Irish Economy

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The Politics of Breathing Space – or Why the Irish Government Can’t Let Syriza ‘Win’

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It is difficult to make sense of the EU governments’ attitude towards Greece – not if we’re using rational measurements.  There was a deal on the table – as reported by Paul Mason of Channel 4 news.  The Greek government was happy enough with it, the EU Commission was happy enough with it, it didn’t cross all the t’s but it provided the necessary breathing space to allow a more sustainable and beneficial deal for both creditors and debtors to emerge.  So what went wrong?

One of the problems with writing about the current crisis is that by the time this gets posted, events have moved on – such is the speed at which events, and rumours of events, are moving.  So let’s just hit some highlights.

You’d think Greece has been lethargic in applying its austerity programme, resulting in comments like – ‘Why can’t Greece be more like the virtuous Irish?’  But as Kevin O’Rourke states, pointing to the comparative fall in the structural deficit between Ireland and Greece:

‘So, to summarise: the Greeks have done more “reform” than we have, have endured a lot more austerity, and live in a country where the costs of austerity are likely to be higher than here. Perhaps the Irish government might want to tone down its assertions of relative virtue, and display a bit of solidarity with Greece. Is a less deflationary and less creditor-friendly Eurozone  not in Ireland’s long term interests, assuming that we remain a member of the single currency?’

What the new Greek Government wants is very reasonable:  a few weeks to draw up an agreed programme.  Claims that ‘we don’t know what they want’ (made consistently by our Finance Minister) are misleading and insulting. They are not asking for extra money, they are not seeking transfers from, or additional liabilities to, other members states.  From the outset, Greek Ministers has been asking for what can be called a ‘bridging loan’ which would only last a relative few weeks – in order to negotiate a new programme.  In other words, they are asking for time – a reasonable request for any new government.

And that is exactly what was almost agreed – or at least was on the table.  Paul Mason quotes from a draft agreement was drawn up by EU Commissioner Pierre Moscovici

‘The above (the proposed agreement) forms a basis for an extension of the current loan agreement, which could take the form of a (four-month) intermediate programme, as a transitional stage to a new contract for growth for Greece, that will be deliberated and concluded during this period.’

This coming from the EU Commission which is not known for its debtor sympathies.  Nonetheless, it was a constructive intervention – even if some officials from the EU Finance Ministers’ meetings tried to insist it didn’t exist.

This got nowhere even though Greece was willing to sign.  So why the opposition to what could be seen as a face-saving compromise for all involved?

Quite simple – the Syriza government cannot be seen to ‘win’.  Never mind debt write-downs (which Syriza is not looking for – Alexis Tsipras has made it clear they will honour all contracts, all obligations); the ‘win’ here refers to breathing space and the political momentum that such space might encourage throughout Europe.

The breathing space would give time to construct an alternative to austerity.  The breathing space would provide momentum, not only in Greece, but in other countries (and not just the periphery) to those forces who have been arguing for an alternative to the current deflationary regime.  The breathing space would create the danger that the initiative could be wrested away from the controlled-rooms of Minister meetings and taken up by popular forces.  The breathing space could be a very dangerous space – dangerous to the current elite.

What might happen if the new Greek Government constructed a programme whereby relaxation of arbitrary budget surplus rules (which would cost nothing to anyone but would allow for a humanitarian and investment programme), coupled with an authentic reform that tackled the corruption and tax evasion imposed on Greek society by the oligarchs?  A programme that met all EU fiscal targets but did so in a different way than what is being demanded by EU member-states?  This wouldn’t put some folk and some ideologies in a good light.

This helps explain why only a matter of hours after they were elected, the new Greek government was subjected to a torrent of demands to continue the Troika, extend the current bailout deal, maintain the current course – no deviation, no relaxation.  Even now, the bottom line from the Eurogroup is that Greece must apply for a bail-out extension – even though this is unnecessary and gratuitous given the EU Commission’s intervention.

Syriza raised hopes and expectations throughout Europe in the aftermath of their historic victory.  They continued those with the new Prime Ministers’ first address to the Greek parliament.  They swept through Europe in the person of the Finance Minister Yanis Varoufakis and his support team.

That had to be shut down – and shutdown quickly.  If Europeans got similar ideas, all manner of problems could arise for domestic governments who have a more grim agenda in mind.  The last thing the Syriza government should be allowed is to carry on all this hope and expectation-raising.  Normal business must be resumed and seen to be resumed.  Immediately.

This explains the Irish Government’s attitude of ‘no breathing space’.  This might give time for progressive voices here – in concert with other European groupings – to critique and propose alternatives to a deflationary programme of squeezing public spending, cutting taxes and obsessing over a balanced budget while labouring under incredible debt levels.  Give the Greeks breathing space and we might get ideas about getting one of our own– and that can’t be allowed.

The Irish Government’s position is unconscionable and unreasonable.  Their opposition to the Greek Government’s reasonable request should be highlighted at every opportunity, opposed at every turn; and not only for the sake of the Greek people.

For, like the Syriza Government, the next Irish Government – hopefully the first progressive government elected in this state – will be demanding the same thing:  breathing space.  Let’s hope it is not too late – for Ireland, for Greece and for Europe

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Sacrificing Our Young

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It is often stated that everyone has made sacrifices during this crisis.  Whatever about ‘everyone’, there are certain groups that clearly have ‘made sacrifices’; or, rather, have been sacrificed. And one of these groups is young people.

We have seen emigration rates rise substantially, high levels of unemployment, substantial cuts in social protection payments and even insults (the infamous ‘unemployment as a life-style choice’).  Let’s look at another grim metric – Eurostat’ssevere material deprivation rate.

As stated before, this benchmark is particularly dire.  Severe material deprivation is defined as enforced inability to pay for at least four of the following items:

To pay their rent, mortgage or utility bills * to keep their home adequately warm * to face unexpected expenses * to eat meat or proteins regularly * to go on holiday * a television set * washing machine * a car * telephone

Eurostat looks at the plight of young people throughout Europe, aged 15 and 29 years.  For 2012 this is the percentage of young people suffering severe material deprivation.

Youth Deprivation 1

Unsurprisingly, Greece leads the league.  But there’s Ireland right there at the top.  More than 13 percent – or more than one-in-eight young people live in severe material deprivation conditions.  This is more than double the average of other non-Mediterranean countries (a particular comparison given that our Ministers continually claim that we are not Greece or Italy, etc.).

The growth in severe material deprivation among young people over the course of the crisis has been alarming to say the least.

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clairbyrnelive1

The French Elephant in the Room

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How do EU countries manage to provide better public services and income supports than us?  And are the Irish willing to pay for European-style public services (the implication being we are not).  These were the two questions posed by the Claire Byrne Live show which compared life in France with our lives here.  It was both provocative and frustrating; frustrating because it did not answer the first question.  Had it done so, we would have realised the second question is irrelevant.  

Provocatively, we learned that in France:

  • Children receive full-time education from the age of three, totally free
  • A visit to the GP costs €7 and the waiting times for medical procedures can be measured in days – not months or years
  • If you become unemployed, you get 80 percent of your last wage in unemployment benefit for up to two years.

In other words, the French social model is far, far advanced compared to ours. 

How do they do they achieve this?  Do they tax their citizens more?  The programme provided a couple of statistics in a video introduction that should have alerted the discussion.  They compared a French two-earner household with an Irish one – both on €80,000.  The Irish household paid higher personal taxes (income tax, USC, PRSI). 

The second stat showed French government spending at 57 percent of GDP; Irish government spending is well below that at 40 percent.   So, if Irish personal taxes are higher, but spending is much lower – well, somewhere in there is the answer.  Let’s see if we can find it with the help of Eurostat and the EU’s Ameco database.

Claire Byrne 1

When it comes to personal taxation on employees and household consumption tax (VAT and Excise), Ireland and France are pretty close with both trailing the EU average.  So the reason can’t be found here.

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Solidarity with Syriza: Challenging Austerity at Home

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An article by Brendan Young and Eddie Conlon

The election of Syriza has sparked a rash of speculation on the possibility of a left government in Ireland at the next election. Contributing to this were the recent inferences from SF sources that they would not go into a coalition with the Troika parties – in particular FF or FG. Such a commitment would be welcome.

This note addresses three issues:

  • there is little prospect of a left government coming out of the next election, so what should the anti-austerity movement do to build a political alternative in the light of the Syriza victory;

  • the movement against the water charge is the source of a new political alternative and new, anti-austerity candidates in the coming election; any slate of anti-austerity candidates must therefore champion the non-payment demands of the movement because otherwise it will remain isolated from it;

  • should any new political formation accept the rules laid down by the defenders of wealth and privilege – or be prepared to lead a challenge to those rules?

No to Coalition with the Right

Explicit rejection of coalition with the Right – FF and FG – is a pre-requisite for discussion of a left alternative in Ireland. We cannot develop an alternative to the ravages of capitalism by forming a government with parties committed to the preservation of the wealth and privilege of the capitalist minority. But as yet, no clear statement has come from SF on this matter. Nor is it clear that SF would not do something analogous to what Syriza has unfortunately done: formed a coalition with a party of the Right, in this case ANEL – a populist right wing, anti-immigrant party – rather than form a minority government and demand the support of the KKE on concrete issues. The fault in this lies with the refusal of the KKE (Greek Communist Party) to support a Syriza government.

Hopefully this coalition deal will not derail the pre-election promises by the Syriza leadership – or become an excuse for not implementing anti-austerity or socially progressive measures. Socialists across Europe should support the actions of the Syriza government against the continued imposition of debt and austerity in Greece and build active solidarity with Syriza. The best way to do that is to actively challenge the austerity regime at home.

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Debt? What Debt?

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With the Dail to debate a private members motion from Catherine Murphy, TD calling for support for a European Debt Conference, it is worth looking over Ireland’s debt numbers; especially as we will get a flood of claims from some quarters that our debt level is fine, its’ sustainable, we don’t need debt relief, etc. etc. etc.

The starting point in such debates is the question:  is Irish debt sustainable.  This can, however, descend into a black hole of formulae.  Simply put, just about any debt can be considered ‘sustainable’ if the debtor is willing to starve the kids and live under the railway bridge.  ‘Sustainable?  Sure, but there will be sacrifices’ (which, in Ireland are never inventoried).  If you believe this is an exaggeration, consider the EU elite’s attitude towards Greek debt levels. 

Let’s go through some bald numbers.

Debt 1

Irish debt is among the highest in the 19 Eurozone countries.  Officially, it is at 110 percent of GDP; when measured against our fiscal capacity as suggested by the Fiscal Council, it rises to 122 percent.  We’re placed fourth though look out for Cyprus and Belgium in the next few years.

When we turn to what some call an ‘illegitimate’ debt – that private banking debt that we all ended up paying for – Ireland remains league leader.

Debt 2

While banking debt makes up a quarter of our GDP, in the Eurozone the total debt is less than 2 percent.  And for Ireland, this doesn’t count the nearly €20 billion taken from the National Pension Reserve Fund for recapitalisation – since this is categorised ‘investment’ and not debt.   Were it not for the official banking debt, our overall levels would be close to the average Eurozone level. 

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risingineq

The Very Real Cost of Rising Inequality

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Inequality is one of those concepts that for many people remain somewhat abstract and amorphous.  There are few that are against equality, but it has difficult gaining traction in the popular debate.  When you’re trapped in deprivation, debt, or low-pay then income or more hours of work becomes the measure of the solution.  Equality, however framed, remains detached.

It shouldn’t be.  For all of us are paying a real Euro-and-cents cost for rising inequality.  Inequality has many facets – economic, social, cultural, gender, sexual.  Let’s just look at one aspect – rising income inequality with the assistance of a valuable database:  the World Top Incomes Database.

Equality 1

In 1977, the top 10 percent income group’s share of national income was 27 percent.  By 2009 this had increased to 36 percent – a rise of 9 percentage points.  Two years into the recession saw a drop in this share as income from the speculative bubble fell faster than the national average.  However, don’t worry – Eurostat shows that since 2009 it has started rising again.  While the data isn’t directly comparable (the World Incomes Database is based on tax revenue data, while Eurostat which is based on a survey of households shows little medium-term movement), an indicative number would be that it has risen to 37 percent in 2012.

Another way of looking at this is that the lowest 90 percent saw their share of national income fall from 72.7 percent in 1977 to 63 percent in 2012 (using the indicative number).

Again, this graph is abstract.   So let’s play a little game.  What would be the impact on households if the share of the lower 90 percent had remained the same; that is, how much more money would the lower 90 percent have today if their share of the income was the same as in 1977?

The bottom 90 percent of households would have €10.975 billion more.  Nearly €11 billion spread out among approximately 1.5 million households.

  • For each household, this would mean approximately €7,400 more income

Of course, there would be differences given the variations in household types (single, couple with children, single parents, etc.).  And this is just a suggestive estimate.  But imagine the improvement in their fortune if a low-paid couple (on €30,000 per year) were receiving an extra €140 or more per week.  And compare this to the €4 weekly increase from the tax cuts, which won’t even keep pace with inflation.

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If This Isn’t an Emergency, What is?

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If five percent of the population suddenly fell ill to an unknown disease a national emergency would be called.  Government agencies and health professionals would be brought together under the direction of an emergency cabinet committee to first diagnose the disease, come up with a cure and then deliver it.

Well, we have such a disease – and it affects not five percent but 30 percent of the population. It is not unknown –   It is the economic and social disease of deprivation.  The CSO released the 2013 Survey of Income and Living Conditions and the data on deprivation is truly alarming.

Deprivation 1There are now 1.4 million who are categorised by the CSO as living in deprivation.  There are well over 400,000 children living in households suffering from multiple deprivation experiences.  Since the start of the crisis, these numbers have more than doubled. The disease is spreading.

You are classified as ‘deprived’ if you unable to afford or experience two of the following items:

 

Two pairs of strong shoes * A warm waterproof overcoat * Buy new (not second-hand) clothes * Eat meat with meat, chicken, fish (or vegetarian equivalent) every second day * Have a roast joint or its equivalent once a week * Had to go without heating during the last year through lack of money * Keep the home adequately warm * Buy presents for family or friends at least once a year * Replace any worn out furniture * Have family or friends for a drink or meal once a month * Have a morning, afternoon or evening out in the last fortnight for entertainment

This is not a welfare phenomenon.  Over 22 percent of all those experiencing deprivation are actually in the working force – well over 300,000.

Deprivation 2

The number of people experiencing in-work deprivation has more than trebled since 2008 – more than one-in-five working today.  Over a third of one-income households are in deprivation.  But a substantial number of two-income households also find their living standards marred – one-in-six.

Clearly, having a job is not necessarily a pathway out of poverty.

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elderly

The New Fiscal Enemy Within: The Elderly

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“Old people don’t need companionship. They need to be isolated and studied so that it can be determined what nutrients they have that might be extracted for our personal use.”

- Homer Simpson

The Irish Times published the highlights of a paper produced by the Department of Public Expenditure and Reform (DEPR) purporting to show the latest crisis awaiting us – the crisis of unsustainable public pensions.  DEPR produced some numbers:

  • The number of people aged 65 and over is projected to increase from 570,000 in 2013 to 855,000 in 2026.
  • Spending on the contributory and non-contributory State pension schemes already account for €4.93 billion, or 25 per cent, of the total cost of social protection services.
  • The State could have to provide annual increases in funding of nearly €200 million up to 2026 just to keep pace with the growing elderly demographic.  This means a 50 percent increase in spending on state pensions by 2026

These look like truly scarifying numbers – 50 percent increase in the number of pensioners and 50 percent increase in pension costs.   No wonder the newspaper headline read:

‘Cuts to state pensions “must be considered”

What can we do, short of setting up a kind of Hunger Game for the elderly?  Thankfully, DEPR has some ideas:

  • Cut the weekly pension by €8.50 per week
  • Scrap the €10 weekly top-up for people over the age of 80
  • Bring forward the scheduled dates for raising State pension eligibility
  • Abolish the free TV licence.
  • Means test fuel allowance for new recipients of the Department of Social Protection’s household package of benefits.
  • Abolish free travel passes for spouses and companions of the elderly

Or we could take another route:  increase PRSI contributions and/or cut back on expenditure in other areas (health, education, etc.).  Thankfully, DEPR is on top of things, laying out the painful but necessary reforms (i.e. cuts) necessary to sustain our public pension system.

What does all this add up to?  Rubbish.

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makingendsmeet

The Era of Making Ends Meet

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2015 will be all about making ends meet; or rather, not making ends meet.  Gone are the drama days of the last few years – NAMA, bondholder debt, collapsing employment and output, bailouts and Troikas (unless the EU decision-makers are determined to accelerate the European deflationary spiral; then we could have drama aplenty).  It’s not that these issues have gone away – but they are now embedded, hidden, in what can be called a ‘new normal’.  And this means we are entering into an excruciating and potentially protracted period of grinding things out; day by day.

So many commentators talk about the economy in recovery but ‘people not feeling it yet’.  I suggest there is a better way of looking at it.  The boulder has fallen down the hill – that’s what the gravity of recession will do; that, and austerity pushing it down faster.  Now people are pushing the boulder back uphill – it’s a big boulder and it’s a big hill.  And people are supposed to be ‘feeling it’?  They are supposed to be grateful?  Hmm.

We have discussed other indicators – deprivation, food poverty.  These are harsh benchmarks that affect a significant proportion of the population.  But there is another indicator, referred to as ‘soft’, which gives a more representative picture of this phase we are entering:  making ends meet.  It is called soft because it is not calculated on the basis of percentages of the median wage (relative poverty) or even a survey of people’s concrete experience (deprivation indicators).  It is based on asking people ‘are you having difficulty making ends meet’ – a highly subjective question that doesn’t define ‘difficulty’ or ‘ends’.  It is left to people to determine that.

The EU asks such a question in the annual Survey of Income Living Conditions.  They break it down by degrees:

  • Households making ends meet with great difficulty
  • Households making ends meet with difficulty
  • Households making ends meet with some difficulty

This is the result:

Making Ends Meet 1

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For Some Vicious Mole of Nature: Making Sense of The Irish Bank Crisis

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God will forgive them.
He’ll forgive them and allow them into Heaven.
I can’t live with that.”

Dead Man’s Shoes (2004)

What are we to make of the Irish Banking Inquiry, which began its public hearings last week. For myself, as I said in Shop Floor in September, I think it provides an opportunity for progressives and we should make use of it.

As to what I mean by that, well, take this quote from a 2012 paper by Gregory Connor, Thomas Flavin and Brian O’Kelly, entitled ‘The U.S. and Irish credit crises: Their distinctive differences and common features’, published in the Journal of International Money and Finance (available as a pdf here).

It is not clear that Anglo Irish Bank represented a systemic risk. Anglo Irish had a limited retail presence; it operated by making large-scale commercial loans funded by institutional borrowing. Other banks may have wanted Anglo Irish included in the government support schemes since, as was subsequently revealed, many developer loans with different banks were secured with the same collateral, creating a complex web that would be difficult and costly to unwind if Anglo Irish alone were allowed to fail.” (Connor et.al. 2012: 63)

The key to the Irish bank guarantee and subsequent sovereign debt crisis is right there in that complex web of developer loans with different banks. That’s the rabbit hole, the one we need to fall into, in order to make sense of this whole mess.

But let us be clear: although the loan book is key, this is not just about developers and their bets.

For example, the loans for commercial property speculation cannot be separated from the tax incentives approved by the Oireachtas and various finance ministers; nor from the legislative and regulatory environment that finance and property speculation demanded of, and received from, the Irish State.

Alongside the finance/speculator/state core lie the professional sectors that benefited hugely from this environment – that is, accountancy, law and real estate.

There is also the issue of the media in Ireland – private and public, the newspapers as well as RTE – which as a sector not only benefited from property speculation via ad revenue, but at a deeper level shared (and continues to share) much of the ideological framework which gave an intellectual sheen to such base and futile speculation.

When we take these dynamics and place them within a historical time-frame, we start to observe a reconfiguration of the Irish State, from the late 1960s to the mid-1990s, which parallels the shift in profit-seeking strategies within Western capital, from production to rentier. Ireland’s role as a comprador state, that stays the same, albeit one that shifts from the grazing fields of Meath to the glass towers of the docklands.

The best way to make sense of a ‘complex web’ of social, political, economic and cultural forces is to apply a relational approach, not a causal one.

A world seen through causality is binary, whereas a relational approach is dynamic – it allows us to see the various forces in motion, bouncing off each other, as they create new tensions and contradictions.

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mbT

If this is a recovery why are people getting poorer?

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On the same day that the CSO reported that the economy grow by 3.5% from a year ago, the Irish Times reported deepening gloom among households with survey respondents reporting decreasing disposable incomes. 45% of people said they were spending more on utility bills, and many others reporting increased costs of transport, healthcare and housing.

How is it both possible for the economy to be expanding at a decent clip yet the population is becoming poorer? Leaving aside the possibility that the population is expanding at a faster pace than the economy (which is not the case here), then either the data is false or all of the benefits of recovery and more are going to a minority of society. Or both.

The reality is that the CSO vastly overstate the improvement in the economy, which in reality is doing little more than bumping along the bottom. At the same time, the austerity policy works to redistribute incomes from poor to rich, from labour to capital, especially unproductive capital such as banks and landlords. If energy bills are rising in real terms incomes are being transferred to them from households. If rents are rising, real incomes are being transferred from tenants to landlords, and so on.

Fake exports, real stagnation

The export-led recovery that is so widely touted by supporters of this government and of austerity generally is a statistical fiction. Over time a number of commentators have pointed to the tax regime as a source of huge distortions to the external accounts. This facilitates the booking of costs, output and profits in this jurisdiction in order to avail of extremely low effective tax rates, way below even the headline rate of 12.5%. Constantin Gurdgiev at True Economics has also shown that this is a key factor in the current inflated level of GDP.

One marker of this distortion to the trade data is that the monthly CSO accounts show total goods exports of €23.2bn in the 3 months of Q3.  Yet the data included in the Quarterly National Accounts show exports at €27.3bn. There is a different methodology for the two pieces of data. But there is a truth gap between the real level of goods exports and reality, which has widened over time. In 2008 the export totals were almost aligned, with the GDP data showing exports just €1.8bn higher for the whole year. Now that annualised discrepancy amounts to €16.4bn. This is greater than the entire recorded improvement in real GDP since the trough of the recession at the end of 2009, which is €15.7bn. Without the fakery of an ‘export-led recovery’, statistically there is no recovery at all.

Because the export data is so distorted, it is important to consider the trends in aggregate domestic demand, which is the sum of household consumption, government consumption and investment (Gross Fixed Capital Formation).

Fig.1 Real Final Domestic Demand, €bn

MB1

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A Mini-Tax-Cutting Budget? Abolish the USC? Can It Get Any Worse?

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Christmas comes early for employers, high-income groups and right-wing ideologues.  The Sunday Times (behind a paywall) reports on demands from Government backbenchers to introduce a mini-budget in an attempt to salvage the Government’s fortunes.  And what would be the centre-piece of such an initiative?  The race is on between Fine Gael and Labour backbenchers over who can make the most outrageous tax cutting promises, including the notion that the Universal Social Charge (USC) be abolished.    Ho-ho-ho.

Let’s first deal with the idea of abolishing the USC.  Who would be the greatest beneficiary?

USC 1

As seen, someone on the minimum wage would get a boost of 2.2 percent in net take-home pay from the abolition of USC.  This rises to over 10 percent for those on €100,000 and it gets even more lucrative for those on very high incomes.  Abolishing the USC would be highly regressive – benefitting those on the highest incomes the most.

But this doesn’t tell the full story as the above refers to headline tax rates.  High income groups can hire an army of accountants to avoid paying large amounts of income tax, inheritance and gift taxes, capital gains tax – exploiting a huge array of reliefs and allowances and other legal tax reduction strategies.  However, that army is defeated when it comes to USC.  There is no getting out of paying it.  So, if anything the benefit to high income groups would be disproportionately higher than the chart above.

Let’s put this in Euros and cents.

USC 2

Someone on the minimum wage would get €7 per week; at the higher end they would get over €350 per week (that’s right, a €16,000 annual tax cut).  From my own, admittedly back-of-the-excel-sheet, calculation, over 46 percent of USC revenue comes from those earning €70,000 or above.  Less than 10 percent of USC revenue comes from those earning less than €30,000.  Guess who wins out in that tax-cut auction.

To be fair, some proponents of abolishing the USC claim that alternative means of getting revenue from high income groups can be introduced.  This is simply not realistic.  USC collects over €4 billion per year.  That’s over one-third of what income tax takes in.  How could you make it up?

  • Increase the top rate of tax from 40 percent to 57 percent.  That would do the trick (though as mentioned above, those who can afford accountants would be able to get around the high marginal tax rates).
  • Abolish tax relief on pension contributions, health insurance and mortgage interest.  However this would only bring in €1.5 billion – or 37 percent of the USC loss.
  • Abolish PAYE tax relief.  This would raise €2.8 billion – still, far short of the USC loss.  And every worker above the income tax threshold would lose €1,650, wiping out gains for all low and average income earners.
  • Increase VAT to nearly 30 percent.

There are other measures such as a wealth tax which the Nevin Economic Research Institute estimates could raise €250 and €500 million.  You could toss in increases on capital income (inheritance, capital gains) but there’s a limit.  Of course, there’s a real loss here.  Instead of using the additional revenue from wealth and capital taxes to invest in social housing, education and health, we would only be clawing back a tax break that we gave to higher earners in the first place.

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Don’t Mind What’s Going On – Feel The Spin

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You’d think there would be concern among commentators about the latest GDP numbers produced by the CSO.  After all, a quarterly growth of 0.1 percent is not that far from negative growth.  Or that consumer spending has fallen in the last two quarters (an interesting contrast to all those feel good anecdotes about increased consumer confidence).  Or that the explosion in export growth doesn’t quite tally with global trends or even other numbers produced by the CSO.

But there’s a class of commentators who are determined to cheerlead regardless. Michael Hennigan gives a flavour of these – with economists talking up the ‘fastest growing economy’ in the EU.  Sure, why not.

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Tweedledum Tax Cuts vs. Tweedledee Tax Cuts

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Apparently the Government, if not having an outright row, is at least engaging in a ‘strong debate and discussion’.  What’s it about?

  • The introduction of a Living Wage and associated reforms such as abolition of zero-hour contracts and minimum wage increase?
  • A comprehensive affordable childcare network – with savings of €400 to €500 per month for families with young children?
  • Universal access to free community health services – such as GP visits, outpatient services and heavily-subsidised prescription medicine?
  • Maybe a debt-relief programme – not only for households in arrears, but also for those caught in the terrible debt spiral of money-lenders and their interest rates which can exceed 100 percent?
  • Or a guarantee of an adequate income and home-help services for all people in retirement?  Or additional supports, such as a ‘cost-of-disability’ supplement for disabled women and men – of whom 50 percent are officially described as living in material deprivation?
  • Or a major drive to reduce rents in the private rented sector – through rent freezes combined with a new public enterprise drive to directly deliver quality, affordable rental units to private tenants?
  • Is the row about any of these or something similar (like eliminating all education-related costs such as school-books, transport, ‘voluntary fees’)?

No.

It is about which tax cuts the Government should pursue.  Good grief.

Let’s call it for what this is.  First, this is a deeply disingenuous debate – ‘my-tax-cuts-are-better-than your tax cuts’.  No Government Minister, TD, or candidate should be allowed to come to the doorstep, seeking votes by claiming ‘we can cut your taxes and still deliver European-style living standards – income supports, public services, economic and social investment’.  To make such claims is either hypocritical or completely indifferent to how the real world operates.

Living Standards 1

Second, tax cuts will undermine the next government’s ability to actually improve people’s living standards – affordable childcare, affordable rents, reduced public transport fares, free and comprehensive primary health care, real free education, etc.  Let’s not forget that Irish living standards are closer to Greece’s than it is to most other EU-15 countries.  Question:  how will a couple of extra Euros close this gap?

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