CT seems safe – and don’t forget the North and GB

Nerves will be stretched until the exact terms of the deal are known. Meanwhile government spin continues to minimise the extent of the damage. The bond markets at least seem satisfied for the moment but what about the Irish people, still much in the dark?. A huge sigh of relief will go up at the one bit of good news for Ireland. At least for the first year, the EU terms will be no worse than the Croke Park agreement. And…

A Government source said that its main achievement in the negotiations was protecting the 12.5 per cent corporation tax which will not form part of the bailout deal.

If confirmed, this as I’ve said is good news for the north which only now has started to creep into the story as a sort of British footnote – apart from this timely reflection from Drumlin’s Rock. The British embassy has been busy with briefings like this oddly headlined piece from the BBC’s Mark Simpson ( the “thaw” began at least 25 years ago). The theme that interdependence is wider and warmer than membership of any currency zone  is taken up by Ann Marie Hourihane as a part- antidote to fury at  Biffo and the gang.

In 2009 every man woman and child in the Irish Republic spent £3,607 on British imports, one of the highest per capita spends on British goods in the world. In 2009, we bought £2.4 billion worth of food and drink from Britain, making us the biggest importer of British food and drink in the world

Britain – or more specifically, England, is where our girls look to for their heroines and for their hairstyles. England is where our boys dream of playing soccer. Dublin was always a unionist town and in many ways it still is.

Let us have no more wittering on about sovereignty. Loose talk costs lives – it has certainly cost us an economy.

Amen to that. Meanwhile US economic envoy Declan Kelly thinks this is a good time to beat the northern drum in the Bel Tel. Is this whistling in the wind? I don’t want to gripe but what exactly was the beef from the NI-US Economic Conference?  The competitive devaluation of the dollar is designed to suck FDI into the States rather than export more US capital abroad. Nevertheless the bold Declan seems optimistic about that special enterprise zone.

Over 6,000 people start a new business each year in Northern Ireland. This is an incredible number on a per capita basis.

There are nearly 126,000 small and medium sized enterprises in the region and these companies are the backbone of the local economy, employing over 63% of the private sector workforce.

I have stated on many occasions that I believe Northern Ireland can become one of the world’s fastest growing economies on a per capita basis over the next five years. In order to accomplish this, the region must continue its focus on attracting high quality foreign direct investment. Only through a combination of inward investment and indigenous growth will the region achieve lasting economic prosperity.

At least they should get on  and agree the budget!

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  • GoldenFleece

    Rumour has it that it was the UK that was instrumental in persuading France and Germany to let Ireland keep their Corp Tax low.

  • Mack

    Gawd bless you ma’am!

  • John East Belfast

    The problem now is that you cannot believe one word the current ROI Govt says about its economy or financial state – there have been too many lies and spin.

    Therefore them saying that they “will keep their CT rate” should be treated with the sceptism is deserves.

    The bottom line is that if the ROI is costing the German tax payers money then the pressure on Merkel from German tax paying corporates that their taxes are subsidising ROI corporates will be overwhelming.

    Anyone who thinks that under these circumstances that a world beating 12.5% CT rate is sustainable is living in cloud cuckoo land

  • Mack

    Perhaps JEB, but there are equally strong arguments that the debts of the banks aren’t the debts of Irish citizens.

    Could you really rule out a populist party of the left or right coming forth in the near future to repudiate those debts – leaving the German ‘banks gone wild’ in the doo doo?

    Whether such an option becomes palatable depends on the relative costs of a default and Euro exit vis a vis the slow grind of debt repayment while bailing out the European bank bondholders. If the cost of the later becomes excessive, then the former (the Argentinian route) becomes more attractive.

  • Itwas SammyMcNally whatdoneit

    “The problem now is that you cannot believe one word the current ROI Govt says about its economy or financial state – there have been too many lies and spin.”

    As an absoulute opponent of Feckless Fail and alll who sailed in her or cheered her on I couldnt give a flying feck, nor will the Plain people of Ireland, if it turns out that telling a few porkies knocked a few points off our rate of interest.

    %5 is an excellent rate in currnet conditions and we even have the Englezes (though their banks have 50 or 80 ? billion at stake) and Sweeders fighting to give us money.

  • Mack

    Almost certainly in an effort to support an ally in the fight against tax harmonisation. We should not forget this..

  • Pete Baker

    And a profitable effort, Mack.

    As Robert Peston points out

    Update 1057: Over the past 24 hours, I have been asked countless times how the UK government can afford to provide around £7bn of support for Ireland – through indirect and possible direct loans – at a time when it is struggling to reduce its own deficit.

    Well the answer, as many of you will know, is that unlike Ireland, the UK is currently having little difficulty borrowing record amounts at comparatively miniscule rates of interest.

    If the UK were to lend to Ireland for three years at an interest rate of 5% or more, which seems likely, that – in theory – would yield a profitable turn for the UK exchequer of perhaps 3 percentage points (or 300 basis points, in the jargon).

    It would be good business, on the reasonable assumption that Ireland repays the UK.

  • Itwas SammyMcNally whatdoneit

    Mack,

    “We should not forget this”. You can always get out your Union Jack for the Queens visit to Dublin in March. lol

    Of course self-interest is at play and it is being dressed up as an act of ‘friendship’ – but whatever, it is certainly to be welcomed – slightly suprised the Tory right (and some Unionists) are not giving Davey more grief.

    If oyu personally

  • Itwas SammyMcNally whatdoneit

    Pete,

    Borrowing from the Englezes is the National equivalent of borrowing from Anglo Irish Bank.

  • Mack

    Of course self interest is at play. If we stave off this attack our interest will likely align again in future.

    Not sure I agree with Peston’s analysis. The market rate is significantly higher, lending below market rates – unless you know something the markets don’t that help you price the risk better – generally isn’t a good idea. (In fact it was that type of blasse attitude to the risk of default that got us into this mess in the first place). There is a pretty good chance that Irish debt will have to be restructured at some point. Better for Britain that that does not involve Credit-Anstalt style collapse of the Irish banking system, which would endanger theirs.

  • Mack

    Irish Times reporting Corporation Tax rises back on the agenda –

    http://www.irishtimes.com/newspaper/ireland/2010/1122/1224283834966.html

    Multinationals threaten to pull out if it is raised.

    http://www.independent.ie/business/irish/multinationals-will-exit-if-corporate-tax-rate-jumps-2429217.html

    Personally, I’d be in favour of an EU withdrawal over this particular issue. We could deal with the IMF directly and model ourselves on Switzerland.

  • DC

    because Britain is fooked too – completely interconnected with Ireland in terms of finance and trade. Britain’s debt is 300% of GDP when all debt is accounted for, plus personal debt rates via credit cards, loans and mortgages running at 150%.

    This is the big difference in relation to post WWII analogies.

    Plus the inflationary shadow of China and Inda and Russia (new oil and spends) looms large.

    I reckon Ireland should say no and be the deflationary domino on global financial markets by firstly telling the IMF to wipe out or write down the debt released between 01-08 – or the IMF and EU can go to hell themselves to collect the fools good that was released and paid upfront in the name of *financial innovation* – i.e. bogus credit released inside private financial markets as toxic debt.

  • Itwas SammyMcNally whatdoneit

    It sems that Ireland will be borrowing money at a rate about 3% below the market rate and will not be fully underwriting it as they did previoulsy?

    A guarantee of 4 years of stability may well be sufficent to stabilise the housing market – perhaps after another 10-20 fall and shore up the banks – what’s left of them. May be nearly time to get the old credit card out ahd have one of those 3000 estates lying empty.

  • Itwas SammyMcNally whatdoneit

    “Personally, I’d be in favour of an EU withdrawal over this particular issue. We could deal with the IMF directly and model ourselves on Switzerland.”

    The MACK-SF-Alias Alliance has a nice ring to it.

  • Glencoppagagh

    “Britain’s debt is 300% of GDP when all debt is accounted for”
    Can you provide a reliable source for this assertion?

  • dible

    Can someone explain why 12.5% profit tax is an all-party brook-no-argument policy?

    Did someone die for it somewhere back along the line?

    It is a beggar-my-neighbour policy which completely distorts trade and basically says to American companies ‘My name is Biddy, and I’m the cheapest whore in Europe.’

    If it went to 15% would the sun rise over Dublin Bay ever again?

  • Glencoppagagh

    Sorry Mack, I just can’t see the RoI ever becoming like Switzerland.

  • Glencoppagagh

    “Britain’s debt is 300% of GDP when all debt is accounted for”
    It’s odd that the markets haven’t noticed since they only require a yield of less than 3.5% on ten-year gilts.

  • Mack

    Well, if we don’t do something soon, we’ll share a new first language 🙂

  • Glencoppagagh

    An amusing and fairly accurate summary of the position Dible.
    I think the problem is that while American companies might still be willing to sample Biddy’s wares at 15%, they’d worry that she might be tempted to raise her price again.

  • Alias

    The low corporation tax policy will become politically and morally unsustainable when ordinary taxpayers have to subsidise the cost of bailing-out the eurosystem through income and other taxes.

    The EU doesn’t have to make the removal of the low corporation tax policy an explicit condition of the loan because it is an implicit condition of it.

    The EU is smarter than you are. 😉

  • DC

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/16_12_09_new_capitalism1.pdf

    Here are some of the numbers that tell us what’s gone wrong. For the UK, if you aggregate together consumer, corporate and public-sector debt, the ratio of our borrowings to our annual economic output is a bit over 300%, or over £4000bn. That’s a similar ratio of debt to GDP as that of the US, and it’s a record. Over the past decade, we borrowed and we borrowed and we borrowed: we assumed that the day

    This was from Peston back in Dec 2008 so I haven’t entirely remembered it correctly but it’s 300% all in, including personal debt. if anything I imagine it has gone up given further disclosures of bad corporate banking debt in Ireland.

  • Glencoppagagh

    Oh don’t worry Mack, they surely won’t go as far as banning Irish.

  • Alias

    Competition is good for economies but bad for the EU when its policy is to become a single economy on its way to becoming a single country.

    That is why the EU is rabidly anti-competitive in the matter od tax policies. It has nothing to do with the economics of it.

  • bob wilson

    Some people are subscribing or wishing to subscribe strange motives to Tory attitudes.

    Dissapointing as it might be for Sinn Fein/SDLP and FF supporters but there is NO anti Irish feeling in the Tory Party.
    Those Tories who question the Uk’s involvment in the bail out do so largely because they want Ireland to be free of the Euro.

    Likewise those who wish to describe it as pure self interest I think are wrong too. It is a combination of self interest and the (shock horror) fact that Tories dont reciporate the hate which simplistic Irish nationalists display towards them.
    Most Tories have a relatively benign attitude to the Republic.

    I think this is, however to use a cliche, a ‘game changer’ in NI politics.
    Simplitstic notions repeatedly poured out by SDLP and SF about an All Ireland economy are shown to be the nonsense they always were – an all British Isles solultion was as credible as ‘All Ireland’ but we must all respect political realities.

    New political Reality one is that all discussion United Ireland should be ruled out of sensible political discussions for the lifetimes of anyone alive today

    New political reality two is that the Irish Govt will increasingly make common cause with the UK Govt in Europe and will be obliged to follow a UK Govt agenda with regard to the North

  • Mack

    Not sure I get your moral point. The low corporation tax rate brings in a tax take above European averages.

  • Alias

    It’s benefits are highly dubious and would benefit from more recent objective study in the area. For example, Ireland’s largest company, Ingersol Rand, doesn’t pay any corporation tax now that it can run its profits through Bermuda. In addition, the incentives given to this company to employ workers here were in fact given by Irish taxpayers to emply Eastern European workers since they are the majority of its Galway workforce.

    The point, however, is that the EU has given Ireland a bill of several hundred billion euros which will require that several hundred billion euros be raised in extra taxes to pay for it.

    It won’t be a case that the state can simply hand that bill to income tax payers and not hand it to payers of corporation taxes. The public will see that they are paying extra taxes to bail-out private business and that private business is not. That makes it impossible for the policy to be politically sustained.

    Therefore, all taxes will increase dramatically and that includes the corporation tax policy. To ensure this occurs, the EU will use the europhile media to promote propaganda to that effect. So it isn’t needed that the removal of the policy should be explicit when it is already implicit. That is how the EU’s step-by-step progression operates, and they are masters of non-linear politics.

  • Cynic

    Britain is out of recession and will prosper

  • Cynic

    If Biddy wants the business she has to get her prices right as she has a lot of we’ans to feed

  • Cynic

    Tripe. The key to all of this is grow the economy and create jobs that lower the social welfare bill and increase total tax yield. Higher taxes on companies don’t necessary lead to a higher tax take in the short to medium term.

  • Cynic

    Those questioning the bail out are – by and large – a few backwoodsmen who want to see the UK out of Europe and will use every opportunity to promote this.

  • DC

    Bob, it is proof of the limits of communal/identity/cronyism politics in the face of turbo globalisation and a very interconnected capitalist world.

    Left/right ideologies would be of more benefit for sure in Ireland – all of it, particulary the left for Ireland – a lift which is less antagonistic of capitalism but more critical of it and challenges the value and price of things – and is intensely relaxed over claims of extreme wealth, much of it unhealthy!

    Ireland’s politicians lack the contemporary skillsets to survive.

  • john greene

    Bob not only will nationalists be bithcing about the ‘Brits’ help but the fact that George Osborne is of Anglo Irish Ascendancy stock and heir to an Irish baronetcy!
    Insult to injury

  • DC

    not lift but *left. and also should read *isn’t intensely relaxed.

    hasty at work posting.

  • Mack

    The point is that raising corporation tax won’t lead to higher corporation tax revenues. Not only may corpo revenues fall, but income tax, VAT etc might fall as well.

  • Drumlins Rock

    I understood that mainly due to low interest rates personal debt in the UK is falling dramatically, and is causing concern that people are clearing debt rather than aid the recovery by spending.

  • Drumlins Rock

    Mack, you may be right, I would like to see figures otherwise but surely paying the interest will strangle the country never mind clearing the actual loans?

  • Itwas SammyMcNally whatdoneit

    The Tories gave Ireland a say in running Ulster originally as part of AIA and then adopted a positive attitude to copperfastening that say in the GFA/STA and helped Unioists over the finishing line with Police and Justice.

    As long as they stay on the straight and narrow in relation to Irelans (North), they will get the political credit they deserve (Hatfield and UCUNF were hopefully just temporary kickbacks to the bad old days) and we here in Ireland (South) will happily have the financial credit on offer.

    Apart from some mischevious behaviour, the Tories have done well – but must keep up the good work.

  • Drumlins Rock

    It reminds me a bit of the Eurovision, the UK always give Ireland a high score even when they are crap, where as Ireland always gives the UK little or nothing even when they have a winning song. hopefully the anti British core will die with Fianna Fail.

  • another

    Financial guru Jim Rogers says, what most Irish citizens believe, that the country should be allowed to go bankrupt;

    http://url.ie/88bi

  • GoldenFleece

    I think it is becoming clear to most people after this that the ROI was in the United Kingdom all along – economically, the ROI just had more devolution that everyone else :-).

  • GoldenFleece

    The British Parliament is discussing the Irish Financial Crisis right now on live feed.

    Did the Dail meet today on their own financial crisis, nah, monday is their day off apprarently. No wonder the South is down the tubes, disgraceful.

  • Can you produce any statistics to support that anti-Irish propaganda?

    In 1966 the UK entry was sung by Kenneth McKellar. His song received more votes from Ireland than from anywhere else. The BBC commentator remarked about the result from the Irish panel “Oh you scratch my back and expect me to scratch yours.” Do you, as a Brit, apologise for that comment?

  • Alias

    Mack that is your point, but not the point made in the post that you replied to. My point is that corporation taxes because it will become politically and morally unsustainable that income taxes should carry the cost of bailing-out corporations.

    In addition to that, your EU masters demand it. However, there is no need for them to make the demand explicit because they have made it implicit in their demand that Irish taxpayers should bail-out the eurosystem.

    And in addition to that, Ireland is about to make a sharp swing to the left, and voters will also demand it.

    The low corporation tax policy is a goner, so get over it already. 😉

  • Greenflag

    Mack,

    ‘and model ourselves on Switzerland.’

    Brilliant so we become how many cantons ? I suppose we could make use of all those now unemployed building workers to build a few Alps in the middle of Leitrim and Roscommon and Longford for authenticity -sell the East Coast to the Germans and the West Coast to the French and Cork and Munster to the Italians and the rest of the country to our Romany ( travellers) and hey preston we could could go for the full name rebranding from ‘The land of the Celtic tiger/pussycat’ to ‘New Switzerland – the Gnome Isles of the west ‘ 🙁

    Over my dead body 😉

    But I’ll agree that rather than give up on the corporate tax issue Ireland should consider leaving the eurozone at least . This corporation tax issue needs to be shelved until the country has recovered from the banker’s heist !

  • Alias

    Typo: “…corporation taxes will rise because it will become politically and morally unsustainable that income tax payers should carry the cost of bailing-out corporations.”

  • JH

    Sorry Alias but you’re wrong there. Higher CT does not create greater tax yields, at least in situations where c70-80% of the economy originates in FDI from companies that are threatening to pull out if it’s raised. Raising CT would result in working people paying MORE to ‘bail out the euro-system’ (what?).

    The low corporation tax is a keeper, so get used to it already.

  • “Britain’s debt is 300% of GDP when all debt is accounted for”

    I do not agree with DC very often but he is basically correct here. In fact, these figures are Conservative (sorry to use that word DC).

    The following link to a spectator article will provides an additional reference, although the article is 2 years out of date.

    http://www.spectator.co.uk/coffeehouse/3078296/the-true-extent-of-britains-debt.thtml

    Like Ireland, our financial services sector was not adequately regulated. The difference between us and ROI is that our currency was able to fall in reaction to the crisis. You could say that everybody had a pay cut of 25%. as a result of the falling currency. That kind of relief was never avaliable to the ROI Government. I am thankful that Gordon Brown did not allow the UK to join the euro.

    Coming back to the UK debts, it is actually not as bad for the UK, in terms of their capability to recover from it, as the figures might lead anyone to believe. Something like 40% of the exposure to debts is the banking sector. That debt level is set to rise, following credit card defaults, repossessions and personal bankrupticies over the next couple of years. However, unlike Ireland, the Balance sheets of the UK banks are strong enough to ride the storm. The measures taken by the last Government a couple of years ago to recapitalize the most vulnerable of the large UK banks has effectively prevented a banking sector collapes.

    The Government accounts for another 20% of the overall debt. By 2016, the budget deficit will rever to surplus. Most of the rest of the debt is secured debt in the form of mortgages. The vast bulk of those mortgages will be paid off over time.

    What is most important, from a UK perspective, in the next few years, is that the balance of trade moves into surplus. A low sterling value which enables exporters to better compete, plus a flat property market (this is looking increasingly likely) that will provide the conditions for less consumer spending make this more like to occur than not.

  • al

    Northern Ireland as we all know is a burden on the UK economy and this burden has been increased by the need for the UK to send direct financial aid to the Repbulic. The UK/NI economy will be hit hard by the situation in the Republic. Remember when ASDA in Enniskillen was the 6th most profitable store worldwide for Walmart? Now what’s it doing? This constant changing of economics in the RoI and NI are extremely unhealthy for both nations.

    I love NI, it’s the country I was born and raised and I’m proud to come from there but I’m also a realist and the end result in 20-30 years could very well be a United Ireland. In the era of capitalism economics is more important than national identity. I’d much rather be a part of a United Ireland than some failed and neglected state.

  • I suppose this is a bit off topic. Is it not the case that Terry Wogan is not particularly popular in his native Ireland. It has been suspected that in more recent years, this has led to rather harsh judging by Ireland.

    I have to say, I dont believe the nonsense. The UK has not had a decent entry since God knows when and the tabloid reporters jump on any excuse when things are not going their way.

  • GF,

    I would say that Ireland’s best years were 1979 to 1999. This was the period when the punt was no longer tied to the pound. Jack Lynch may have broken the record on ridiculous promises in a general election in 1977 but setting the punt free laid the foundations for the Celtic tiger which had 5 genuine years before 1999.

    After 1999, Ireland was effectively part of the united states of Europe.

  • This constant changing of economics in the RoI and NI are extremely unhealthy for both nations.

    Agreed. The problem is, you cant look at the Republic of Ireland as a place on its own anymore. It is part of Europe and the campaign that Republicans will be putting forward in the future is for Northern Ireland to be part of a United States of Europe. Things could change, of course, but from the point of view of economic argument, unionism has the upper hand.

    “United Ireland” may be emotionally important but in the big future politics of Europe, it will be of little more significance than two local authorities merging.

  • Alias

    Good post, and sadly true. Ireland no longer exists than as other than a region of the EU so whatever culture or other selling point that those seeking a UI now have to promote will have to be in that framework. However, it also means that they really don’t have to bother since the UK will end up as another region of the EU too. Think it won’t? Look at how much sovereignty it has given away to the EU in the last 30 years.

  • “Think it won’t? Look at how much sovereignty it has given away to the EU in the last 30 years”

    True, but the UK Coalition Government is about to put into effect a constitutional locking mechanism, which would ensure that no more powers are ceded to Europe without a referendum. Just ignoring the amendments that the Germans want to the Lisbon treaty (the UK wont oppose this as it only affects countries in the Eurozone), the next contentious treaties are likely to concern tax harmonisation. This, I suspect, is where there will be huge stresses because the countries with low CT just wont agree to it. I dont think such a treaty will go through without a lot of bribery – to wit – Ireland, e.g. being granted amnesty on some of its debts. Because I dont think they will get that through, the next big treaty may well be full political union because, as I say, that is the only way the Euro can work in a way which addresses both fiscal differentials and democratic deficit

    The events unfolding today make it very unlikely that Europe will become more endearing to the UK in the future.

    I have suggested that Ireland will become part of a USE and that is because, as I say, I do not see the euro becoming a stable currency without full political union. I believe Ireland will vote for that in the next 20 years because they have gone past the point of no return and political union does offer the chance for more fairness when it comes to regional inequality.

    In conclusion, I think it more likely than not that Ireland will move further away from the UK and all because they were chasing “fools gold” when they voted for Maastricht back in 1992.

  • Alias

    In Ireland’s case, referendums are only required if a proposal is inconsistent with the aims and objectives of the existing treaties. A common defence policy, for example, would be held to be inconsistent but little else. Hence we are unlikely to ever see an EU referendum again in Ireland.

    In the UK’s case, Dicey’s doctrine holds that parliament is sovereign so any law made by parliament can be repealed by parliament. So if parliament were to enact a law stating that the public must be consulted then it could also repeal that law if it did not want to consult you. Ergo, the ‘guarantee’ offered by the Tories is entirely bogus.

    Unless you have a written constitution that cannot be amended by parliament then you simply have another empty promise that is worthless. After all, that is the point of a constitution: it gives you negative rights by prohibiting certain actions by your government. Like the EU’s utterly worthless constitution, the state can amend it and, ergo, it offers the citizen no protection from the state. The only point of offering a worthless ‘guarantee’ to the people to hoodwink them into thinking that their sovereignty is secure and therefore need not defend it or take notice as it is stolen from them in incremental steps. Beware of the shyster that offers it.

    I agree that the British public are a patriotic nation and would not give their sovereignty away if they understood what they were doing but that patriotism has been steadily, stealthily and deliberately eroded by the europhiles within the UK for the express purpose of removing that barrier to surrendering their sovereignty to the EU. I suspect, like the gullible and feckless Irish, they’d vote for EU rule if they were scared into it or were led to believe that they needed EU rule to survive.

    Incidentally, the UK has already formally harmonised some of its taxes within the EU (it agreed a minimum VAT rate for member state, for example) and Labour operated a policy of tax harmonisation by stealth. You saw the same ‘harmonisation’ policy applied to the Central Bank where it virtually copied the policies of the ECB in order to make for a smoother transition to joining the EuroZone.

  • dewi

    The real power of the UK cf ROI is the ability to print money – £200bn of it so far – driving down currency, avoiding deflation in short term but encouraging inflation in medium term, and, in the medium term, upsetting the Gulf Sovereign Funds and Chinese bond holders with a poor ($ based) return and redemption value.