Budget 2010 Post author By Karl Whelan Post date December 9, 2009 The budget materials are now available here. Categories In Fiscal Policy Tags budget 28 Comments on Budget 2010 ← Sorry Sorry Brian → Budget 2010: Stabilising the Public Finances? 28 replies on “Budget 2010” Carbon tax means 4.4c on petrol, 4.9c on diesel. All social welfare (including widows pensions for the under 65s and carers allowance) cut. Only over 65 spared. Maybe a property tax. Possibly a water tax. End of mortgage interest relief. Public sector pay cuts across the board. But, on the positive side there is (what the minister called) a stimulus package. 12c off the pint. Car scrappage scheme. VAT increase reversed. Seems to be about it on the stimulus side. There was talk of a national recovery bond though. Must check that out. Oh, and where is the costs associated with the banks in this? (running one and recapitalising the rest) I don’t understand the debt projections 2009 2010 2011 2012 2013 2014 General Government Balance -11.7 -11.6 -10.0 -7.2 -4.9 -2.9 Debt Ratio (year end) 64.5 77.9 82.9 83.9 83.3 80.8 Car scrappage scheme. Ugh! If we are talking of across the board deflation why are over-65s and public sector pensioners being spared? Is this a gerontocracy or what? @DE: I presume they are projecting massive GDP growth 2011 onwards to reduce the debt ratio. I heard a discussion the budget on the radio before it was released and it was noted that given the outcry when the government tried to get rid of the free medical card for the over 70’s last year, that they probably wouldn’t touch the pensioners again, especially since many over 65’s vote for F.F. in comparison to young people. Therefore to save themselves some seats in the next election they need to keep this section of the population happy. If this is the case, we see that, as per usual, politics is seldom about what is best for the people; but rather what is best for those in power. @D_E also at play seems to be the amount of “prefunding” that was done in 2009 so future increases in the debt don’t correspond to the size of deficits. But the document is not transparent on this point. No changes on CAT/CGT! There will be a lot of parents looking for their houses back tomorrow morning 🙂 . @Karl Whelan A budget to help mega developers: – keep the quangos because they rent premises from them. – keep their tax shelters for them to protect their other income and stimulate demand. – extend mortgage interest relief to new buyers to prop up property prices. – no cut in rental allowance, which would have saved cut in basic social welfare, because that would affect rental market. – no mention of gigantic borrowing before NAMA, through NAMA and on top of NAMA because it’s off balance sheet Irish government debt. Instead of Enron, we’re Eiron. And NAMA: write down their loans by 50%; put a floor under the property market at massive cost; take the loans off the nasty, horrid banks (they are for everyone else) and then give them all to a pet state agency to look after them, at massive loss to the taxpayer. Even the moratorium on repossessions is motivated by Lenihan’s desire to stop too many properties coming on the market – I don’t remember a moratorium before the developers got into trouble. If developers were fine we would be told, well, that’s capitalism. Lenihan truly is the Minister for Property Developers. Charlie McCreevy and Brian Cowen lavished money on them in the good times but it’s the man who comes through for you in the bad times – at a cost of €65Bn to the taxpayer – who is your real friend. Brian Lenihan, the likely next leader of Fianna Fail, is the best minister Irish property developers have ever had. @ E65bn “Even the moratorium on repossessions is motivated by Lenihan’s desire to stop too many properties coming on the market – I don’t remember a moratorium before the developers got into trouble. If developers were fine we would be told, well, that’s capitalism.” How many repossessions were there in the entire 2000-2007 period? Like 200? Probably why a change in the law wasn’t required. Use your head. And do you think the rental allowance may have been maintained to keep families in their homes? Ditto the mortgage interest relief? Has your ire now turned away from those building and funding property, to those who actually bought property and decided to live in them? Please see the previous comment about “using your head”. “The Review Body concluded that the Constitution precluded them from recommending a reduction in judicial pay.” The review body concluded this?? Yesterday on RTE former supreme court judge Donal Barrington concluded that the Constitution does no such thing. And he would have a vested interest in agreeing with the review body. The obvious thing is to test it in the courts – unfortunately decided by more judges – but failing there – a referendum would I think be popular. So much for rationalisation of government agencies!! In fact the decentralisation programme has resulted in expanding individual agencies by cleaving them in two requiring additional staff and resources. To choose but one; Bord Iascaigh Mhara have built a spanking new facility in Clonakilty, West Cork however staff in Dublin refuse to move. BIM are now recruiting for various positions for the new facility. Squuezing money out of Mothers and the poor and ploughing money into bricks and mortar -Duplication, Duplication, Duplication! which makes better sense for the southern Irish economy? A car scrappage scheme or somthing more like what Captain Darling did in the neighbour’s budget – a scheme to replace boilers. How useful is a car scrappage scheme. Is it patronage with a nice cloak. According to the SBPOST over the last few weeks its a cracker but I am not convinced. @ Jim Bob the car scrappage scheme brings in huge amounts of VAT and VRT for the exchequer, so if it changes consumer behaviour in even the slightest way it more than pays for itself. Eoin, Even after being paid by SIMI, Peter Bacon conceded that all a scrappage scheme would do was change the timing of new car purchases, pulling spending forward from some point in the future. If there is an argument for a scrappage scheme, it cannot be based on the idea of “paying for itself” via VAT and VRT. Our fiscal problems are of a medium-term variety. Measures that increase VAT and VRT in 2010 at the expense of reducing it later cannot be considered do not, on net, add to tax revenue. More accurately, they reduce it to the extent of the original loss of VRT. If there’s an argument for the scrappage scheme it’s that it is worth losing some vehicle-related tax revenue to induce this reallocation of the timing of car expenditures, pulling spending into a year that’s depressed rather than a year that’s slightly less depressed. But I disagree with the paying for itself stuff. OAPs have been cut. There is no Christmas bonus. This is equivalent to a cut of 2% There has been much hype about the car scrappage scheme. Cheerleaders might care to take a look at Germany and the US in the wake of such schemes. Finally there has been scarcely a mention of the banks, which will require more help from the taxpayer. Car Scrappage scheme, Gents I am not too sure about the car scrappage scheme. Karl has a good point that its just really making purchases come forward a bit. However car engine technology has moved on considerably in the last few years. The more people who upgrade to fuel efficient vehicles with smaller engines then the less fuel will be bought by the driver over the life of the car. This is good for the environment etc, however it does mean a shortfall to the Govt in tax revenues in the following areas, 1) Less VRT paid, 2) Lower annual road tax paid, 3) Less fuel burnt. All of these will have a impact on the country’s finances. Of course the argument could be made that this trend is going to happen anyway in the future. However by encouraging the switch over sooner rather than later I feel is not the wisest move. Ireland needs all the money it can get. So the idea is a bit counterproductive. On the other hand, if in 3 years time the majority of cars on the road are small engined, fuel efficient low polluting vehicles then the road tax on these cars will have to be increased as well as increasing the excise duty on motor fuel. So it is entirely possible that a car such described above will cost the same to run as a older larger engined more polluting car today. Call me cynical if you wish, but if there is a shortfall of tax in one area then it is normally balanced by a increase in another area. Either way it is unlikely the motorist will win. @ Karl fair enough, it doesn’t “pay for itself” i suppose, but i would say that when we have the dual issues of a new-car market that has almost ground to a complete halt, combined with a government chronically starved of big ticket taxes like those from car purchases, there is a real tangible benefit for the exchequer from “bringing forward” these purchases into 2010. Whats the npv from bringing these taxes forward by a year? It certainly pays for a decent portion of the tax break. And what of the benefits of encouraging those who would previously have bought a second hand car, which derives no new taxes for the government? Given the excess of second hand cars at the moment, it could be a while before the balance between new:old car sales returns to ‘normal’. […] And, of course, I never liked the scrappage idea. And I still don’t. […] Does anyone know someone with 10 yr old car looking to buy a NEW car??? The only thing that has hapened is an small increase in the value of a 10 yr old car? Al @ Al me! Seriously, i only scrapped my 1999 Focus a few weeks ago. I didnt end up replacing it with a new car, but i did take a look around at what was on offer before deciding to get a 2006 in mint condition going for around 40% of new price. I’m exactly the sort of person the government is trying to entice back into the market. @Bond. Eoin Bond: “we have the dual issues of a new-car market that has almost ground to a complete halt …” Why is that a problem? There are lots of secondhand cars around; why not retrain the sales staff as mechanics? bjg @ Brian J Goggin, why not retrain the sales staff as mechanics? I don’t mean to be smart, but not everybody is mechanically minded / good with their hands etc. In addition not everybody likes getting dirty and or wearing a boiler suit. Ireland is not like Japan or Germany where engineers tend to be more valued in the social eye. @Sporthog “not everybody is mechanically minded / good with their hands etc.” And I suppose they don’t know much about cars. But perhaps the motor salespeople could retrain as telephone sanitisers and the sanitisers (those who remain after the B-Ark has left) could become mechanics. The main point is that I suggest that having a large number of motor mechanics is at least as good as having a large number of car salespersons. bjg @E65 Rent allowance is due for a review to yield €20m savings in 2010, according to http://www.budget.gov.ie/Budgets/2010/Summary.aspx @ Brian J Goggin i didnt mean it was bad from a societal point of view, but in the context of a government trying to generate tax receipts its very very bad for them. As such i don’t have too much issue with them trying to encourage taxable activity on what is for 99.9% of people a very discretionary expenditure at the moment (ie buying a new car instead of a second hand one). @Aiman Thanks for that. I seem to remember reading the government was mulling over a cut of €100 million. So they have gone for 80% less. We spend an awful lot on this in a country with an enormous amount of empty houses (216,000 in 2006, just before the bubble started to deflate. Probably a lot more now). http://www.irishtimes.com/newspaper/ireland/2009/1021/1224257148064.html Eamon Gilmore: “He said at the moment €500 million a year was being paid by the State in rent allowances, with 90,000 families benefiting.” A drop of 4% then. That doesn’t really reflect the movement of the property market. @ BJG You could also say that keeping older cars on the road encourages recycling and stops the bleed of capital to the manufacturers of cars. The value added in the rish economy actually goes up, while admittedly, the tax take will suffer. But as others have wisely said the government does not lack ways to increase its tax take. Instead again, it is cronyism as those who own these dealerships lobby for such reliefs. A subsidy for weatherproofing those houses that were not flooded will help to cut fuel bills at least. All I see is the government buying into what is good for GM is good for Ireland! Comments are closed.