An Bord Snip Nua report

12 or more months in, and they’re only now getting around to ‘talking about’ the actual problem….

only browsed through the report, but I agree with the broad outline as well as the details I saw (no surprise there)

I would think, though, that we would want to discuss this department by department

the goverment should lead by example and take a 25% + pay cut , is it right that brain cowen gets payed more then the US presadent. i am a public servent and have a family too support on just one wage packet , and my income is €530 weekly how are familys too survive on this in these times , if this goes through the fainna fail party will not be in goverment for many years too come.

Hush! I’m reading.

Heres an interesting tidbit from the report…It’s in the section on Coillte…. Im not sure if the boys flogging NAMA will be glad to see this… sounds like the idea of “long term economic value” is not universally shared.

“Explore the scope to dispose of non-essential land/property holdings owned by the State agencies.

The Group agrees with the principle of the sale of surplus assets. The excuse that property/land prices are now too low to sell has little validity as in the foreseeable future property prices are unlikely to return to anywhere near the inflated levels of recent years.”

@ec

This cry of class war is the tack taken by Republicans in the US in defence of tax cuts for high earners.

The value of the report is that it starkly sets out the conspiracy of the insiders against the public interest.

Pension costs estimated at 30% of earnings; judges appointed from the private sector in their 50s and then given full-service pensions at 65; Gardaí free to retire on full earnings indexed pensions at the age of 50 and so on.

“The Group notes the large number of allowances paid to members of the Gardaí and that the majority of these allowances are pay-related and pensionable. Many of the allowances appear to have limited rational justification. The Group consider that the current system of Garda allowances on top of pay, and high levels of overtime, should be reviewed to realise savings.”

Hardly a crime to tackle such issues?

As for change in the 1898 vinatge system of local government, it would surely be progress.

Other relics of the Victorian era are unlikely to change in conservative Ireland: e.g full public spending transparency

It would also be optimistic to expect any big changes in the buck stops nowhere system.

this is a report written by economists, when are yee going to realise that we live in a society, and for every action their will be a reaction that you can not measure in graphs and charts and put a euro sign at the top of it.

I get the uneasy feeling that Colm Mc Carthy (Economist) is being used by both the FF/PD government and the Department of Finance (the permanent government) to lend his name to a review and recomendations that should never have been necessary if they had not let public expenditure get out of hand on the back of an unsustainable housing bubble in the first place

This report is really a product of Department of Finance thinking. The Second Secretary General, Department of Finance and a former senior
official in the Department of Finance are part of the small group. Other members seem to be from the Ireland’s elite business/administrative cadre.

This group’s first acknowledgement in the report is to ” the excellent assistance and support provided by officials in the Sectoral Policy Division of the Department of Finance. Officials provided the Group’s Secretariat, as well preparing detailed papers for the Group on each Ministerial Vote Group and papers and notes on a significant number of policy areas.”

Enough said!

Can anyone tell me……..there are always ‘consequences’ for any action. Is there anything accompanying this report that attempts to predict what the economic and social consequences might be should they try to implement some of these proposals? I couldn’t see anything in the report itself. Maybe that sort of thinking isn’t in vogue but surely you have to understand the consequences before you decide on an action? Even if your name’s Brian?

@Aidan
We can moan all we like about how we got where we are, it doesn’t change the need to do something about it. That’s what Colm and his group have put forward. The Dept of Finance are probably the best people to do it. That’s what they are there for. You’re not likely to get individual departments volunteering to fall on their swords.

Watching the 9pm news – So far SVP, INTO, INO, Impact have come out fighting. Wonder where they actually think the savings should come from.

This will really test the government’s metal.

@Ernie

In case anyone wants to draw the conclusions you think they should, I’d direct people to read page 72 of Volume 2:

D. 7 Rationalise research administration at the third level institutions

The Group notes that many third level institutions have built up substantial research administration staffing in recent years as R&D funding increased significantly. Over 200 staff are involved in the administration of research and research budgets in the 7 universities at a cost of over €16m per
annum. A total of 67 of those staff are employed in UCD at an annual cost of €5.3m while 40 are employed by Trinity College costing €3.2m per annum. There is scope for staff savings in this area given the likely future reductions in R&D allocations and the excess staffing employed which have
not led to any sizeable increases in private funding for R&D at the institutions. Overall, savings of €4m are targeted.

I see the €1.7bn annual capital expenditure on roads was protected in favour of cuts to more sustainable forms of transport, overseas aid, etc. That’s the kind of fresh thinking we need alright.

@ ERNIE BALL
Maybe those in UCD will lead by example and slash their ridiculous inflated salaries, followed by the governments cutting their own salaries and pensions. Then we will know they mean business. Maybe others will start to fall on their own swords one by one. If the McCarthy report is not implemented there will be state bankruptcy.

This report is only a starting point we need a new constitution for the 21st century, a new political system where politicians are accountable where the buck stops and we know it has stopped by the word “resigned!”. In short we need political reform and then economic reform. We will not get the latter without the former.

Jack O’Connor better be very careful about calling this report “a fantasy” which was his opening cheap shot. A lot of us know, what Jack fantasizes about and that is, running this country by dictat without ever receiving a single vote from the electorate.

If the anger of the ordinary working people or unemployed people of this country is turned on him for protecting ‘his members interests’ he will rediscover something he has never experienced before it is called grass root anger. Jack O’ Connor epitomizes the distortion of wages and salaried between the private sector and the public sector and he can pretend that he is not a wolf in sheep’s clothing all he likes.

@Ernie

I give up. If you want to, you can believe that the authors of this report are recommending the continuation of huge off-the-scale salaries and want to exclude these people from the €4m “staff savings” recommended. But, in my humble opinion, this would be a somewhat strange way to interpret this section.

@Karl

There is also the fact that the section you cited refers only to “research administration.” What about the burgeoning numbers of vice presidents, etc. in other areas?

As for your other claim, there is nothing in the report that targets off-the-scales salaries among administrators. You may think it’s contained in some of the recommendations about general cuts in research administration, but that strikes me as overinterpreting the document. You can’t just assume that because the report recommends swingeing cuts that therefore it must also implicitly recommend all other obvious cuts. It doesn’t.

@Robert Browne

I don’t believe the academic salary scales at UCD (or the other Irish universities) are at all inflated given that these institutions have to compete internationally for staff and have to try to attract top staff to what is, after all, an expensive and in many ways unattractive island (and not getting better). What is a scandal are the off-the-scales salaries that some locally-recruited administrators are earning.

@Garry

If you think the figure is extraordinary, read this. It’s a puff piece but you’ll get the idea.

@Kevin O’Rourke

That one-word comment from Colm McCarthy doesn’t say much and the post it’s appended to conflates off-the-scales administrators (who, as you point out, are almost always recruited locally) and on-the-scales academics.

I feel queasy. I’m a secondary school teacher. Like everyone else, every cent of my wages is labelled before I even get them. Really feel the 10% I’m already paying. Honestly, couldn’t afford to keep my house if any more pay cuts are implemented.

I’ve been considering a solution…I’d work more hours each week if my salary was left alone. That would reduce the number of teachers needed. We need to stop training so many teachers. The training is free to the student, at the moment. Will there be jobs for all these newly qualified people in the future?

@ Ernie Ball
Regarding all the hard earned salaries in UCD. The following do not compare to favorably with salary levels at UCD. Firstly, President of the United States of America one Barack Obama who’s salary is a mere $400,000 U.S dollars. Secondly, Brian Cowen Taoiseach who’s salary is 257,000 Euro. Thirdly, one Nicholas Sarkosy, President of France who’s salary is 240,000 Euro. Fourthly, Prime minister Angela Merkel of Germany 228,000 Euro. Fifthly Prime minister of Japan Taro Aso $243,000. Finally, Kevin Rudd Prime Minister of Australia $229,000.

Having lectured myself I am under no illusions about the responsibilities of lecturing and administering courses in Irish universities. However, I do question staff at universities receiving more than the leaders of the U.S.A. Germany, Australia, France and Japan. It makes me wonder have we lost the run of ourselves completely. Perhaps, the above, are all in the wrong jobs?

Reading the comments above I can see that the viral selfish gene, has mutated to an extraordinary degree in the body politic in Ireland. However, it makes little sense to kill the host organism, as rapid death soon follows. Let us see if that lesson needs to be experienced rather than comprehended in Ireland.

@jennifer

So you don’t mind sacrificing other teachers’ jobs so long as yours is OK then? That sounds like what you’re saying and why it’s going to be impossible to implement these cuts (and many other cuts that are needed).

Can anyone tell me how you would quantify the savings if a maximum wage were introduced in Ireland (really ‘sharing the pain’)? I’m talking about for those paid out of the public purse e.g. TD’s, civil servants and others I’m sure (are Anglo Irish bankers in this category?). Let’s say if the cap was €100,000 and also €150,000 for a comparison.

Is it possible to do? If not, has anyone got any ‘educated’ guesses??

The standard answer when challenging any of these cuts is going to be “So what would you propose instead then?”. I’m just trying to think ahead.

Re: Jack O’Connor, Peter McLoone and the union bosses. I am a civil servant at a professional (highly educated) grade being paid the average industrial wage (€34k) and feel damn lucky to have it. All my colleagues (we are aged 27-35) voted against the recent Impact ballot allowing strike action as we are not utterly mindless of the crisis in the public finances (despite what some irishconomy.ie contributers might think). I am fairly confident that we will deliver McLoone another bloody nose if he attempts to push us towards striking.

The main militancy in the civil service union membership comes from the CPSU, which, in all fairness, represents people who earn a very poor salary: for most of their working lives (ie home-buying, child-rearing years) they are paid €24-28k. The levies have hit these people hard and the new taxes coming down the road will hit them harder.

Finally, I think the idea of any state servant earning €200k+ is disgusting and immoral. All salaries (inc. politicians) should be capped at €100k, or around €70k if I had my way.

“Capital spending is not covered by the report.”

And yet the report says that the Western Rail Corridor should not be extended. So somehow they do feel free to recommend cutting capital expenditure on rail, but not with regard to roads.

Now of course I realise that one can argue that re-opening the rail line will cause current expenditure in the future to rise, but the same could be said for roads.

There is a definite pro-road bias to this report.

@ Vincent

sorry, is it accountancy driven or ideologically driven? You can’t have it both ways.

Fiscal deficit of 20bio: Tax hikes or spending cuts? Please suggest, even at a very general and basic level, what you see as the alternative to the Bord Snip report.

@eoin

“is it accountancy driven or ideologically driven? You can’t have it both ways.”

I rather think I can, Eoin. The report itself is an accountants balance sheet exercise without any analysis of economic consequences. It is that way deliberately because its remit is ideolgically driven!
As to your question in relation to tax hikes or spending cuts dont forget that we have a commisssion on taxation to report yet.
The bottom line is that the approach is deflationary and will worsen the economic situation.

@Eoin.

Sorry but I don’t deal with hysterical rants.
Would be interested to know, however, what sector you work in and whether you have had anything to say about banking/financial/construction sector that is costing us, the taxpayer, multiples of McCarthy’s cuts.

Colm McCarthy and the group he chaired deserve plaudits for putting such a comprehensive menu of public expenditure cutbacks and potential efficiency savings before the Government – even if even if the range and size of the portions will prove unpalatable.

Some context is required. The report examines current expenditure and numbers in the public sector. It does not take pay, productivity, taxation or capital expenditure into account explicitly. Of course, some specific references are made to capital expenditure as the context demanded and there are implicit assumptions about productivity, but the key levers of pay and taxation were clearly out of bounds. The Government presumably expects to have the outputs of the Commission for Taxation and its own proposals on public sector pay as the principal tools to get whatever it requires of this package of cutbacks through whatever remains of the so-called “Social Partnership” arrangements.

What the report does not have – and which it neither could nor should have – is a clear vision and set of principles governing the role of the State in a modern economy and society. This is the guidance that is required to restore some measure of prosperity and cohesion in society, but our system of democratic governance is totally incapable of providing it.

Of the 149 TDs who reveal their former occupations the following may help to explain why:

Education 40 (26.8%)
Unspecified Business 19 (12.8%)
Farming 18 (12.1%)
Local Business 18 (12.1%)
Accountancy 11 (7.4%)
Law 11 (7.4%)
Technical Skill or Profession 11 (7.4%)
Medical 6 (4%)
Public Sector 5 (3.4%)
Media 3 (2%)
Political Support 3 (2%)
Economics 2 (1.3%)
Trade Union 2 (1.3%)

Over 50% come from education, farming and local business (e.g., publican, undertaker, auctioneer, insurance broker, plant-hire, etc.). I’m sure that dealing with children, animals and crops provides wisdom and insights, but I’m not sure that these provide the skill-sets to legislate for a modern state and to exercise effective democratic restraint on the executive and the plethora of statutory and non-statutory bodies it has established. Pay peanuts and you’ll get monkeys; deprive the Oireachtas of any power and authority and you’ll get seat-fillers.

And on the need for pay cuts that seems to be energising some many posters, it may be worth looking at price levels in Ireland (which cannot be unrelated to the levels of pay sought by workers in both the public and private sectors).

Eurostat has recently presented EU member-state price indices (EU27=100) for Household Final Consumption Expenditure and for major components in 2008: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-09-050/EN/KS-SF-09-050-EN.PDF

Ireland’s index levels and rankings are revealing:

Household Final Consumption Expenditure 127 (2)
Food and non-alcoholic beverages 127 (2)
Alcoholic beverages and tobacco 184 (1)
Clothing 91 (23)
Consumer electronics 111 (7)
Personal transport equipment 125 (2)
Restaurants and hotels 137 (2)
Electricity, gas and other fuels 114 (4)

(If other fuels and the impact of taxation were excluded, Ireland would be second to Cyprus with an index level in excess of 120.)

It is difficult to avoid the conclusion that there are serious inefficiencies and rent gouging by businesses (and by Government via taxation).

Finally, the Group chaired by Colm McCarthy proposes taking €5.3 billion out of the economy. There seems to be an almost universal consensus among the cognoscenti in Ireland that any form of investment stimulus would be wasteful and irrelevant (let other countries do and we’ll get a free ride, we can’t afford it, there would be huge leakages, and so on), but there seems to a broad international consensus that, while households and businesses are deleveraging, saving and not spending or investing, governments are the investors of last resort. The international liquidity that fed the global financial crisis has been diminished, but it hasn’t disappeared. There is anything between €10 and 15 billion sitting in equity in the existing semi-states that could be disposed of and the proceeds used to leverage the financing of much needed investment in infrastructure and utilities. And the efficiencies generated would bring down prices in these key sectors.

This, I believe, is the context in which this so-called “McCarthy Report” should be assessed.

@ Vincent

hysterical rants? Ah yeah, there’s nothing like slinging a bit of mud to win an argument. This country is gonna be in great shape with debates like this.

I work in the banking sector. However i work for a foreign bank so im not costing you a dime. If the guys in Anglo were taken out back and shot, i’d plead for clemency on the guys pulling the trigger. If a lot of the banking sector lost their jobs i couldn’t create a decent argument against it. Despite having a better 2008 than 2007, my bonus was hacked in half a few months ago, so my ‘real’ take home pay is 15% lower this year than last year. Im not expecting any pay increase at the end of this year, but to be honest i think a pay freeze in combination with keeping my job is a reasonably decent scenario given the economic outlook. This is the reality of working in the private sector – 15% less this year than last and im reasonably content. Would that the public sector would look at life in this way. What do you work as Vincent???

@Eoin

“Please suggest, even at a very general and basic level, what you see as the alternative to the Bord Snip report”.

Put it out of its misery?

I suppose we could always outsource/rent Ireland to India to use as a very large vegetable garden and source of fresh water……
OH! You’re my new favorite blogger fyi

@Eoin

Sorry I meant to add: “If a lot of the banking sector lost their jobs i couldn’t create a decent argument against it.”

I’m kind of surprised there haven’t been a lot more banking job losses announced in Ireland. Is it because the banks are waiting to get NAMA out of the way/get whatever else they can get out of the government then, when there’s no more to be had, pull the plug at that point and dump a few more thousand on to the dole?

One of the things I find missing in the public debate – just as it was missing throughout the boom – is a genuine public discourse about the the kind of society we want to live in, or rather that we want our children to grow up in.

I accept we have – through political failure, market failure and other – ran ourselves into a terrible situation fiscally. There will have to be cuts in spending and the tax base must be broadened and deepened.

But there are many ways to skin a cat: even accepting that we need to get order on the fiscal situation, we ought to be discussing what is the shape of the destination we want to get to. Ultimately do we want to pare back our public services and public spending as chunk of GDP so that we drift further from the more universal models of Europe (especially northern Europe), leaving the state as a facilitator for economic actors and providing a safety net only for those who are in most diffuclty. Or do we want to strive for a public service that provides a wide and excellent service in health, education, transport and so on.

I think without this debate we have a scattergun approach – add a bit of tax here where you get away with it, make a cut there where there is less resistance and so on. The result is a patchwork of sometimes conflicting goals.

It seems to me the government just wants to balance the books and doesn’t care how. The will likely take McCarthy’s prescription and run with it, trying to implement as much as they can politically. So they want to balance the budget (ish) but don’t care how. But citizens should care.

Unfortunately the debate will be taken over by the same major voices – with their vested interests – and these powerful forces will shape the outcome more in terms of what it preserves or delivers for their particular constituencies rather than any long term goal about the shape of society.

I just finished reading the report and feel like I just witnessed a car crash;

For a detailed, critical and independent analysis of the report see:

http://notesonthefront.typepad.com/politicaleconomy/2009/07/fear-and-loathing-reading-the-report-or-it-really-is-the-economy-stupid.html

It is high time that we stop refferring to this report as ‘independent’. It is not. It is a straight forward application of market principles to the public sector. And this valued loaded application is not independent.

Thus, the first battle against the implementation of this report is a fight against failed market-economics reasoning. I call on all astute, critical and independent thinking economists to start critiqing this ‘independent rationalisation’.

@ John H

Easy now, we don’t all fall under that category

@ Vincent Byrne

“I also believe that the Public Sector requires fundamental structural and cultural change none of which have been addressed”

Great point, the public service needs an internal, yet supervised, restructuring, not an external one where a simple number crunch was done and the chop is given. No matter how well advised Colm McCarthy is you need to have an internal knowledge/experience in departments of the public sector to make judgement calls and cuts.

Now, “abolishment of NUI’s”

Explain…

explain…

@ Vincent

listen, i have no ideological gripe against the public service. The problem i have is that they are basically in a monopoly position in most of the services they provide, and they are gnerally run by a combination of politicians and extremely strong unions, neither of whom have any real direct ‘benefit’ from making the PS more cost effective etc (ie unlike private sector management and shareholders). As such, inefficiencies and excess capacity are not only likely, they’re highly probable.

We have a fiscal deficit of 20bio. It’s likely to stay at somewhere close to this figure for the next few years unless remedial action is taken. If it stays at these levels, we’re all toast and we’re going cap in hand to the IMF and/or ECB. Its a simple equation – we either hike taxes or cut expenditure, or a combination of both. Public sector pension levy, check. Income levy’s, check. Vat increase, check. Time for expenditure to feel the blade as well.

Public sector pay is in the region of 20bio, and social welfare is something similar. A hopeful “efficiency increases” type program in the PS would suggest 5% savings and deliver around half that at best, which would barely be a dent in a deficit of 20bio. The cuts need to be deep and meaningful.

Public sector pay and numbers ballooned under the Celtic Tiger budget surpluses, which are now, with hindsight, clear to all as in fact being enourmous structural deficits masked by equally massive one-off cyclical revenue boosts. We either admit and rectify this, or we let someone else do it for us.

@John Heavey,

You rage against unions is quite impressive, but will advance the public debate not one inch. I would agree that unions will put the interests of their members first, and that may mean before the common good. But in that are they any different from IBEC, a political party, the Irish Pharmacy Union, or whoever. I have no doubt at all that there are changes which should be made to the public service which unions will resist. But there also should be changes to competition in the professions, or to GP funding, or many other things which will also be resisted. We are just going to have to have as best a public debate about it as we can and try to overcome the difficulties. This kind of public debate is the essence of a free country – in fact, it is more important to democracy than the workings of Dáil Éireann. What do you propose? An edict from the minister for Finance that implements the cuts forthwith? That might be possible in China, but not in a free, democratic country.

On the subject of “massive waste” in the public service. In fast, this has never been shown and in any case, isn’t credible. Is there a certain amount of waste? Without doubt. Are there inefficient practices? Surely. Is there overlap and bad management? No question. But each function that is not performing well needs to be identified and changed where necessary. That is a huge, detailed job of work and can never lead to any sort of nirvana of engine-clean efficiency. Why? Because such doesn’t exist.

The private sector has some of these flaws. I have worked in firms, large and small, and saw very significant waste, poor management, and outright failure. This is not to mention the other consequences of failures in the pricate sector – externalities from environmental damange to wealth destruction, to, you’ve guessed, financial collapse. The truth is the shareholder doesn’t always pay. Not always. Often enough workers pay, or the taxpayer. The cases where these happened – even in Ireland – are too numerous to cite.

Any debate which doesn’t accept both the failures and necessity of both market and public sectors isn’t worth having. But the view must be at least based on analysis of facts. The wearing of a beard alone, I suggest, should not be an offense punishable by hanging. But I would say that, I am biased, I’m wearing a dark, ominous, Friday stubble.

Tomaltach – I agree. The discussion needs to be about society; not about interest groups protecting their patch but look at events to date. The best example is the assertion by the judges that they could not be compelled to pay the levy and the acceptance of this by government. Add to that Colm McCarthy’s comment on accelerated pensions for judges.
“Justice is that which is in the interest of the stronger” so while I have little faith in the trade union leaders to lead the way, I have less for IBEC, CIF, the Law Society, the Medical organisations, etc. etc..

@eoin f…. “Go on then, suggest where we can save the €20B… Tax?”

Stop NAMA… Let the banksters swing.

OK its not “the” 20B but its another much bigger bill coming down the line.

@ Eoin F

“In the current climate, I feel you’d be pretty safe to assume less people are arriving with no English, and, if the teachers have been doing their jobs, the other kids’ English has been improving… so logically there should be less need for those to teach “English to newcomer children…” No?

Logically perhaps, but in practice, not in the slightest, for a whole variety of different reasons, which, an economist is not likely to understand. Granted I said 10 years, when really, I should have said 4-5 years. Even according to your logic, if teachers were not doing their job, it is not a sufficent basis to get rid of them. The child who needs support remains. Replace the teacher not get rid of them. This is the social dimension to the real-actual (not the fantastic-econometric) impact of cuts in educational supports.

The level of english language neccessary for a post industrial ‘knowledge based’ economy is not being met at primary level. Cutting educational supports for language development is akin to removing maths from the curriculum and then asking Irish school kids to take an economics degree. The rational basis to these cuts, in practice will be the most irrational thing the state has ever done (egged on by a failed method/quasi-science).

There is absolutely no systematic, societal analysis in this report. It is not even cost-benefited, in the sense that there are costs to cuts not just benefits. It is number crunching downwards, nothing more nothing less.

@ Garry

the problem with your NAMA reference is that while NAMA may indeed come in with a bill around 20bio or so, the current fiscal deficit is coming in at 20bio PER ANNUM, so over the course of NAMA (10yrs), we’re going to run up 200bio in deficits if things remain the way they are right now. Food for thought.

@John,

Regarding your remarks on tax/GDP. I am partially in agreement. Yes I would agree that the tax/GDP figure is important and that in Ireland it was never terribly high and is likely to fall since taxes are, unfortunately, falling even faster than our GDP.

Where I differ slightly is in terms of how the public debate can be framed. I don’t really think the tax/GDP ratio should be the starting point. It would be wise to bracket it notionally between say, the lower end below which public service becomes thread bare, and the upper bound where investment and job creation is affected. (Unfortunately neither of these two boundaries are step functions, we are looking at some kind of distorted bell curve I imagine.)

But with these notional outer boundaries in mind, then we start asking ourselves about what kind of place to live and work and rear a family we would like Ireland to be. What kind of education to we want to be publicly provided? What kind of health care? What kind of regulation? What kind of police service? And so on. And from there we build up the components while keeping an eye on what it means in terms of tax/GDP. Obviously if something on the wish list pushes us heavily into the area where investment is badly effected or job creation would stall, we need to trim back our demands to something realistic. I’m envisioning this as a kind of ‘thought experiment’ for now.

None of this precludes an aggressive search for efficiency. Some might say, ‘but now is not the time to set out this vision, we are in crisis’. Yes, but the fix to our crisis cannot be immediate anyway. So why not plan something that is sustainable and brings us closer to a long term goal. So if say, we decided that primary education is crucial to our vision of the future, we would spare it the worst right now and shift the burden elsewhere – even if that meant more tax. If we just slash primary now, and then decide after two years, that after all it is crucial, then we have to rebuild from a low base and valuable time has been wasted.

@ john
Currently, we raise about 34billion in tax and about 10billion in A in A, some of which is tax in another guise. If we were to increase the tax base to 35% of GDP this would imply a tax take of 55-60billion, depending on where GDP settles at. In broad terms, this involves an increase of between 10 and 25billion, depending on your definitions of what tax is and where GDP falls to. Lets split the difference and call it 17.5billion
perhaps you could outline broadly where you would raise this quantum of tax revenues over the medium term.

I am puzzled as to why there is such a media uproar against the releatively minor proposed cuts in sw, health & education. The reality is all this report will do is buy about six months worth of debt on the bond markets before the inevitable IMF and/or ECB takeover is fully implemented. Be under no illusion, the uneducated political/union class who have ravaged this country have no stomach for even the minor reforms & cuts proposed by An Bord Snip Nua. Far better to leave it to the International bogeyman known as the IMF to put us on the straight & narrow. This country deserves everything it gets as far as I am concerned.

@ john

Ok if 33% is your target by reference to a European range and
tax/GDP is running at 21-23%-can’t be more precise until we know GDP
add some part of A in A as this is tax in all but name and may indeed be counted as tax in other jurisdictions-that would add another 5% to the tax/GDP ratio again assuming this total is about 10bn this year.
Then allow for the fact that taxation would be somewhat depressed due to the economic cycle. In other words we could be at or close to your target once the full year effect of the tax changes kick in in 2010.

We are still left with an expenditure problem through the cycle.

One thing that should be done immediately in my opinion is to publish
real house price statistic’s
What we have at the moment is VI’s publishing crap that is “questionable”
The Revenue have all the details already and should publish them.
Why are these stat’s not available???

The Buck stop’s nowhere system prevails.

Some more data to think about

Forecast German revenue 2009 €527b, down €45b
Deficit expected to be €50b i.e expenditure of €577b

And they’re pretty upset about it.

If we were running a pro rata income/expenditure ratio based on 2008 we would have revenue of €40.8b and expenditure of €44.8b. And if we were German we would still be upset.

@stuart

You can easily get bogged down in the details of individual taxes. There are millions of them, all with different rates, allowances, exemptions, levels of avoidance and so on and on and on. Accountants working in the Department of Finance might be able to keep track of them, but I can’t. And, in countries like Germany or the U. States (although not Ireland), there are Federal taxes, and individual State taxes, and City Taxes, and all sorts of other complications. I don’t think you can possibly do comparisons by selecting a few taxes and comparing them like that. Its far more complicated.

The way simple people like me (and indeed most people) know how high or how low is the overall level of taxation in a country is when its expressed as a percentage of GDP. That’s nice and easy to understand.
That’s how organisations like the OECD and the IMF show comparisons between taxation levels in different countries.

The bottom line is that in most continental EU countries taxation as a percentage of GDP is in the range 40% to 50%. In the Nordic countries its close to 50% and, if I’m not mistaken, in some of them its over 50%. In Ireland, its been in the range 30% to 35% for the past decade, which was perfectly fine for keeping CT low, while not having other taxes at exorbitant rates to compensate.

The bottom line is that An Bord Snip Nua (apart from murdering the beautiful Gaelic language) is all about moving the Irish economy From being merely a low-tax economy (30% to 35% of GDP) to being an ultra-low-tax economy (under 25% of GDP). Their mechanism is to adjust public spending to the very depressed levels of taxation that are typical in a recession, and then freeze it at that level when the economy grows again. You could say that the cuts will be restored when the global recession ends and the economy is growing again. But, we all know that, in the prevailing political climate, it won’t happen. What will happen is that, as long as the recession lasts, it will be cuts, cuts and more cuts. And, then when growth resumes, public spending will simply be frozen until its about 25% of GDP.

I really don’t know why we bother debating it any longer. The decisions have been made. The fact is that the government (and opposition too), in alliance with the business world and academic economists, has allready made two strategic decisions. One is to slash private sector wages by 30% to 40% relative to other countries and the other is to slash the public sector share of the economy to an ultra-low 25% or under. To achieve these goals, they will scaremonger us to death. And, I have little doubt that they will succeed. In fact, I’d go so far as to say that the setting up of this site was part of the drive to achieve these goals.

@stuart

Its funny how we are being asked to copy Germany in some respects but not others. So, we are being told that we have to have these cuts so as to get our deficit in line with Germany’s and make Angela Merkel happy. But, when it comes to wage increases this year, there is of course no question of us following Germany. In Germany, wages are up 5% this year. In Ireland, down around 5% (estimates vary). And, before you say that German exports are competitive and our’s are not, I should point out that German exports were down 28% y-o-y in April, while our’s were up 12%.

@John
1. The breakdown of Irish tax revenue for 2008 I gave above is accurate. Which ones do you think should increase to bridge the gap or bring up our taxes as a % of GDP.

2. Private sector wages are not being slashed. We’ve had this argument before. They’re firing people. Businesses don’t do this for fun. They’re losing money. They’re losing money because their revenue has dropped. Their revenue has dropped because their customers are buying less. So they cut costs. That means jobs as well as any unnecessary expenditure. The state is in a very similar position.

3. On the exports I’ll hold fire. I still am suspicious about our figures (as I was about property during the boom), I wonder how much of the figure is real and how much inflated transfer pricing. Time will tell. Germany’s exports will take off again when recovery comes. Hard to see how they can justify pay increases at the present time but they are more unionised.

4. As for this site being some sort of right wing conspiracy there seems to be plenty of debate and opinion on it from all sides. On the other hand I do wonder if your real name is “Brian”

I think we need our hosts to run a post on the export numbers. It seems like too much serendipity that Ireland just happened to be concentrated in export products that haven’t been hit by the crisis. CSO has an extensive definition attached to their balance of payments numbers that makes me worried — it sounds like they adjust exports for “financial intermediation services indirectly measured” and from what little I can figure out about this, it seems to be a number that goes up when interbank deposit rates go down (the reference rate for the cost of funds). But someone who knows the issue better could take a look.

Net factor income from the rest of the world (NFI) is the difference between investment income (interest, profits etc.,) and labour income earned abroad by Irish resident persons and companies (inflows) and similar incomes earned in Ireland by non-residents (outflows). The data
are taken from the Balance of Payments statistics. However the components of interest flows involving banks in this item in the national accounts are constructed on the basis of “pure” interest rates (that is exclusive of FISIM) whereas in the balance of payments the FISIM
adjustment is not carried out. There is an equal and opposite adjustment then made to the imports and exports of services in the national accounts which is not made to these items in the balance of payments. The deflator used to generate the constant price figures is based on the implied quarterly price index for the exports of goods and services. In some years exceptional income payments have had to be deflated individually.

http://www.cso.ie/releasespublications/documents/economy/current/qna.pdf

@eoin

“Vincent Browne is a complete nut-job . . . you work 20 hours a week, and i work 60 hours a week, and i get paid more than you, apparently thats inequality.”

Stamps foot, juts out chin.

You see what I mean about the deterioration of quality and standards?

This blog is one of the few places where certain serious matters are discussed seriously. In the past couple of days it has been overwhelmed by this kind of childishness.

To me, the key issue is not ideology or the level of waste in different sectors but the dysfunctional nature of the Irish State.

Whether it’s public or private, the gravy train has had a kaleidoscope of characters; €1.6 billion annually for State drug purchases, which have an ex-factory price of €1 billion (even the factory price itself has a subsidy); multi-millionaire farmers on public welfare, then hitting property purchasers with a hidden tax through the corrupt rezoning system; huge outlays on IT projects via the opaque procurement process, for private consultants* and then the cornucopia of allowances and other perks available in the public sector, led by the political class, while the majority of private sector workers do not even have a basic occupational pension scheme.

The biggest unreformed vested interest is at the top and I cannot recall any proposals of radical reform from the 216 members of the Oireachtas, most of whom are nonentities, in response to the current crisis.

In recent months, Senator David Norris made a plea in the Irish Times for the retention of the Seanad. It is however instructive, that his own significant contribution to Irish society, would always leave his membership of that defunct institution, as a footnote.

The cost of running the Oireachtas has increased at an annual rate of 12% in the past 5 years.

There has been resistance on both sides of the aisle to sacrificing priviliges and embracing radical change in the archaic system.

The 1828 US term, “‘to the victor belong the spoils,” likely sums up the outlook of the Opposition.

All roads lead back to the political system and Ireland needs to badly look in the mirror.

In contrast to the propaganda, the country remains deeply conservative.

Since a government collapsed in 1951, through pressure from the Catholic Church and the medical profession, the significant change in the system has been the neutering of the influence of the Catholic Church, related to its history of child abuse, and trade union power becoming focused on the public sector, because of its exclusion from much of the private sector.

The system of political clientism remains essentially the same and the vested interests retain their power, with the top earners in the medical profession post-1951, no longer against “socialised” medicine but having a well-healed foot in both camps.

An example of the insider system of little accountability is provided by the first “benchmarking” award, where a system of checks and balances could not work.

They all got the increase and the same Secretary General of the Taoiseach’s Department, five years later was given another 25% pay increase – – as were his 3 retired predecessors.

Inside the loop was RTÉ, the State broadcaster with a virtual monopoly in domestic TV broadcasting and while ministers never took issue publicly with evidence that the benchmarking system was a sham, they were never held to account elsewhere either.

The same people who resist necessary radical reform of the system and a surrender of their own over-the-top perks, are now responsible for selling the béal bocht to a public they had convinced a short time ago, that the free lunch had been invented.

Exports

Caution is required when bragging about export success when the better performance than elsewhere recently, is based on the operations of less than 20 American-owned firms.

Knowing the facts about Irish exports is not an easy process.

This week a public statement read: “Enterprise Ireland today reported that its client companies achieved new export sales of €1.3bn in 2008, bringing the total value of exports from Enterprise Ireland-supported companies to €14.3bn.  This represents a net increase of 3% on 2007, which was itself a record year for export growth.”

So what does “new” mean?

EI confirmed to Finfacts on Friday that no additional exports came from new client companies of the agency.

Exports sales grew by €400m but the €1.3bn makes a better headline.

Even the total figure is a guess.

*http://www.finfacts.ie/irishfinancenews/article_1017081.shtml

Stuart

Your tax figures are completely accurate with the one exception – PRSI. Ireland has exceptionally low PRSI when compared to continental Europe. Indeed Employer social insurance contributions are a key source of State income.

@stuart

Wages ARE being slashed. I admit there is a dearth of official statistics on the matter which, as a staistician, annoys me. But, read Garret Fitzgerald’s article in today’s Irish Times. This is what he writes today (I’ve condensed it for brevity):

” during the past century pay rates almost everywhere have moved in one direction only – upwards – but now pay, in the Irish private sector, is actually falling”

“private sector pay (in Ireland) will fall by at least 7 per cent this year and probably by more – in the rest of the eurozone pay is still rising and labour costs are expected to rise by around 4 per cent this year”

Those aren’t my words, they are Garret Fitzgerald’s. He’s a statistician.

So, our wages are falling 11 per cent below the eurozone this year – which, surprise, surprise, is almost exactly the amount by which domestic spending in Ireland is lagging behind that in the eurozone this year.

The reality is that we are being subjected to a unique experiment, massive wage deflation. Its never been tried before, anywhere. It was dreamed up by quack economists under the pretext that exports were collapsing, when we now know they weren’t and aren’t. Its proving disastrous.

As for this business of it not being exporting firms that need these pay cuts (the argument that we were losing export market share now having been destroyed), but non-exporting firms dependent on the domestic market.

Well, of course these businesses are doing badly. If everybody’s pay is being slashed, nobody can afford to buy anything. In addition, if they’re told that their pay will be slashed next year again and the year after again, then quite naturally they will immediately reduce their current spending to bring it below their projected future reduced income. In a nutshell, that’s what’s happening. Incomes have fallen and the proportion of those incomes saved has shot up. Spending has collapsed as a result.

How about putting it to the test?

Reduce employees wages to zero for a year. Let them work for nothing. I mean, they’re all lazy sods anyway, so zero pay is too much for them. Then, let’s see how bars, restaurants, hairdressers, garages, corner shops, beauticians, estate agents, and so on fare in that year. It won’t be pretty!

@ All

apologies for my rant at Vincent Browne. Quite clearly i dislike the guy (!), but this thread ain’t about him.

What i will say is that at times of crisis and panic like this, people tend to lurch left or right of the political divide, they’re no longer interested in the cosy middle, cost it ain’t so cosy anymore. Look at the formation of the PD’s and how that came about, it being a direct consequence of the horrible 1980’s.

This report could i suppose be described as being to the right of the political spectrum, even though cost cutting and waste/innefficiency reduction should be of interest to everyone, left or right. As such, i fully expect the likes of Vincent Browne, Joe Higgins, CORI, Richard Boyd Barret etc, who i would see as being to the far left of the discussion, to come up with an alternative plan which involves huge tax hikes across the board, and little if any real cuts in the public sector.

Whether the country buys into such a plan is anyone’s guess, but the fiscal deficit as it stands is completely and totally unsustainable. Real and permanent changes need to be made to how we run and fund the country and the public services. Those in favour of cost cutting have made their pitch, so i think there’s an obligation on those against it to come up with an alternative plan for us to discuss, analyse and contrast against.

Colm McCarthy did not go half far enough. Our economy is a basket case and all the vested interests are in complete denial. Invite the IMF immediately to straighten out things.

Has everyone gone mad how can the government implement what has been advised its OK for them with there nice big houses and their fancy cars,what happens when the garda have no resources to attend a burglary in their home or the theft of their car because the patrol car is broken down and the nearest car is an hour away in a less rural station give the garda the resources they need they are the ones that are keeping the sum off are streets they are the ones that are risking their lives daily to protect not only the public but the government who do you think drives them around 24 7 not themselves but a plain cloths garda