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Conclusion of Irish Times series on what is to be done

John Fitzgerald concludes the series here.  He shares ICTU’s recommendation of a top rate of 48 percent (levies etc included in that?)

3 replies on “Conclusion of Irish Times series on what is to be done”

On the idea of everyone taking equal pain, etc

Private sector workers — those still in employment — are already facing pay freezes / cuts, shorter time working, lower bonuses etc etc. They are also, in general, working harder and being more productive because in almost every organisation either part time or full time staff have been let go. Those in DC pension schemes have seen their funds deciminated and those in DB schemes are worrying about the health of their funds.

I would threrefore take issue with John’s statement that those in work are, in general, marginally better off. The average private sector employee is working harder, getting paid less ( or the same if lucky) and has suffered a substantial fall in net worth due to a collapsing pension fund.

The issue of public sector cost reductions should have been addressed in the Budget, as part of the package which also imposed pain on us all through higher taxes. To suggest, as the unions are doing, that taxes must now be hiked immediately so some kind of fairness can be applied to the process which may see them make an overdue contribution to their pensions is, in my view, nonsense.

The scale of the adjustment over the next few years does clearly require increases in tax revenues. However the idea that there is some super rich group that can be soaked for large sums does not add up. Any tax which raises a decent sum is going to be one on the middle classes. My own view is that higher income taxes should not be top of the list, due to their impact on the jobs market and on the cost of rewarding employees.

There are obviously two issues mixing here — the need to stabilise the public finances and the need to restore competitiveness. Measures to tackle the first must surely not be in conflict with the second goal ?

John is to be congratulated for his lucid concluding contribution to the series. The piece does a nice job laying out options and preparing stakeholers for what is to come. However, when all the cuts and taxes are put together, I worry it is frigthening the livin’ daylights out of people. (I had the same uneasy feeling about my own contribution to the series.) I fear the result is to make people feel poorer, racheting up the private spending cutbacks, and potentially even deepening the fiscal hole. An alternative view is that people are already so paralysed by uncertainty that a clear path to fiscal balance — however hardshipping in the near term — will increase confidence in future after-tax income. Maybe.

@John: this is where political leadership comes in. The government needs to get the balance right: convince people that urgent measures are needed now to prevent ourselves getting into a 1980s-style fiscal hole (or worse), but at the same time reassuring them that we have the capacity to do this, and that if we do, all will be well.

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