How to Cut Public Spending

Richard Tol is today’s contributor to the Irish Times series: “The Right Cuts in Spending Will Not Hit Recovery‘” . Richard moves beyond the ‘broad parameters of adjustment’ approach by specifying a detailed list of expenditure items for pruning.  Let us see if ‘An Bord Snip Nua’  follows his advice.

4 thoughts on “How to Cut Public Spending”

  1. Richard proposes auctioning emission permits up to the (low, unfortunately) limit permitted by the EU. There are other possibilities along these lines. Ireland has heretofore allocated radiomagnetic spectrum either for free or at below-market prices. Many other countries, including the UK and USA, auction these assets.

    There are also tax breaks with economic rather than redistributive or social policy objectives, some of which have already been curtailed (some of the property-related ones, for example). Tax changes, of course, are outside the remit of An Bord Snip, but the Commission on Taxation is due to report in September. Richard is suggesting ways to enhance revenue without increasing rates of tax, and there are certainly options in this area.

    Disposing of State assets as he suggests does not directly cut the GGB deficit, but finances it through the sale of equity rather than debt, and thus helps to de-leverage, This has to be a consideration for both public and private sectors in current credit market conditions.

  2. I was surprised by the headline and picture on the front cover. At the end of the day, I don’t see that the government has much choice other than to do more or less what Richard says. If it doesn’t follow that formula, there are going to have to be very deep cuts indeed in 2010 and 2011 to get things back on track.

    Personally, I can’t see how the 21.5 percent VAT rate will be viable even in the medium term. The differential with the UK is just too wide.

    The difference will have to be made up with a property tax of some sort. Maybe this can be used as a relief to apartment dwellers who might be spared some of the tax if their block is taken care of by a management company.

    Also, there is a question of how we actually stimulate the whole thing. We need to do that by establishing a new industry in ireland. I would suggest that Europe-wide consumer banking would be a good industry for the country, if we had the regulatory operations in place.

  3. It was not in the public sector who precipitated this crisis. Moreover, workers demanding money for every small change are responsible the job losses. I will never again operate a business in Ireland,particularly the West. My experience has been heart breaking trying to keep a business a float. I am one small loss to the economy but not alone, cumulatively over demanding unions greedy lazy employees, bloodsucking banks and commercial landlords who thought the party would never end are responsible for the downfall of the good times.

    Finally, have we forgotten the last election that stopped the building trade in its tracks long before the global banking crisis was exposed. Party politics scramble for votes promised stamp duty cut but did not deliver.

    I have lost so much. So what? you might say, but look around who will employ those people in my place.

    Why not reduce Public Sector Programmes to the new appropriate level but dont fool yourself it is not their fault. Retire the older higher paid and lower the over all pay bill.

    Good luck Ireland

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