhat. I would imagine doing cutting edge research in Trinity or UCD – maybe even spinning of a start up – would be more interesting than the work in yer average IT firm. But private sector IT work is bound to beat implementing government systems.
    The thing about the recent years is that benchmarking in the south boosted public sector wages – across all disciplines – pretty dramatically. In IT specifically, private sector wages fell after the tech bust. Though I do agree, the outlook for IT is pretty good – it’s recovering strongly after the tech bust.

    It’s the general principle though – to give some specific examples a train driver in Ireland (Republic) earns on average 52k a year. This is equivalent to a mid-level software engineer – someone who will have spent 4 or more years at college, and another 5-8 years of solid learning on the job. Working overtime when required (60-80 weeks as deadlines approach), and will be expected do whatever is required of them (not strike like the train drivers when asked to train a new hire). Prison officers salaries were over 70k on average a couple of years ago – and have no doubt increased. Diamen Kiberd blasted this as ridiculous as it was at the time equivalent to a fully qualified solicitor (who has gone through college, FE1s and then apprenticeship) with 8 years experience.

    Government finances are fecked – we can no longer afford to pay semi-skilled workers in the protected public sector better salaries than highly educated workers taking a risk in the private sector.

  • While the shortfall will involve some pain for all, the big loser has to be social welfare. It already accounts for about a third of all current expenditure – more than health, more than education.

    Health and eduction are difficult to cut in any meaningful way – certainly not enough to find 8 billion! But social welfare is not really an investment, so despite the pain that will be caused, I fear that is where the knife will fall. Apart from pensions, who are the main beneficiaries, does anyone know?

  • Mack

    Horseman

    Landlords! The government put a floor on rents – by paying up to around 1200-1300 euros per month in rent allowance. With huge rental oversupply – the government should cut this drastically.

    They also pay mortgage interest for the first year of unemployment – perhaps they could now force the banks to forgo this.

    Public sector pensions – are linked to pay rises rather than inflation.

  • Greagoir O Frainclin

    “northern interest in the southern economy is more akin to looking at a car crash while driving by in the slow moving traffic.”

    Less of the rubber necking eranu, but please spare a thought for the road victims of 2008!

    “its nice to see so many southerners taking an interest in northern irelands politics and culture every day on this site :)”

    Oh indeed eranu, the plight of fellow Irish folk in NI is always a concern!
    😉

    “If people like Ben Dunne are hinting that they may be in trouble… ”

    Ah well, sure Ben’s spent all his money on Charlie (no, not only Haughey but in this case the white powdery stuff ye stick up yer snozzle). In any way what would he know as he spends his time these days slating his sister and the Dunne Stores ‘retail empire’.
    😉

  • kensei

    Mack

    Some of those figures are astonishing. I don’t bregrudge anyone doing well for themselves, but those figures are unsustainable as we are now seeing with the huge hole in the public finances.

  • Mack

    Kensei – Another figure for you.

    €66k (£61k) is the average salary in the Health Service Executive (this includes all admin staff and health care workers).

    http://www.independent.ie/national-news/anger-at-department-of-health-staff-duplication-1592125.html

    The HSE is chocabloc with middle management muddlers. The Health Service is incredibly disorganised – which I think given the numbers involved and salaries paid to those administrating it is a disgrace.. I think there are strong grounds for redundancies here – or the threat of redundancies to force through pay cuts and drastic changes (productivity enhancements) to produce a well run service.

  • Driftwood

    Maybe the Republic should have a Review of Public Administration (RPA)like the one that has been taking place here for the last 10 years. Whatever happened to that BTW?

  • David

    For NI participants, bear in mind the fall in Sterling recently in looking at these figures. A year ago Euro 40k was only in the high £20k’s which is more than the same job in NI but not massively so.

  • Oilifear

    In today’s Irish Times, Brian Lenihan is reported as saying that ‘”decisive and sustained” Government action was urgently required’. In yesterday’s online edition, Brian Cowen is reported as saying that ‘the Government would have to take ‘decisive action”‘. Do either of these men know that they are the ones in government?

    Jesus wept! The only thing these two baboons seem decisive about is that someone needs to make a decision. And quick.

    Get them off stage now.

  • David

    “northern interest in the southern economy is more akin to looking at a car crash while driving by in the slow moving traffic.”

    With a strange sensation that we might be next…

  • Comrade Stalin

    At work we’re finding it very hard to find experienced software engineers, and graduates aren’t easy to come by either. It’s even harder to find people who know their stuff, ie instinctively have a feel for how a computer works and how software should be structured.

    I think IT is probably one of the easiest professions to get involved in. Lately, it has become very democratic. There’s lots of free software, toolkits and documentation that you can use to teach yourself programming languages or how to use a commercial-grade OS, and you’ll be earning good money from the time you land your first graduate job. Solicitors, would-be barristers and accountants are treated miserably during their training, and that’s after they’ve graduated.

    In the USA, Google is considered among IT people as being a company that has lost it’s way, dining out too much on it’s image as a liberal employer with lax working practices. Some descriptions of Google workplaces make the place look like a child’s playground. While it’s good to have a relaxed working environment, I prefer to have the feeling that I’m contributing something to the lifeblood of the company when I’m completing my work. If I’m not busy, it means my brain isn’t being kept sharp and isn’t learning new things which makes me nervous for my longer term interests.

    While I reject the somewhat indirect implication above that someone who has a degree is automatically entitled to more salary than someone who has not, the figures quoted for train drivers in the RoI are outrageous, but not surprising. I don’t believe that anyone can become a train driver until they have passed through various other more menial grades first. It’s more or less a closed shop operated by the unions, and it happens only in the public sector because the unions know they can fist the government. The day is eventually going to come when there will have to be a reckoning.

  • Mack

    Comrade Stalin

    While I reject the somewhat indirect implication above that someone who has a degree is automatically entitled to more salary than someone who has not

    No such implication was meant. Salaries in the private sector are determined by supply and demand. Barriers to entry restrict supply and contribute to higher salaries. Having to acrue a large knowledge base is a barrier to entry. In software it doesn’t matter how you acrue it, as long as you can demonstrate it. Many graduates – as hinted at above – are pretty much useless. I would hire someone without a degree, but who was a major commiter on a solid open source project in a heart beat. IT salaries are heavily damped by competition from Eastern Europe and India.

    Salaries in the public sector are not determined by supply and demand – they are determined by political pressure. It is not good economics to pay high salaries for jobs that – well – anyone could do…

    In the private sector excess supply (or demand to do that job by workers) would drive down salaries of semi-skilled workers to more reasonable levels. Taxi drivers in Dublin would be experiencing this now, if the regulator let prices fall – instead prices remain high and more cabs come on stream every week. I suspect most are topping up their dole – there is no way they can be making enough money.

  • Mack

    Also on Google, from what I hear from people who work there – there is no danger of not being kept busy. The Googleplex is run the way it is – campus atmosphere – to provide complete essentials for a home away from home. i.e. To encourage long hours..

  • Mack

    Also, on the degree point. In Ireland (Republic) public sector workers in many fields get paid more for doing the same job if they have a degree or higher degree.

    http://www.paulgraham.com/credentials.html

  • Comrade Stalin

    Mack, yes, that’s daft as a brush.

  • Biffo – please go. You are just not cut out for Taoiseach. You make bold declarations of intent to reform the public-sector, but then you cave-in to protest groups. You are open to the charge of being all-mouth (no pun intended *cough*) and no delivery. The depressing thing about this is that the seeds of this crisis in the public-finances were sown when McCreevy was given the chop and packed off to Brussels. That, as Matt Cooper said in a recent column, is where the problems started. Cowen has presided over the Irish economy becoming dangerously dependent on the construction-sector, which accounts for 1/4 of all male employment in this state. As David McWilliams correctly predicted, since 2001 we went from an export-led growth to construction-led growth. The old ‘tax-and-spend’ wing of FF – you know – of the pre-1987 bent, are back in the driving seat and are taking us off the cliff.

  • Oilifear

    Brian Boru, couldn’t agree more.

    It’s incredible. If he was still Minister for Finance he would be fired for presided over the creation of this mess. Now that he’s Taoiseach, who’s going to fire him?

    Worst Taoiseach Ever. Epic fail.

  • RepublicanStones

    What, so Enda Kenny’s chivalrous pay-cut didn’t sort the mess out???