Cutting the welfare budget without cutting welfare rates

Instead of reducing social welfare rates (such as the proposed halving of job-seekers for the under-24’s), could we use a bit of lateral thinking and modern technology to come up with solutions that may provide cost savings without reducing benefits? The (Irish) government may be able to leverage it’s buying power to get a better price for daily essentials purchased by welfare recipients. What it could attempt to do, is negotiate a price for preferred vendor status for a range of goods – principally groceries & clothes – with some of the major supermarkets and other stores operating here. Recipients of social welfare, and other state benefits, could be given a debit card which would only work at preferred vendor stores and each week the card would be automatically topped up with a proportion of their welfare / benefit payments. If the government was able to negotiate a 10% discount and 50% of welfare benefits were delivered via the debit card, a 5% saving could be achieved without badly impacting those on welfare. Such a scheme could have the added advantage of ensuring that benefits paid out by the state were spent within the state and not across the border in Northern Ireland.

What do you think? Crazy idea? Is a 10% discount achievable?

  • DR

    Mack, the profit margins at the low end consumables are pretty as it is probably, you can expect the supermarkets wont take a hit so they will screw their suppliers, it would also seriously damage your local “corner shops” as they often depend on the the less well off, ie. those who cant afford a car to drive to the big supermarket, finally administration costs dear boy…

  • Mack

    DR –

    the profit margins at the low end consumables are pretty as it is probably

    If they still have some sort of margin after a 10% hit (if that is feasible), the increased volume may make up the difference. That’s probably the killer though, if the government can’t get a deal here…

    it would also seriously damage your local “corner shops”

    Surely EuroSpar and/or Centra and the like would be prime candidates for inclusion? Though it would damage small family run stores disproportionately. There’ll be some damage inflicted here if welfare is cut – particularly if it’s targeted at those in their early 20’s.

    finally administration costs dear boy…

    I presume you could get a bank to manage it for a fee (say 1%), perhaps a reduced fee given NAMA?

  • DR

    so do you decide what items it can be spent on?
    only food? no alcohol or ciggies I persume,

    have you any examples where it is working, not sure how food stamps work in the USA.

  • Mack

    Bear in mind the Welfare budget is something like €21bn at the moment – and some of it (not sure how much) is paid to people in employment – even to high earners (e.g. child benefit).

  • Mack

    No, just struck me last night as perhaps a better solution than cutting it outright.

    I don’t think the state should prescribe limits what it can be spent on within prefered stores, the only reason the number of stores would be limited is so the state can negogiate a fee for itself. The stores might wish to prescribe certain low margin goods however (I imagine alcohol and ciggies would be pretty high margin – and thus essential the profitability of the scheme).

  • the social workers go ape any time vouchering or other forms of restricted welfare are proposed.

    they claim that cash is the way to go but that is basically acceding to the notion that welfare cash may be paid on the basis of feeding and clothing you and your dependents but spending it on cigs and booze is equally valid. I personally cannot accept that argument.

  • Mack

    Hi Mark – this would be cash equivalent, but limited to certain stores. Killing two birds with the one stone.

    1. Reducing welfare costs
    2. Reducing loss of VAT revenue to NI

    We’ve gone from near full-employment to high unemployment very quickly. Probably most of the newly unemployed have cars – and very likely they are shopping for bargains. Even if their partner is still working having €110 per week that _has_ to spent in certain shops in the south is likely to discourage the cross-border spend somewhat..

  • John East Belfast

    Mack

    Full markes for thinking out of the box.

    However the big problem with something like this is that Debit card would be very valuable.

    Lets say it had a Eur 100 Top up and could but certain groceries for Eur 110.

    What do you think of the chances of it being sold for 80 Euros cash and that cash being used down the pub, bookies or local drug dealers. Meanwhile the wife and kids back home go hungry ?

    Obviously this would be the exception but I fear it would happen in enough welfare cases for it to fall apart.

    I am afraid I would be too cynical about this one

  • Mack

    JEB –

    Good feedback – to clarify though –

    1. It can’t buy €110 worth of groceries (only €100). The €10 goes to the government not the welfare recipient.

    2. At the minute they are being paid €208 per week cash anyhow.

    3. If the sold the card on it would still have to be used in the approved stores.

  • John East Belfast

    Mack

    I thought those Eur 100 of groceries were worth Eur 110 though to whoever buys them – ie the stores had agreed to discount the groceries by a certian % which meant the Govt correspondingly reduced the welfare payment via the Debit Card ?

    However if you change the Eur 208 into say Eur 100 cash and Eur 100 Debit card with the latter being able to secure Eur 108 of specified groceries I still fear some would try and cash in that Eur 100 Debit card for cash (at any price) and forget about the groceries – ie they may not spend a lot of that Eur 208 on specified groceries at the minute anyway.

    I think Eur 208 is way too high by any standard and it needs to come down.

    I think you may be over optomistic on how the Eur 208 is being responsibly used by the majority of recipients ?

  • Itwas SammyMcNally whatdoneit

    Mack,

    schemes takes time – that sounds too trickey, probably many different and unforseen outcomes as JEB has inidicated due to that old favourite – the law of unintended consequences.

    But the idea of alternative payment could be explored. Perhaps mandatory ‘savings’ – you dont get your mone now but could get some ‘stuff’ (e.g. nursery places, bus passes) or your money back at a future date.

  • New Blue

    Mack

    Could you clarify the following points as I don’t seem to be getting this.

    The recepient gets a debit card with 100 euro on it

    They can take this to a set number of retailers.

    They can buy 100 euro’s of shopping with it

    The Government gets 10 euros for every 100 spent by the recepient.

    Is this your proposal, or have I get something wrong?

  • JoMax

    Useful post, Mack

    AFAIK, social welfare budget in NI is £4 billion a year, half the Executive’s budget and broadly equivalent to the NI health budget. It is paid, of course, direct from Westminster so doesn’t feature in discourse here.

    I think none of us fully realise how much the tax base has been eroded, probably permanently, and globally how the balance of economic power is shifting to India/China. The OECD today made it clear that the decline in RoI standard of living as a result of the economic crisis is permanent.

    I support SDLP and I think some people will be reading what people like Frank Field have been saying, without buying into everything he says.

    Bill Clinton, probably the closest to a social democrat President in recent times, made radical changes to the social security system there.

    I think the imperative is to end the dependency culture, the anomalies whereby Job Seekers’ Allowance is less than Incapacity Benefit etc. and yet maintain the innate right of people to a decent standard of living (no suggestion of the humiliation of food stamps, etc).

    I know this is slightly off-thread (perhaps worth a thread on its own) but welfare is also paid out to grossly-overpaid barristers and lawyers here (£90 million a year). Those bloated barristers claim that the “best” barristers will forsake legal aid. I thought the whole idea of their rigorous training system that anyone who qualified as a practising barrister had reached a high standard of competence. By putting legal aid out to tender, you give the less experienced people a chance in a more competitive market.

    Time for a bonfire of the vested interests here!

  • Itwas SammyMcNally whatdoneit

    JoMax,

    re. “The OECD today made it clear that the decline in RoI standard of living as a result of the economic crisis is permanent.”

    As we have learned to our cost anyone sporting a qualification in Economics and speaking of the future should be listened to with some scepticism – although no one can mistake that the axis of economic activity is shifting to the east and will continue to do so. But in the case of Ireland, using the cunning trick of luring Yankee multi nationals here by allowing them to pay little tax and being an English speaking Euro zone country may help us punch above our economic weight once again – but perhaps not for a good few years.

  • Panic, These Ones Likes It Up Them.

    Let just have a revolution and take all the wealth from the rich.

    It keeps bureacracy down in the short term.

  • Comrade Stalin

    I’ve had this idea in the past. Yes, there is a real problem with people receiving welfare and child support benefits not spending the money as intended eg. ensuring the child is properly clothed/fed etc.

    It sounds great but in practice it is not likely to be easy to implement.

    – taking choice and dignity away from people who are unemployed through no fault of their own. Dole fraud is a problem but there are people who are on the dole legitimately, they do not deserve to be victimized.

    – getting retailers to accept the payment method, and requiring retailers to enforce what may be purchased. This requires updates to EPOS systems etc, and embarassment when the retailer must refuse service.

    – stopping the black market. How would you stop people selling their card containing £40 worth of credit to be spent on food for (say) £35 cash ? That’s win win – the person the card was issued to gets cash, the other person gets a fiver off their grocery shopping.

    JoMax, agreed about the barristers.

  • Comrade Stalin

    Sammy etc:

    But in the case of Ireland, using the cunning trick of luring Yankee multi nationals here by allowing them to pay little tax and being an English speaking Euro zone country may help us punch above our economic weight once again – but perhaps not for a good few years.

    Two problems with this.

    The first one is that you do not have confidence in the ability of the Ireland to build, by itself, products that can be sold. I think that is misplaced. We have people who have shown that they can build businesses from scratch – Ryanair and the Quinn Group spring to mind.

    The second point is that I wouldn’t bank on America being the economic powerhouse it has been until recently. There are rumblings afoot. American domination of the automobile and consumer electronics industries have been pretty much lost. Desktop computers and servers are going the same way. What’s going to be left ? The future is in Europe and the far east, and the English speaking thing nulls itself out.

  • Greenflag

    Mack – full marks for something ‘different ;)’

    ‘There’ll be some damage inflicted here if welfare is cut – particularly if it’s targeted at those in their early 20’s.’

    I don’t know how much you know or have read of mid 1980’s economic fiasco . I’ve recently been having a reread of Colm Rapples ‘Recession no End in Sight ‘ which is worth a perusal on the causes and even more on the Government’s of the time response . Basically they adopted the ‘unionist’ approach 😉 heads deep in sand and kept them there for the better part of a decade, while they waited for the ‘world’ to come to our rescue . They were still waiting in 1988/89 when help came in the form of the IMF preparing to kick down the door and consign our ‘currency’ to rouble or Polish zloty status in double quick time .The prospective boot in the economic goolies by the world’s merchants of finance did however provoke a response which ultimately ended with the longest and greatest period of economic expansion in the country’s short economic history as an independent state. Of course later it went to the heads of our politicians who forgetting the IMF ‘s threatening posture clapped themselves on the back for the economic rebirth and assumed the position of ‘financial ‘ infallibility when it came to economic policy 🙁 The result we see around us .

    The current welfare cut is designed to get the young people OUT of the country – anywhere , somewhere , where they won’t be in a position to drag down either government or vested interests . It worked in the 1980s and ’emptied ‘ the country enough to enable the McSharry cuts and Reynold’s new lower tax regime to take hold and survive long enough politically to make the turn .

    Ireland 2009 has about a million more people than in 1984 and unlike those of the 1980’s the young have been brought up to expect ‘better ‘ from their government and business leaders . We have an almost identical rerun of the 1980’s with public sector unions resisting cuts and private sector employees being cast to the waves .

    However with iirc some 200,000 empty houses and Irish Homebuilders still spinning that falling prices are levelling out (ultra hype and not lite ) there is still a ways to go with property revaluations .

    We know only too well it was the property bubble which helped more than anything else to pile this particular pyre .

    As of now it seems that while publicly our government is making ‘waves ‘ it seems that privately the ‘vested’ interests’ have concluded there’s not a lot they can do except ‘ride ‘ it out and in the meantime just hope that enough of those ungrateful young pups will leave for somewhwere else and take some of the newer immigrants with them .

    It’s somewhat ironic then , that our present Finance Minister Lenihan is the son of Brian Lenihan who as a Government Minister back in the 1980’s made the startling declaration that as Ireland was a very small island it could not be expected to find jobs and provide a decent living standard for 3.5 million people .

    Nobody mentioned to him that Holland with less than half the Irish ‘living space ‘ and Belgium with about a third of Irish ‘living space’ were providing at the time a much higher standard of living for 4 times as many people in one case and 3 times in the other. If population densities were taken into place then 12 and 9 times respectively .

    I believe Mr Cowen earns more than double Angela Merkel who governs a country of 84 million people ? Perhaps all of our politicians need to take a hit -a very large hit and then they might be in a position where the very highly paid sections of the public service would agree to appropriate cuts .

    I suspect as always however that the economic axe will fall hardest where the necks are thinnest. Doesn’t matter who rules – British or Ascendancy or Irish the law of the economic jungle will prevail . To them that hath shall be given and to them that hath not even that which they haven’t got will be taken from them .

    The ‘safety valve’ of emigration may not be as attractive an option as it was for earlier generations of Irish – America is in free fall with probably 16 -20% real unemployment . The UK is a little better than Ireland but they are in for just as tough a time and north and west of the south east maybe even worse .

    Wish I could be more positive . BUt where will the economic elixir come ? I don’t see it coming from the opposition . I suspect our ’emperor’s don’t know and more to the point don’t want us to know how naked they are .

  • John East Belfast

    Greenflag

    “The ‘safety valve’ of emigration may not be as attractive an option as it was for earlier generations of Irish”

    There is another problem this time as well.

    ie there is a whole generation that has experienced the good life.

    I think a lot of skilled and educated people wont want to pay the price via higer taxation and will jump ship. So it wont just be the adventurous and the unskilled wanting to work in US bars and construction sites.

    However one advantage of the property slump is many are trapped in negative equity and cant go anywhere unless they do a permanent runner.

    But if you were a 25 year old software engineer without a mortgage then I think you will go anywhere other than the ROI – there is too much money to be made and too little tax to be paid in most other places. Those kind of people will be essential for any recovery.

  • JoMax

    I think someone once said that the worst thing about being exploited by multi-nationals is not being exploited by them.

    I wouldn’t knock the tranformative effects of the RoI low tax regime. I would swap all the Invest NI grant-making powers for the Corporation Tax incentive. The RoI low tax rate brought in expertise and management nous and helped to build up a fair few world-class businesses and, more importantly, transferred that expertise to quite a few indigenous people. We’re very short of these in NI-Almac is one case in point.

    As for Ryanair and Quinn Group, yes, they are tremendous successes for the owners in generating money but I would like to see the sums about the value-added they earn.

    I personally think that in RoI there should be a cap on salaries which are paid for out of the public purse, say €100K, and that would include barristers getting obscene amounts from tribunals.

  • Greenflag

    Jeb ,

    Some good points but our income tax rates are not yet anywhere near where they were in the mid 1980’s when an accountant could hop on a plane to London -earn a 50% higher salary and reduce his income tax from 58% of gross to 27% .

    We are a long way from that yet . I suspect there will be recovery before we get back to those rates .

    The ‘property ‘ deal is as you say is a cruncher . WE Irish are not Americans . While we may move across countries and continents we don’t as yet have a predeliction to do a runner on the family home in Mayo (in the sense of negative equity determining the exit – btw this is the first property bubble ) and start again from scratch in Louth or Swindon .

    I’m not sure where those other lower income tax places are ? any specifics ? Not everyone wants to work for less tax in places where ‘life expectancy ‘ may be just a coup d’etat away ? For an unattached 25 year old it may be worth a few years ‘risk ‘ if the capital gain is enough and they don’t piss it all into the desert .

    Recovery will come and many of those who may leave for a few years will make it back . During the last great ‘outflow ‘ of the 1980’s some 250,000 people left and a little more than half of those who left returned many with extra skills and experience which they would probably never have experienced had they stayed .

    But a longer term fix for the economy has to be to generate sustainable economic growth from within our own resources and not be too reliant on FDI or the magic mirrors of quickly vanishing ‘wealth ‘ in the form of bricks and mortar. I believe we haven’t yet seen the bottom of the negative equity trend although it isn’t too far away . We are about a year behind the USA and they seem to be close to bottom now with some signs in some areas of a minor upturn .

  • Itwas SammyMcNally whatdoneit

    Comrade Stalin,

    re. “The first one is that you do not have confidence in the ability of the Ireland to build, by itself, products that can be sold. ”

    That is not the case at all you cheeky little monkey – I am suggesting for Ireland to punch ‘above’ its weight, like during the years of the mythical Celtic Tíogar it needs other factors as well and those other factors are external.

  • Greenflag

    Jo max ‘

    ‘I think someone once said that the worst thing about being exploited by multi-nationals is not being exploited by them.’

    That may be a paraphrasing of the old Hungarian jokes that one of the worst things about being liberated by the Russians was NOT being liberated by the Allies .

    ‘ I wouldn’t knock the tranformative effects of the RoI low tax regime.’

    Neither would I . If we don’t take effective action on the public finances we run the risk of ending up with a 50% plus share of the economy going to the public sector . That would be disastrous imo for the long term prospects for the country . We should endevaour to keep the overhead to around the 30% mark with a 5% down and 10% up variation depending on economic circumstances i.e (25 to 40% range ) . The higher that public sector figure then the more likely that new business enterprises will not get off the ground and the downward cycle that’s seen with overly dependent public sector economies will feed on itself .

    I’m waiting to see if our Government has learnt anything from the 1980’s . Although we live in different times and the world has changed the essentials havent changed except for the critcally important one that now we float wearing the euro life belt whereas in 1987-1990 we were wearing no lifebouy and the IMF was preparing to throw us a concrete laden life jacket .

    Reynolds , Mc Sharry et all did the right thing then but neither got any thanks from either the public sector nor their political party colleagues .

  • John East Belfast

    Greenflag

    “I’m not sure where those other lower income tax places are ? any specifics ?”

    Ultimately it will be anywhere where there is not a technically insolvent banking system combined with terminally declining public finances and no ability to devalue your currency. That combination will result in falling wages and if the Govt wants to maintain its social welfare programmes then only greater state borrowing and/or higher burdens of taxation will result. Either the IMF and/or the European Central Bank will be calling in Dublin sometime in the next 5 years.

    Basically the ROI is not a good place to be if you are professionally qualified and mobile – you are going to have to scarifice a lot to get the country back on its feet and I think a lot of such people will not be prepared to make that scarifice.

    Meanwhile the really well heeled who benefited from the Celtic Tiger years will decide to spend their retirement in the likes of Switzerland.

    To me Canada would be a place I would seriously consider if I was 20 years younger.

  • Charityat home

    For the ignorant.
    Dunnes have a scheme for buying vouchers at 5 or maybe 10% discount. This is already in use by charities giving out vouchers to needy cases.

  • The Raven

    “But a longer term fix for the economy has to be to generate sustainable economic growth from within our own resources and not be too reliant on FDI”

    Oh yes….I like that. Someone should have whispered that to Professor Barnett et al…

  • Pigeon Toes

    “Crazy idea?”

    Yes.

    Sure why don’t we stick them all into the Workhouse and be done with it?

  • paddy

    do they not get daily liquer allowance DLA down there

  • elvis parker
  • Itwas SammyMcNally whatdoneit

    Elvis,

    I think that makes Mack’s suggestion look like the best thing since the GFA or even since sliced bread.

  • Mack

    Guys, note that there would be no restrictions on what can be purchased under this type of scheme – the purpose is only to reduce the welfare bill.

    @New Blue

    That’s it exactly.

    @Pigeon Toes

    Welfare rates are almost certainly going to cut – do you think getting the same amount with a portion on a debit card is preferable to getting half?

    http://www.politics.ie/economy/114875-dole-halved-under-24s-15.html

  • Interesting idea, it is odd that the state as a large potential purchaser of good doesn’t throw its weight around more in the market.

    Back in July, some of the young turks of YFG suggested that child benefit be in the form of vouchers that could only be spent on child related purchases and they were deemed to be planning on burning babies or something.

    http://www.irishtimes.com/newspaper/ireland/2009/0727/1224251385103.html

  • Mack

    Thanks Daniel, I think restricting recipients freedom, to make purchasing decisions, is not something to be considered lightly (esp. for a right-of-centre party – not only would does it infringe on personal choice but would damage producers of goods and services not so anointed by the state). I think it would be important under such a scheme, as suggested here, to get as many retailers involved as is possible while maintaining a 10% fee (or higher) and to maintain a substantial portion of the payment in cash.

    On the YFG proposal – many parents save child benefit (for education costs well into the future). Aedin Doris has a good blog entry on this over at Irish Economy –

    http://www.irisheconomy.ie/index.php/2009/11/06/4601/#more-4601

  • I think the YFG proposal was rather clumsy, it would be simply to have the vouchers be redeemed against all good except X,Y or Z. So rather that an anointing particular products it would be excluding certain products. That said, there are always going to ways around such a system.

    But the principle remains that welfare payments should be targeted at those in need and that some means if possible should be at least explored and discussed and if the proposal not up to what is required then scraped.

  • As a benefit recipient i would not condemn this out off hand However there is another way Give the unemployed a chance to join the elite business profession and bring greater employment thought the community business model
    1 Services are tendered to a local company bring jobs and money employment into the local area
    2 Money is spent in local area
    3 people have a say in their local area
    Give us a hand up not a hand out
    Here in NI we spend 145 million a year on useless work schemes with no full time jobs
    Oh and by the way as i said at the start off my post if the system was not to be absed nor scammed i see nothing wrong with it

  • Sorry to post again however i forgot one very important point in my last submission As the community business drives down the cost off managing the serves tendered to it and is able to provide more for less without exploiting the workers the government saves a packet . I have a business plan and all documents relating to this and no financial help is available

  • Dave

    A union leader on an RTE current affairs programme was asked by the presenter if he supported a 10% cut in wages for public sector workers. He replied that “lateral thinking” should be applied in that the problem was how to reduce costs and that there were other ways to reduce costs than cutting wages, listing a few examples of inflated non-labour costs that could be reduced. He ran out of “lateral thinking” when the presenter asked him “Why not cut those excessive costs and cut inflated wage costs too?” Lateral thinking is just a tactic to avoid painful but nessessary solutions. The average industrial wage in Lodz in Poland (which gained 3,000 jobs lost at Dell in Limerick) is €7,500 a year. The minimum unemployment benefit in Ireland is €10,600 a year. That’s not workable in a single market.

  • Mack

    Dave –

    The notional 5% saving (or perhaps slightly less) mooted here, matches the proposed 5% cut in welfare rates in the McCarthy report.

  • Greenflag

    The future as seen by Colm Rapple cited above in the mid 1980’s

    ‘There are some who see the solution in a return to the free for all economic theories of the past and let the devil take the hindmost. The advocates of this approach are increasing and they are to some extent having an impact on economic policies ‘

    I doubt if Mr Rapple foresaw how such ‘advocates’ of the ‘free for all ‘ could end up delivering the USA into the biggest recession since the 1930’s and our local advocates could deliver the Celtic Tiger with a modest injection of ‘free for all ‘

    To be fair to the ‘advocates’ of low taxes and less public sector spending, it’s undeniable that did help to propel the Celtic Tiger forward . But in Ireland’s case the dose of economic arsenic became politically palateable for the public sector and the stronger unions because 250,000 people chose to remove themselves from the State’s overhead costs by ‘choosing ‘ to live elsewhere . And the IMF bootboys were lining up to kick down the door.

    Unfortunately for Ireland and the UK and the world economy the ‘advocates’ of neo conservative economics in the USA continued with ever more doses of said economic arsenic until the dose became a toxin instead of a tonic .

    So it goes -We live and don’t learn or don’t want to learn . Vervet monkeys in suits .

  • Mack

    Dave –

    The figures are actually much worse than that once you take in rent supplement and other benefits. The replacement rate (amount of money you need to earn to make it worth while coming off welfare) in Ireland appears to be quite high – (Constantin Gurdgiev has been making this point, backed up in the recent OECD report). Ironing out the welfare traps in the system is essential, and there are bound to cost savings there too. However, it’s certainly unfair to cut benefits that would go to taxpayers – who do normally work and contribute, to the general tax take and social security – just when they lose their job in a jobs depression..

  • John East Belfast

    Elvis

    David McWilliams – ROI withdraw from Euro.

    Interesting.
    My view is they never should have joined in the first place and they should definitely not have joined without Sterling.

    The fact is that political matters drove the ROI to this decision – an ongoing desire to distance itself from the UK at any cost.

    The fact that the ROI had more in common with the UK economy – housing ownership and scale of financial services – not to mention language and historical ties plus of course a Land Border was discounted.
    There is no doubt that the UK in the EURO would have dragged Euro policy towards a more acceptable level than what the ROI is now facing on its own – although even that would not be enough and both countries would be facing Euro membership problems by now.

    The problem of course is the practicality of leaving the Euro now.
    The main thing that McWilliams seems to gloss over – but which is the elephant in the room – is that as soon as such a decision was muted then it wouldnt be just cross border shoppers that would be driving across the border. Basically ROI citisens, at haste, would be lodging their Euros in Newry BOI Euro Accounts before they were giving a one to one swap with the new currency which would sink like a stone overnight.

    There would be a massive flight of valuable Euros out of the ROI.

    I have always wondered why they just couldnt re-join Sterling – Once parity approaches then they just de-couple and on a one for one join sterling. They would then benefit from UK monetary policy. It wouldnt solve the cross border shopping problem per se – ie the ROI Sterling prices would have to collapse – but it would certainly stop them getting worse in the event that the Euro went beyond parity.

    The big question of course would be if the UK would have them back – ie if the new Punt is going to fall like a stone then what effect would the ROI have on joining Sterling ? Maybe not as much as one would think as in weighted average terms the ROI Economy within Sterling would not have too large a problem ?

    I think the ROI should jump from Euro to Sterling as Parity re-approaches.

  • Mack

    JEB –

    While the UK is Ireland’s largest single trading partner it accounts for only 18.7% of our exports. Belgium, Germany and France account for around 28% of Irish exports.

    Ireland imports a _lot_ more than it exports from the UK, so by and large weak sterling is actually a boon for Ireland. 38.3% of our imports come from the UK.

    Exports – partners:
    UK 18.7%, US 17.9%, Belgium 14.5%, Germany 7.4%, France 5.8% (2007)

    Imports – partners:
    UK 38.3%, US 11.3%, Germany 9.7%, Netherlands 5%, France 4.2% (2007)

    http://www.theodora.com/wfbcurrent/ireland/ireland_economy.html

  • Greenflag

    Mack ,

    I know I’m simplifying but the gist of your above hard numbers is is that sterling is more dependent on the euro vis a vis the Irish trade than the reverse , and thus should the UK join the Euro -Ireland would be adversely affected 😉

    JEB ,

    There is no going back . The pound will end up in the euro sooner or later . So t’would be pointless.

  • Dave

    Only a minority of Irish exports are to countries that are in the eurozone. The majority are to countries that are outside of it, meaning that most exports have been damaged by a hugely overvalued currency – hence Irish exports are now half the level in real terms than they were before we joined it. Incidentally, JEB: Ireland had assurances from the UK that the UK would join the eurozone, but Blair backtracked on it, so your theory is wrong.

  • John East Belfast

    Mack

    The UK remains the ROI’s single largest trading partner and with a depreciating pound I dont think it will do the ROI any short or medium term harm to be in Sterling.

    In any event I was more talking about having an acceptable monetary policy for the ROI which they would more find within sterling than Germany and France.

    Greenflag

    “There is no going back . The pound will end up in the euro sooner or later . So t’would be pointless”

    There is no chance for the forseeable future of the pound joining the Euro unless Labour win the next election and Mandelson has been elected leader thereof. The chances of that are remote.
    If Blair couldnt get it through with his massive majority then there is no way it is being introduced under a Tory administration.
    Add the current experience where no commentators are now saying they wish the pound had been in the Euro so that we couldnt indulge in Quantitative Easing, letting our currency devalue and boosting exports.
    It will be totally off the agend for at least 5 probably 10 years and dear knows what the Euro will be then.

    The UK public intrinsically value their own sovereignity and it wouldnt pass a referendum which is what it will require.

    Dave

    “Incidentally, JEB: Ireland had assurances from the UK that the UK would join the eurozone, but Blair backtracked on it, so your theory is wrong”.

    If by my theory you mean that the ROI was not intrinsically motivated to distance itself financially from perfidious albion I think the recent reports by Fintan O’Toole on the ROI property sector’s attitude to buying up England under the noses of the British in order to stick the one finger up – not to mention Seannie Fitzpatrick’s recent utterances – then I think otherwise.
    I think there were other emotional factors at play when what should have been cold hearted business and financial decisions were being made in ROI Cabinets and Board Rooms.

    What kind of reception would anyone have got if they had stuck their head up and said look I think it is a bad idea for Ireland to join the Euro without the Pound doing so as well ? They would have been hounded out.

    As for assurances from Blair – come on ! So it is not just us in the UUP who were taken in by his deceitfful assurances – did he write them up on black board for the Irish Cabinet ?
    The fact is he had an Iron Chancellor that was opposed and any assurances from Blair and Mandleson without Brown were worthless – not to mention the British public – the ROI Cabinet couldnt have been that easily misled ?

    No I think there was a momentum to join regardless of what the British did – indeed despite it.

    Anyhow I am not suggesting the exit of the ROI from Euro to Sterling need be permanent. I know you would like the Punt back but the shock to the system of a move straight from the Euro would be too much for the system. However a move around parity from the Euro to Sterling and then after several years once matters had stabilised from Sterling back to the Punt could be a strategy for the ROI getting its hands back on its own Monetary Policy ?

    It bit like passing chairlifts on a ski slope with a rising Euro and decling Pound the ROI hop off the former to the latter and then further along decouple again ?

    You could get the Punt back via Sterling ?

    However I am not sure how the Bank Of England would react to such a proposal ?

  • igor

    “the English speaking thing nulls itself out”

    in the EU where, to French dismay, the common language is rapidly becoming ….English. Its all those New European states you see.

    As for the original idea of an RoI only card, it would cost a fortune that the state doesn’t have, require a re jig of the card payment system which wont happen and would be illegal restraint of trade under European Law.

    The Irish need to understand that we have to compete to survive… and that means compete on the price of groceries as well

  • Mack

    Igor –

    would be illegal restraint of trade under European Law.

    The state is able to purchase good and services for it’s citizens. Laser cards – the standard debit cards in the south, normally only work in the south. There are always ways and means around these things, depending on how they are structured. e.g. Vehicle Registration Tax.

    There is no reason why large numbers of companies could not sign up – it could be regarded basic marketing segmentation, targeting discounts to those who would not otherwise purchase goods (to get them into the store in the first place).

    As for the original idea of an RoI only card, it would cost a fortune that the state doesn’t have

    Nope, it would be funded out of revenues generated (say 1% – €21bn budget remember) and outsourced to a bank with capability of running such as scheme profitably.