A recent AlJazeera English report called Firms enjoy tax haven in bankrupt Ireland which uses a short excerpt from the recent Anarchist Bookfair IFSC walk tour.
Ireland is one of the country’s that’s been hardest hit by Europe’s debt crisis.But amid the austerity, billions of dollars are still flowing in and out of the economy.The problem for Ireland is that it is not collecting much of a share of the money. Laurence Lee reports from Dublin.
‘Which will also of course inevitably provide a rationale for reducing weekly SW (social welfare) payments.’
This is a crucial point. Cutting wages hits social protection recipients – unemployed, old age, single parents, the invalid and sick – in two ways.
First, there is a reduction in tax revenue. In the private sector when pay is cut by €100, the state loses nearly €42 ((nearly €63 if the employee is in top tax rate). In the public sector the loss to the state is even higher given the pension levy and pension contributions. This leaves the Government with less revenue and, so, puts pressure on spending.
Second, wage cuts can drive down workers income towards social protection levels. Using the ‘incentive-to-work‘ argument, some will argue that social protection must be cut so that work ‘pays’.
A UK PPP Equity Database and a full report on Public Private Partnership is now launched.
High profits and annual returns
The average annual return on the sale of equity in UK PPP project companies was 29% between 1998-2012 – twice the 12%-15% rate of return in PPP business cases at financial close of projects.
Twelve PPP projects had an annual rate of return of over 100% and another 25 had an annual rate of return of between 50%-100%. PPP profits remain unregulated with no profit sharing with the public sector. The excess profit could be £2.65bn, all of which benefits private sector companies.
Equity in 716 PFI/PPP projects (includes multiple transactions in some projects) has been sold in 281 UK transactions worth £5.6bn since 1998. Health and Education PPP projects account for over 60% PPP equity sales between 1998-2012.
Why ownership and control matter
The sale of PPP equity provides new opportunities for profiteering, can invalidate value for money, increases offshore tax avoidance, erodes democratic accountability, increases secrecy and trading of publicly financed assets with significant negative consequences for the future of public services and the welfare state.
Even the Government admits their policies are having little effect on job creation. They expect unemployment to remain at 13 percent by 2015, a fall of only one percentage point since they took office. The number of people at work will only grow by 12,000 over the lifetime of this Government. Truly, we are into a period of medium-term stagnation.
A number of analysts have rightly called for a sustained and substantial programme of investment. This would boost growth in the medium-term while putting people back to work in the short-term. But it cannot, alone, fill the jobs gap – especially for those seeking to participate in the service sectors of the economy. There needs to be complementary strategies.
‘I would say that ultimately the State must be willing to contemplate being an employer of last resort through local authorities or social employment. The lessons of the Great Depression may have been lost but they are as valid in social terms now as they were in the 1930s. No country, no society can afford to regard so many of its unemployed citizens as expendable.’
The state as Employer of Last Resort (ELR) – that’s a considerable intervention. The concept is simple: during periods of enforced unemployment, where the private markets cannot employ people who want to work, the state should employ people until sufficient job creation commences.
An ELR programme would employ people through the mainstream public sector, local authorities, or community, voluntary and non-profit organisations on socially beneficial projects. There are a number of questions over how this would work. I will focus on two and, in so doing, start the work of outlining an ELR programme.
Michael O’Reilly: On December 5th, the Government is set to introduce its second austerity budget – and the sixth austerity budget since the onset of the crisis. €3.5 billion more will be sucked out of the economy, on top of the €25 billion already withdrawn since the end of 2008. Once again, all the signs are that low and middle income groups will bear the brunt of increased taxation and reduced expenditure. And that means that domestic demand will continue its downward spiral – putting more businesses under pressure and throwing more people onto the dole queues.
Budgets are about political choices. In a democracy, political choices are dictated by public opinion – and public opinion needs to be mobilised and vocalised. That is why the Dublin Council of Trade Unions, together with other civil society groups, is asking people to come out on Saturday November 24th and issue a simple demand: No more cuts in 2013.
Today marks the start of a 30-day countdown to the march. During this countdown, we will be publishing ’30 reasons to march’ – one each day until November 24th. There are, of course, many more and we are inviting individuals and groups to visit our Facebook page and leave their own ‘reasons to march’.
Communities up and down the country see the economic and social consequences of current economic policy every day. They know that austerity is killing the patient – and that more austerity will not produce a cure.
Domestic demand has collapsed. Five businesses closed down each day in 2011 – and this year’s figures are likely to be worse. 300,000 are unemployed, and many more are underemployed. Over 1.8 million people are left with less than €100 at the end of each month after paying essential bills. One in ten of us is living in food poverty. One million of our fellow citizens are living in deprivation as measured by the CSO – including over 335,000 children.
And these figures would probably be even starker were it not for emigration: between April 2011 and April 2012 alone, a total of 46,500 Irish people left the country.
It is unusual for ‘academic’ research published by the IMF to find its way into popular media. But this has happened to the latest World Economic Outlook where the IMF deals briefly with the issue of ‘multipliers’ that is, the economic impact of changes in government spending.
The short article has caused an usually high level of commentary among economists and commentators because the data suggests that the multipliers are perhaps more than double the level generally implied by official research and forecasts. Nobel Laureate Paul Krugman has commented that the research shows that, ‘the reason for the worsening outlook is that policy makers have gotten the basic economics wrong’. In Britain Chris Giles economic editor of the Financial Times has led a counter-attack by questioning the validity of the research. A string of other commentators have joined the debate on both sides, including a Greek finance minister.
The key point in the IMF research is that the multipliers are much higher than previously thought by leading bodies such as the IMF, OECD and others. ‘The main finding, based on data for 28 economies, is that the multipliers used in generating [IMF] growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2….’ Whereas the IMF’s (and others) own forecasts implied a multiplier of 0.5, the actual multipliers may be in the range of 0.9 to 1.7.
It is useful to assess why this seemingly arcane debate has created such controversy and why that is taking place currently.
The recent Comptroller and Auditor’s report on the 2011 public service accounts reveals the continuing cost of Public Private Partnerships (PPPs) in Ireland. It provides further evidence that the transfer of risk has been exaggerated and overpriced.
The National Roads Authority (NRA) agreed to traffic-related guarantee payments for the M3 Clonee/Kells and Limerick Tunnel PPPs. The NRA has to pay the PPP company additional money if average traffic levels in any half-year period do not exceed the level of guaranteed traffic in the contract. The Comptroller and Auditor reported significant shortfalls in traffic volumes relative to the guaranteed thresholds in 2010 and 2011 and forecast the additional payment of €6.7m for 2012. Even if traffic continues to increase at an average 2.5% per annum, the government will be paying traffic guaranteed payments for the M3 Clonee/Kells PPP until 2025 and the Limerick Tunnel until 2041! Additional payment could exceed €140m at current prices.
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