Labour’s and Fine Gael’s proposals for Budget 2011 Post author By Richard Tol Post date December 3, 2010 Labour’s proposals for the next budget can be found here. The numbers are in the back of the document. UPDATE: Fine Gael’s proposal is here. Categories In Uncategorized Tags budget, election 2011 41 Comments on Labour’s and Fine Gael’s proposals for Budget 2011 ← Eureka at FIFA! → EU-IMF Bailout Borrowing Rates 41 replies on “Labour’s and Fine Gael’s proposals for Budget 2011” You might as well add FG’s proposals here: http://www.finegael.ie/news/a/4489/article No live link though to the docs. Any numbers yet from Sinn Fein & Greens? It will be great when we have numbers and policies we can compare across all the parties. Reading that was 20 mins of my life that I won’t get back. Labour obviously hasn’t been reading any of MH’s articles about the knowledge economy, and I doubt that they can usefully invest €500 million in the knowledge economy every year without getting into the most awful winner picking exercises. Again, Labour skips merrily past the issues around Ireland’s public sector pay and social welfare rates. The only comments are a limit on PS and political pay above €190k (nice, but probably not a lot of people) and that social welfare should be protected. 48% tax rate. Plus levies etc. are we talking a top rate of tax of 60%? I cannot say that it is impressive. The recommendations about where the use of the guillotine to end dail debate and getting the motion to a vote, where the minister must truthfully answer the question to the best of their ability all see to hark back to arguments between Mr Brian Lenihan and Ms Joan Burton over the last few weeks. This I don’t understand, because if Labour are to be in the driving seat (which is a real possibility after the next GE) then should they not be wanting to keep the guillotine and not having to answer the dail questions to the best of their ability etc. Most unusual. Labour want to abolish the tactics that FF used against the opposition. However Labour don’t seem to understand that in a short few weeks seats will be exchanged, so that the Labour will not be able to use these tactics against the opposition. Unless the strategy is to pander to the mob, whinge and moan about these tactics, but on obtaining the reigns of power quietly forget about these recommendations. I don’t agree with the suggestions that tax exiles do not contribute a single cent. People like Mr Dennis O’Brien and Mr JP McManus have contributed considerable sums of money in Ireland, which coulcd have been spent elsewhere. Labour wants taxes to take half of the adjustment and it wants a 48% tax rate. FG wants taxes to be a quarter of the adjustment and no increases in tax rates. Are these guys meant to form a coalition? This is an election manifesto, not an alternative budget proposal. The most important point is that Labour rejects both the 6bn adjustment in the public finances for next year AND the IMF/EU package. On radio this lunchtime, Joan Burton said Labour believed that package was open to renegotiation. In the event that the GE opens up the possibility of left-majority government led by Labour, the deal is off. If Labour emerge as the largest party or larger than FG, the deal is off then too. It should be noted that Ms. Burton did not give a straight answer to the question of Labour entering into coalition with Sinn Fein, responding when pressed that the party has no such proposals, which translates in normal non-politico jargon into ‘we have no objection to coalition with SF as a junior partner.’ Within the document itself, two proposals stand out for me: the 500m euro ‘Jobs Fund’ and the proposed Strategic Investment Bank; the Jobs Fund because it is proposed that it would be controlled and operated by a ‘Cabinet sub-Committee’, and the SIB that would take an initial 2bn from the NPRF for set up costs, and the remainder of the NPRF for capitalisation, if the Irish diaspora don’t buy enough ‘bonds’ to make the bank viable. The notion of a Cabinet sub-committee directly doling out 500m funds is noxious and a recipe for corruption; think pet projects, cosntituency projects. Even if the Ministers in charge were as pure as the driven slush, it’s just wrong and whatever they did would be open to accusation every second day. The SIB idea strikes me as quite insane, and what happens to the rest of the Irish banking system in the meantime isn’t addressed. The jobs/training ideas do not appear to take account of displacement issues and would be unlikely to have any effect on unemployment levels. I’ll leave discussion of the new tax rate proposals to more qualified folk. Maybe the 48% tax rate is a good idea, I don’t know enough to know. Overall though, I think this is a stupid document that is politically clever; designed to appeal to the baser instincts of the electorate rather than address the economic problems facing Ireland. BW II if we vote for your preferred option of FF what do we get. FF & LAB? Labour’s proposals are the best chance yet for a FF rebound in 5 years time. Page 26 of the Labour Party budget proposals: A car-pooling arrangement will apply for Ministers … Workers, peasants, we are The great party of labourers The earth belongs only to men […] This is the final struggle Let us group together, and tomorrow The International Will be the human race. @ Paul Hunt, Links available on FG website now. FG document reads much better than Labour’s flaky populism; probably because Fg has worked on detailed policy proposals in a number of areas that provide coherence and depth to what they’re proposing, however much people may challenge individual policy suggestions. At least there are no compensation schemes for taxi drivers type schemes, though New Era and its jobs’ claims remain highly suspect. FG accepts the IMF/EU deal and is genuinely attempting to devise proposals that will deliver the 6bn adjustment in next year’s budget. They’re on a different planet to Labour. Unless one or other party completely abandons its stance post -election, then there is no possibility of successful negotiations on a joint programme for government between these two parties. We’re in political no man’s land. It’s conceivable that the fortcoming GE could end up like the recent Belgian GE result, which would do no good to anyone in our society at all. 1. Reduction to 25% in the amount of interest that can be offset against rental income for tax purposes. 2. Increase tax on seconds (sic) homes from 200 to 500 For a country with a huge surplus of houses, the supply of rental accommodation may be about to go in the other direction. We have no shortage of incentives for job creation and any dressed up ‘knowledge economy’ proposal will get public money from people who have no skin in the game, have never had the experience of launching a startup, meeting a payroll or handling the challenge of selling overseas. They are of course well meaning and helpful – – that is fact but it’s far from enough. The deadline for investments in the €500m Innovation Fund Ireland was last Friday – – wonder why there has been no crowing in the interval? IBEC said Innovation Fund Ireland has the potential to attract leading international venture capital firms, particularly from the US, to locate in Ireland. The fund will play a key role in attracting new investment to the country. It appears that American VCs have not been convinced; university research will NEVER be an engine of jobs growth — too much spending in this area could be termed welfare for the rich. Top global players such as Google and Facebook initially relied on venture financing to scale and become multinational firms, according to the Batt O’Keefe. US startups have a large local market if there is a compelling product; Ireland has a small local market, which makes it then difficult to develop an export market. The exit for a VC in Ireland is a sale of a young firm to a bigger American company – – a small number including academics have the potential of becoming wealthy thanks to the taxpayer but with little value added resulting in the local economy. Smart economy and money moving to emerging world: what to do? @Brian Woods II On your question on tax rates…it would hit >60% wouldn’t it? Remember now, if you’re in the private sector and able to make good money and bring wealth to Ireland, Labour would like you to STOP DOING THAT AT ONCE! Or at least go away….one or the other. Hey ho. … If you’ve been trained (at years of state expense) to enhance the health or educational level of future and current private-sector wealth creators (among others), you’ve already been bumped up to a tax-and-levy rate in the high 50s. “Remember now, if you’re in the private sector and able to make good money and bring wealth to Ireland” ..and that wealth wasn’t based on the bubble or on gouging you are probably one of a very very select group of people. Certainly no more than a couple of 1000s if Michael Hennigan’s stats on the native industrial sector are anything to go by. I have no sympathy for hospital consultants , accountants, lawyers, QUANGO wallas, insurance executives or senior bank muppets who are asked to pony up. The mortgage interest drop to 25% which can be offset against profit for revenue calculations will produce a “bloodbath” in the private rental sector. It has already been reduced to 75%, and various costs which cannot be offset against profit are already in place, notably the E200 NPPR fee, and the income levy of 4%. I just cannot see how landlords who are highly geared can survive. In fact I just cannot see how even landlords who are low to middle geared can survive either. Of course it could be argued that the interest only mortgage which was available up until recently acted like petrol in the fire of the housing bubble. If we are to push landlords into taxation on a loss, or remove what interest can be off set against profit then it should be done on a phased basis, timelines of 10 years or more etc. All I can see is a lot of people who got into the property business going bankrupt and maybe even going to jail. Must be part of Labours “Equality agenda”. @seafoid Bingo. If you’re not a consultant or a Quango walla or a bank muppet you’re just shit out of luck because Labour will protect the quango wallas and consultants (they’re PS after all) and the bank muppets own us all anyway. Again, if you’re out there grafting in the private sector, Labour’s message is crystal clear. Don’t invest in skills ‘cos we’ll tax them. Don’t invest in business, because if it’s successful we’ll tax it. Don’t do the right thing, ‘cos if you do and if it works, we’ll tax it. On the other hand, if you happen to know one of the committee handing out the €500 million a year in Knowledge economy pork, come on in and have dinner! Any idea what tax rate Labour suggest should apply to selling land to the state? @Hugh. +1. Not sure which is in more disarray – Labour’s budget plan or the hairstyle/make-up which Joan Burton had on RTE news tonight. How a party which trumpets greater government transparency can (1) go to the populace with all kinds of promises of no tax increases, no pay cuts and no benefit cuts, no property tax, with no real commitment to get our spending to match our outgoings, and (2) go to the IMF and seriously ask for more money, I don’t know. FG’s policies seemed reasonably sensible. Not sure their jobs plan is particularly compelling. Actually achieving the public sector reform they trumpet may yet elude them – they haven’t proved themselves so eloquent in that area. @ Tull, “Any idea what tax rate Labour suggest should apply to selling land to the state?” Captilism when it suits!!!!!!!!! @Tull. re above What rate of tax applied applied to selling the State? @Sporthog. re: “All I can see is a lot of people who got into the property business going bankrupt” Speculators going bankrupt! I am more concerned by real wealth generating businesses going bankrupt. Thusands already have. In particular I have the gardening and landscaping businesses. Please allow me to print a section of Lloyd George’s Limehouse speech in relation to the contributions being asked to ensure the survival of the country, which is relevant in the current debate. LLoyd George: “Somebody has got to pay; and then these gentlemen say: Perfectly true; somebody has got to pay but we would rather that somebody were somebody else. We started building; we wanted money to pay for the building; so we sent the hat round. We sent it round amongst the workmen and winders of Derbyshire and Yorkshire, the weavers of High Peak and the Scotsmen of Dumfries who, like all their countrymen, know the value of money. They all dropped in their coppers. We went round Belgravia; and there has been such a howl ever since that it has completely deafened us.” @ Joesph Ryan, I don’t subscribe to the view that all property owners are bad speculators who should be punished. Yes I agree that some did speculate. I think there was a procedure where you could pay the cost value of a house when a builder was building the estate, when the estate was completed you could then sell at market value for a big fat juicy profit. But what about the person who is not speculating, but providing a nice home for a tennent? The point I am making is that there has to be trust between the state and the investor from the level of the multinational down to the single person business. If that trust is to be eroded then investors will be forced elsewhere. Granted there were a lot of mistakes made during Irelands recent property history. I mentioned just one fact in the post above, interest only mortgages for investors which I described as having a “petrol effect”. These people invested, they provide a service, and they based their business model on certain projections. But now the tax rules are being altered. With the result that these investors will be wiped out. It’s not a case of removing some of their rich fat profit, its a case of them being annihliated. I think your concern about protecting real wealth generating business as distinct from unreal wealth generating business could have merit. But in this specific example how does this apply to landlords? Are you saying landlords are not necessary? That the service they provide does not provide real value, or is wealthless value. Landlords who got into property recently face severe pressure on several fronts. 1) Levies have been imposed which cannot be offset against income. 2) The NPPR Fee also cannot be offset against income. 3) Banks are increasing interest rates. 4) Banks are also phasing out tracker mortgages and insisting that some of the capital be paid back monthly. 5) Tennents unfortunately are also facing severe pressure, due to tighter money supply and the taxation plan to abolish tax relief on rent paid. 6) The oversupply of rental property in certain areas has pushed rents down, with landlords being forced to reneogiate lower rents. 7) The amount of interest which can be offset against profit has been reduced to 75%. This could go lower, Labour proposing 25%. 8) There is also the risk of a destructive tennent which could wipe out your earnings for a year or more. Irish taxation figures were increased during the property boom. This extra money was paid by the current property owners of today. Now that the boom is over, these people who took on debt to must be made to pay more, even to the point of bankruptcy or extinction. By the way sorry to hear your gardening business got hit, but I hope it gets back on track sometime soon. @ Joesph Ryan, Not too sure how that smilie got in at the start of point 8. Sorry about that. @Sporthog. Thank you for your calm and balanced reply. The gardening business is that of a relative. But several Gardening / landscaping business have gone under, many under pressure from imports from Holland and reduced demand. re Point 7. A half decent two bed in Smithfield is still €1100 per month. A one bedroom and corridor bedroom in Ranelagh is €900 per month. We must however agree to differ on the main theme. While is still regard landlords as human, they have been cossetted and protected by legislation and tax breaks for too long for me to retain much economic sympathy for their plight. I do however have human sympathy for many caught up in the current disaster. DIRT is already a tax on monies that have been taxed already. It was never a fair tax. Labour’s proposal to increase DIRT and income taxes is pure guff populism. If deposit rates were rising there might some thin merit in the proposal but they are poor. In FG and Labour (to greater offender) individual taxpayers and small businesses will take most of the pain. Another consumption punch. There is no appetite to do the obvious and raise CT by 2.5%. (for example). It might spare the pension fund over four years.It won’t stunt indigenous companies and will assist the mncs contribute a little to the recovery of tax regime that continues to benefit them. Hypothetically, if ‘things get worse’, CT changes could be imposed by external authorities that would be less favourable. Self-preservation dictates that the mncs step up to the plate on this issue. Putting even more money into the ‘knowledge economy’ via Labour is a continuation of the policies that haven’t delivered on their objectives despite more than 15 years of generous funding. But it guarantees more well-paid public sector jobs in academe. Do policy advisers bother to read the C&AG reports I wonder. The huge taxpayer subsidies to academic ‘entrepreneurship’ has never been officially analyzed for either fairness (to other sectors) or value for money. Welfare by another name. The knowledge economy emphasis is on supply, without a cost-benefit analysis of the demand bonus earned. It’s all a bit like planting ever more of one crop assuming that eventually sufficient customers will soak up the supply. Depressing. @ Joesph Ryan, O.K. perhaps you are correct, and I think there is good evidence of this “cossetting” that you speak of. For example, 1) Tax relief for the tennent on rent paid. 2) Perhaps too many costs which can be offset against profit for taxation purposes. 3) A culture of social welfare dependency where the state would house a citizen and pay a certain percentage of the monthly rental costs of their behalf to the landlord. I wish to clarify that I am not saying the above examples are intrinsically bad. Its just that in some cases they could be considered to be cossetting. But if the state allowed unsustainable practices to be built up over the last 15 years, and now we are at the stage where it is all gone pear shaped and the state is insolvent then obviously something has to give. So this is where I would agree with you, but its the timeline that is important, now that is where I think we differ. If adjustments are going to be made, i.e. Labour proposal for “25% interest” against costs then I think it should be implemented over 10 years or so. Or applied to new properties, with existing properties being phased out over the next decade. Hence a gradual reduction over this time span. Some of the arguments put forward by the Labour party are proclaimed to be advanced on grounds of “equality and fairness”. But on examination some seem very unfair and very unequal. In fact some are downright unjust. I fear some of the Labour party philosophy is based on begrudgery and sometimes it appears to be based on borderline hatred. But that is just a opinion. Sorry if that ruffles your feathers a touch, but that’s just the way it seems to me. Could I ask you some questions… 1) What do you think of Labours proposal about renegotiating the IMF EUSF deal? I think they are bluffing. I doubt they have a rabbit to pull out of the hat on that one. 2) This removal of the guillotine and compulsary honest answers etc. Why do Labour want to remove these? After all would these tactics not be handy when Mrs Joan Burton is MoF and Mr Gilmore leader of the House? I just don’t understand it, unless they are pandering to the mob again. Either Labour or very naive and are pandering to the mob, or else could they be planning to remain in opposition? And what happened to the Mullingar accord? Labour and FG have had years to come together, get their open honest plan laid out, present it to the people and strike when FF are weakest. Now here we are a few weeks to maybe a few months away from a GE, FF have never been weaker and the wheels are coming off the wagon of the Mullingar accord. What’s going on? Who’s in charge? @Sporthog I have voted for Labour for the past 20 years or so. However I am now strongly thinking of changing to Sinn Fein. That was before the recent poll data. The reason. There are the only ones with a definite and specific policy to cap public service wages. They have other economic proposals that I also agree with. We are entering strange times. @Joseph: I doubt you are alone. Capping public sector salaries at 200K and 190K is pretty conservative. I think a lot of people will vote for whoever caps them at 150K or 100K. @Sporthog “2) This removal of the guillotine and compulsary honest answers etc. Why do Labour want to remove these? After all would these tactics not be handy when Mrs Joan Burton is MoF and Mr Gilmore leader of the House? I just don’t understand it, unless they are pandering to the mob again. ” This is a point raised by quite a few people. Nobody seems to think that it’s possible that Labour want to remove these things because they are flatly against the public interest. We need an opposition that can actually question Ministers and a Dail that can actually debate issues. We need this, even if Labour are in government. People need to question everything Labour does, just like they needed to question everything FF did. It is in the public interest that these changes are made, and even if it hurts Labour as a government party, they still want to do it. Doesn’t that show you why Labour are such a different animal to FF? @ Dave W, Interesting perspective…but I doubt that that is the case. Remember the PD’s, they promised to bring high standards to office, I think the words were, honesty and integrity. This did not translate into more votes. However we will just have to wait and see what happens in the spring. Time will tell, it always does. You could very well be right. The guillotine and the standard of answers could also be applied to the standard of questions. A double edged sword so to speak. In other words, poor answers will not be tolerated, but neither will poor quality questions be tolerated either. So who gets to set the quality of the standard? Who sets the level of the bar? If Labour are going to alter the IMF / EUSF deal, then they just might need the guillotine, and rely of poor quality answers to questions put by the opposition. We will not have long to wait, as Mr Joseph Ryan mentioned….”We are entering strange times.” somebody asked about the SF budget proposal. Its out for a few weeks already @Sporthog “Remember the PD’s, they promised to bring high standards to office, I think the words were, honesty and integrity. This did not translate into more votes.” That’s cos it didn’t flippin’ translate into reality! Helicopters, jets, cars, bowdlerising FOI, Tom Parlon. Pick a thing that went wrong and you see PD pork accompanying it. @ hoganmahew, Yup, I thought the very mention of the PD’s would spark a reaction!!!! Hahahah!! I think the words were “accountability” with some responsibility and integrity in high office, just can’t remember the exact words, so long ago now. @Hugh Sheehy Are the poor rich people going to stop working if they have to pay 48% income tax if they earn more than €100,000? Income tax rates don’t seem to be related to growth: http://www.slate.com/id/2245781/ @Sean Lynch For some people, straight away, yes. Many more will ease off working if they think the high taxes will last for any period, yes. Also, it’ll be a boom for accountants. I guess I’d be wasting my time trying the argument where natural justice and progressive taxation are inimical. Yeah, I guess so. There’s always “someone else’s money” out there that’s worth having. Funny how all those ex communist countries chose flat taxes, isn’t it? Communism is essentially steeply progressive taxation. Whatever about Eliot Spitzer, some of our EU colleagues moved away from those old ideas. Tips for the GE. My big hunch is that there will be a collapse in Lab/FG and FG/Lab transfers. There may even be a beta effect whereby each set of voters, confident that they will be sharing power with the other, vote tactically to try and make their man boss i.e. This beta effect will be aggravated by what are the sharpest policy differences and antagonistic interchanges between the parties pre a GE. This Beta effect could have significant consequences: 1) FG and LAB seats less than the experts predict 2) SF benefitting from Lab transfers 3) FF benefitting from FG transfers Whilst a FG/Lab cooalition seems home and hosed, if FG/FF transfers are actually ahead of FG/Lab transfers we could be in for some seismic realignments. Unfortunately PP’s odds are very very skinny and I cannot recommend any good betting oppportunities arising from my Beta theory. I read the labour proposal.What a lot of rubbish .If this is the alternative Ireland has no future at all.They do not adress the problem ,labour just puts up smoke.The fundamental and only question is : will the irish people and their descendants for perhaps centuries be forced to pay what the banksters took away? The debt is so big that paying it will make people hungry .Is labour going to pay the Rotschilds the failed banksters debts? This is the only question people should consider before they vote. @Hugh Sheehy If there are many high earners who would stop working when they reach a higher tax rate, but growth isn’t damaged, does it make you wonder if these people are worth the high wages? They don’t seem to be adding much to the overall economy. But you’re right, you’d be wasting your time arguing that progressive taxation and natural justice are inimical! I think most people agree that those who earn more should be expected to contribute more. Moreover, as I’m should you know, there are many other advagtages to a more equal society. @Sean I’m sorry it’d be a waste of time talking to you about natural justice. So, here, have more of my money. Honestly, I feel fine about having my money stolen. Take it, don’t feel guilty. Why would you feel bad about taking my money? It’s no problem earning it. Comes easy. Honest, no hard work required. Go on, take it. My kids don’t need it either. I’ll tell you, I’ll be teaching them the ethics of the new world as they grow up. I just wish my father had taught me. Unfortunately, he was congenitally honest and infected me too. I’ll make sure my kids don’t have the same handicap. Comments are closed.