Budget Thread Post author By Karl Whelan Post date December 7, 2010 Off we go. Categories In Fiscal Policy Tags budget 164 Comments on Budget Thread ← Gormley Update: Guarantee Decision Not Taken Over Weekend → Überfordert in der Ecke 164 replies on “Budget Thread” I think John the Optimist wrote the first few paragraphs of the speech! No comment. Action … You beat me to it. bjg Experts probably know this, but I didn’t: Budget 2011 to be available on http://budget.gov.ie/2011/2011.aspx once BLTD sits down. I wonder how robust the server is. bjg @ BjG given the world focus, not robust enough i’d suggest… The crisis was the fault of the poor and the opposition, who supported the idea of spreading the benefits of the boom. bjg Spending back to 2007\2008 levels. But, of course, since so much of that is going on unemployment and debt interest, spending on everything else is back to some earlier era. Lenny Stay away from my car tax! How is the private sector going to pay for the new internships? I think pestering unemployed folk (“activation measures”) is a waste of time. bjg You know you’re in bother when sky news are broadcasting your budget live. They are giving it the same treatment they gave their own. Public servants being praised so they’re going to be shafted …. bjg Labour activation measures will mean you will have both the worlds most expensive and cheapest public sector workers in the same room. NPRF to invest in Irish infrastructure – I hope its not Metro North or the Slane Bypass! Croke Park still an election spoiler. Mary in the Park doing a great job and took a pay cut Spending a lot of time on public service pensions. Is the short-term effect important? bjg @Edgar: NPRF: I hope it’s not the Ulster Canal. bjg has the NPRF any money left to invest 14k off salary of world’s most incompetent and best paid (well OK, there’s the Burmee junta etc) Teashirt. Do you think he would notice? Does that maximum salary 250k apply to semi state bodies as well? sorry if he said it, have no sound where i am @BJG – indeed, but be aware that this government is still committed to spend as much as half a billion on a road not locatied in this jurisdiction. @cet par – I hope so. @Jarlath: plan seems to be that Govt as main shareholder will enforce its will so, courts permitting, SSBs will be covered too. bjg Doubt it jarlath and keeping salaries high in sem-states means when you sell them it reduces the price investors will pay to buy them – so taxpayer shafted both ways – 3 ways if you include them as customers. DIRT up 2%. bjg re PS cap: what about lawyers appearing in front of various tribunals? Professionals working for the government in other capacities? cutting the judiciary -oh another constitutional challenge BES scheme getting revamped and getting a new job-friendly-sounding name. BES to be revamped and renamed if approved by Euro Commission. Limit up to EUR 10m; 2.5m euro in 12 months; certification simplified. 3-yr corp tax exemption for new companies extended to 2011? bjg and the banks have a salary cap of 500k… its hard to see the semi states accepting 250, if the banks are getting double that. 1% on property transactions to 1m eur; 2% above that; no exemptions; intended to be less volatile; will provide valuations database and reliable info. bjg @cet par: this is one referendum that would be easy to win. Higher discount for tenant purchaase scheme (won’t that just increase the supply of houses?). bjg Big farmers still to pay what, 90% off gives, you a tax rate of a whole 2.5% rate on capital acquisitions tax. Zero rate on first 4 mil. Second class citizens still stuffed t 25%. Stamp duty changed to flat rate 1% on all transactions. Did I hear that right? I’d have preferred eliminating it — but BL points out that he’ll use the transactions to generate a useful database. Contractor withholding tax for certain sectors changed to support those who are compliant. Std rate tax up to 10k on approved energy conservation works (attic insulation here we come). bjg @BJG – this will reduce the stock of public housing. Constantin: rejoice. Air travel tax down to EUR 3, single rate, from March 2011 to Dec 2011. bjg @Kevin O’Rourke They’re not referred to as the “sheltered professions” for nothing!!! @Edgar: I see that, but it adds those houses to the stock of those for sale or stops people buying from that stock. 4c petrol, 2c diesel; scrappage extended 6 months. Internet betting charge same as in shops. bjg @BJG – Don’t rejoice to early – the reduction of the travel tax is temporary and conditional on increased passangers. Excice on motor fuels up 4c The ‘wonderful’ scrappage scheme extended!!! CAR DEALERS REJOICE. More bimmers on the way from Munich. Taxpayer not taking most of the hit for the banks loan losses. Looking after Bill Cullen, but not his customers Burden sharing legislation for subbies to be submitted next week. Will it allow banks that have had huge amounts of money shoved in during February to then wipe out subbies in March? @BJG – by reducing the stock of public housing (assuming anyone does actually buy) would, given at least constant demand for public housing, imply demand for additional public housing from councils. Banks were reckless; previous regulators were weak; bank shareholders got no bailout; nor did subbies (and they may be screwed further). Limit to burden-sharing; can’t renege on senior bondholders unless EU allows it. State will own bulk of banking system; NPRF investment needed …. First instalment of national recovery plan … sustainable … sensible … rational …. bjg Hitting seniors not possible. Well not if you want to borrow the money for Croke Park that is. Edgar: I thought Constantin would rejoice. Personally I disapprove of flying machines and would like to see them banned. What’s wrong with steamers and railways? bjg “The common good” appears to be this year’s rousing ending theme, following on from “a call to patriotism” of 2008 and “worst is over” of 2009. Edgar: on housing, I see you have a better grasp of the deviousness of the FF mind than I have. I am too innocent for this world. The Governator is now being praised. bjg @Brian J Goggin The ferries are “front loaded” half the time too. What are the implications of the universal social charge for the pre-95 post-95 distinction in PS salary scales? They should be unified, one would think? we have acknowledged our mistakes, worked might and main to rectify them …. pass the sick-bag. He’s channelling JtO again on roads bjg OECD education reference…bad day to use that line given literacy rankings.. @grumpy: excellent. Much waffle now going on. If he’d sit down, instead of talking about getting back on own feet, we could try crashing the server. bjg Reasons to be cheerful. I commend this budget to the house (and the EU and the IMF.) every reason to be confident – Oh god Server down allright. Have acknowledged their mistakes and put in place measures to make sure they cannot happen again. Did he ban blanket guarantees, I must have missed that? …..we will defend out 12.5% corporation tax rate, we will fight them on the beaches…. Glad to hear Noonan using the ‘insolvent’ word, I assume he will draw the logical consequences. At least he knows he’ll never have to do that again. Last time i checked, the process of properly acknowledging mistakes involved sincere apologies….so thats a Fail. hubris of guaranteeing 450 bn … excellent review by Noonan bjg Budget documents up now. Should have said Noonan reviews history, not budget (so far anyway) bjg Significant: “The Irish Association of Pension Funds and the Society of Actuaries put forward a proposal under which Irish pension funds would have the opportunity to invest in longer-term Irish bonds at higher yields than are available elsewhere, and to price their liabilities to pensioners on the basis of those higher yields. Following extensive consultation with these bodies, the Government has decided to proceed with such a measure.” “…Changes to the regulations will allow funds to re-price their liabilities to pensioners to the extent that they purchase Irish bonds.” @the other andrew how are they going to sell longer term bonds given the existing yields on long term – sounds like a load of rubbish @CP they’re going to try to lure the pension funds into the mousetrap by dangling the discounting carrot (and they get to pull on the green jersey too…) Administrative efficiencies are promised across most departments. Is the Croke Park stuff? Administrative efficiencies: jam yesterday, jam tomorrow, but never jam today. I’ll believe in them when I see them. bjg @Patrick they are going to stop cashing non existent cheques “Administrative efficiencies” are thrown in to cover 169 million. I see there is going to be a reduction in expenditure in road maintenance. Hmm we might all have to end up driving 4×4 vehicles to get around as the roads potholes get deeper. What does the online motor taxation service mean? I thought that was in place already? Apologies, make that 513 million. classic stuff. joan burton- we are going the way of Japan Administrative efficiencies must include the reductions in PS numbers, no? @Sporthog – “What does the online motor taxation service mean? I thought that was in place already?” – presumably it means that the take-up of the online service has never been reflected in efficincies in the council offices. Joan Burton pretending you can’t find people carrying shopping bangs on Grafton St. I spoke to a couple from London ho had been over to Dublin last week, they were gobsmacked at how busy town and the shopping centres were compared to UK. Couldn’t get parking a Blanch. I understood the numbers teaching was to increase, but administrative efficiencies in the dept of education is 64/160 million. So I dont see staff reductions accounting for that On transport there are a few additional points (other than scrappage and fuel). 1. The subvention to public transport companies is being reduced – will this result in efficincies or simply cuts in services??? 2. The previously flagged curtailment of the support to regional air services – will the regional airports still be viable (parhaps that is going to fill T2)?? I dont think motor tax office is a proper online system. Think they are still printed out and processed does anyone know what the cut to child benefit saves? (going on Last Word!) i can’t see it listed in any of the docs.. @Mick – yes they are still printing etc. but one would think that it is easier to process online than in a face to face setting with smalltalk, missing documents etc. I do my motor tax online. It’s great! Ok they have to post the disc to you..but I guess that’s a security thing too? Sarah, 149 million @Sarah Carey – 149 million according to page B15 What happened to the site value tax and water charges signalled in the four year plan published less than two weeks? @ Sarah Carey, To be honest I think the on line motor tax is not that great. Its a 1/2 effort made at efficiency. Firstly it is not possible to tax a vehicle after the month has expired. Your PIN number expires as soon as you roll over into the following month ie. after 31 days. You have to attend in person to pay arrears for the month missed. If you have not used the vehicle in a public place you can go to a Garda Station fill out RF100A and declare non use of the vehicle for the time in arrears. Again more hassle, inefficiency and time wasting. In addition one cannot tax your vehicle from the 16th May to the 16th August. It has to be from the 1st to the 1st of the time frame. Even if you have been on holiday for 2 weeks. This I feel is unfair and unjust to the motorist. @Karl – indeed. However on the water charges they had signalled that they were waiting until meters are installed. The consolidation of the supply system will be a a very significant potive development. I really have to get basic lessons on economics. On TV3 Constantin refuted Lenny’s argument that borrowing for a deficit provides a stimulus. His argument was that as people anticipate that the borrowings will have to be paid in the future they would thus increase their savings. The SF guy is performing really well. SF would cap PS salaries at 100K. I have to say I am amazed that Labour and FG would cede this ground to SF. Didn’t see it bw2 but if you are right sounds like Constantin has fallen for, or is trying to sell, that Ricardian crap. http://voices.washingtonpost.com/tomtoles/2010/12/i_want_it_all_for_christmas.html @Kevin O’Rourke I’m not amazed as capping like that puts downward pressure on lower grades. Labour are confused as they think they are being left wing by protecting cuts to any public sector worker, no matter how overpaid in international context. They single out a very few on megabucks but think everyone else is “the poor” and their constituency. They appear a bit dim. Maybe SF will wake them up. @sporthog Firstly it is not possible to tax a vehicle after the month has expired. Your PIN number expires as soon as you roll over into the following month ie. after 31 days. Not true anymore. You can still use your old pin they just charge you arrears – at the monthly tax cost @Brian Woods II: http://en.wikipedia.org/wiki/Ricardian_equivalence The Irish should get up their Irish and end trust- me/mystery-asset banking once and for all. Limited purpose banking is Ireland’s and the world’s best hope for restoring prosperity. (Laurence Kotlikoff is professor of economics at Boston University, president of Economic Security Planning, Inc. “Referring to cuts to Child Benefit, Mr Noonan asked what the Taoiseach had against third children and asked had he been beaten up by a third child at some stage” This nugget is almost worth the crisis! @grumpy re: Ricardian crap Rude language is not an argument. Let us say that the jury is still out, in the sense that economists have different views on the efficacy of ‘stimulus’: Eurozone stimulus: A myth, some facts, and impact estimates http://www.voxeu.org/index.php?q=node/3949 thanks – I should have asked earlier! Annual budget whinge fest getting sooo dull…. If you believe everything you hear/read EVERYONE in Ireland is in negative equity, is about to have their electricity cut off and sends starving children to school. Which is really weird because I was in a bustling Dublin city centre this morning and queued in shops where society appeared to be functioning oblivious to this analysis… @Sporthog I didn’t know that! I’ll qualify my point so… Motor tax online works great..for fabulously efficient administrators like me who would have a nervous breakdown rather than let their motor tax expire!!!!! The main criticism I have is cutting carer allowance and disability benefits while leaving high earners alone. It is simply unjust. @Sarah Carey “Which is really weird because I was in a bustling Dublin city centre this morning and queued in shops where society appeared to be functioning oblivious to this analysis…” Perhaps because those who can’t afford to shop don’t normally go shopping. @Carolus Of course, but the point is, the single narrative approach to budget analysis is far too crude. @ Carolus (and grumpy) Thanks for that. It seems that in economics almost any argument can be made. Explains the popularity of this blog and also why so many amateurs, myself iincluded, have no fear in promoting their own theories. Nearly all debate so far as I can see in this blog has followed the “common sense” Keynesian view. More power to Constantin for completely dismissing this conventional wisdom. I think we have to accept that the reason for no reduction in TDs pay is a carrot to pass the budget. Such sacrifice , such valour in the face of adversity. It makes one want to cry. @Sarah Carey ‘..because I was in a bustling Dublin city centre this morning and queued in shops where society appeared to be functioning oblivious to this analysis… Times readers are still shopping. Its the Sovereign that is bankrupt, as confirmed by M. Noonan in the Dail today. Incidentally, I note IT readers are voting 63% in favour of social welfare cuts. @ceteris again with the personal. Look, I was in Mary Street, Dunnes Stores – Arnotts Bargain shop. Perfectly ordinary people out doing their Christmas shopping. The point (AGAIN) is that they are plenty of people in this country who are managing. Why is it heresy to state the obvious? SOME people are really struggling. SOME people are managing. But only ONE story permitted to be told.. @ CPAMG, Thanks for the update, that is handy to know, however if you have a small car then paying the months arrears may not be too much of a penalty. However larger engined cars, or those with higher Co2 emissions etc, paying a month in arrears, or even 3 months in arrears is nearly the same as paying a small mortgage. With all the electronic monitoring of vehicles, ie Speed traps, electronic tolls, random Garda checkpoints and the auto number plate recognition system then do we really need to make a declaration at a Garda station anymore? If all this monitoring systems are to be linked up, then why have a declaration box on the RF100A form? And why can’t one tax a vehicle from the 15th of a month to the 15 of the 3rd month. Why does it have to be 1st to the 1st etc. nothing personal intended. merely pointing out that IT readers are voting 63% in favour of patently unjust cuts to disability and carers allowance. Is it not up to journalists to tell both sides? @ Ceterus actually, i think its up to the MEDIA to tell both sides, not necessarily journalists themselves? Or at least often that is how it is supposed to work. What would have been the rationale for raising the sub-€350k First Time Buyer stamp duty from 0% to 1% when FTBs comprise 60% of mortgage backed home purchases? How will adding an average of €2-3k to the purchase price stimulate demand? @ Bond. Eoin Bond Agree. How do you rate this budget? It will be interesting to see if they ‘ll pursue welfare fraud as stated in budget 2011.. If you add up the PPS numbers for non EU countries against the number of work permits issued,the nos. granted refugee status and the no. of student visas for Non EU countries there is a massive disparity. If one looks at the month by month issuance of PPS numbers to Non EU countries and match them up against the number of work permits and refugee status granted the disparity is startling. Clearly a real problem exists there or some large alternative explanation is required. Universal cut in child benefit is another stalling mechanism. Simply telling people on household incomes of 100k that they are not entitled to child benefit would avoid a cut in something more important and cause very little genuine hardship. Very few people earning 100k plus would claim the benefit illegally and the need for a rigorous enforcement mechanism with full data-base linkage is being overplayed. Particularly given the weather recently, it is important to bring in some systematic way of dealing with the utility connection issue and nothing is mentioned here. Perhaps this is not a budgetary issue (although it could be depending on how it was done) but people’s electricity needs to be turned back on, particularly given that the recent disconnections are almost certainly “can’t pays” rather than “won’t pays”. We also need a fund that deals with the fact that we appear to be getting very harsh winters. At least three older people have been found dead, likely frozen to death after falls, and there is a clear moral imperative to spend some money on effectively addressing this issue. The realignment of the BES and the 15,000 placements are token efforts again and it is the single biggest failure of the fiscal aspect of the government programme that it is giving the unemployed nothing to work with. Poorly evaluated, half-hearted, weakly designed employment measures have been the hallmark of the employment responses. It is a complete disgrace and abdication of basic responsibility to maintain citizen’s ability to integrate into the wider society. The increase in higher level fees is 500Euro and only for the first child in the family (no increase for subsequent kids). So the government has gone out of its way to protect the relatively well off who dominate university. Meanwhile the Educational Disadvantage Budget has been slashed by 60% and student grants are to be cut by 4%. Well at least you know what the government’s priority is: protect the middle class. Jesus Sharon is a fine thing – she makes austerity seem sexy. Departmental growth forecast is in line with consensus forecasts by Reuters – Lenihan Trawling around to pick the most favourable? @ Liam Delaney re households over 100,000: you are assuming that there is direct or indirect access to household income by non-earning members. Once you remove the universal nature of the payment, people start slipping through the cracks. And once the point is conceded, the limit will drop, and more will slip through. Aine – fair point and one that I should have factored in. However, I have not seen any convincing evidence that child benefit payments have this effect and I will start another thread on this at a later stage. If it were the case that a group of people with household incomes of 100k were being spared from severe intrahousehold poverty from this payment then this would certainly have to be factored in. Do you really think that’s likely? How many of the people getting their electricity cut off and facing actual hardship are in this category. It just seems barmy to take equal amounts from people barely surviving and those who, despite taking painful adjustments, are still well-off by any standard. I don’t follow the child benefit cuts. €10 cut for first two children. €20 for third.. and then what? It seems like an encouragement to have more rather than less children. I am misunderstanding something? @ Keith Cunneen, thank you for saying what I was really thinking. The speech was too short. Didn’t cover nearly enough of the contents. I don’t know – it is not the harshest budget I’ve ever seen. I suppose the absence of increase on excise duty on cigarettes is something to do with the illegal imports of fake cigarettes highlighted on prime time last week. Then again I think that they would need to cut it and introduce serious penalties to have a major effect – so maybe they have one eye on the elections here. No property or water tax mentions. Water tax must come – too many people wasting it and no incentive to collect rainwater. Given the circumstances I think I was expecting something tougher. I just plugged my details into the tax calculator (single male on €30k) on thejournal.ie and it says that after this budget I will be taking home €2 MORE per month than I am now. I know there is some rationalisation around this income band owing to the consolidation of the levies and trying to even out the ‘step’ that hit in at around 26k after last year’s budget but can this be right? When someone on 25k is going to be losing 80 quid a month? @ceteris paribus ‘The main criticism I have is cutting carer allowance and disability benefits while leaving high earners alone. It is simply unjust.’ Blind Biddy is polishing her Bazooka! Annex A6 seems to confirm this. At 30k on Full PSRI, average tax rate goes from 16.9% (2010) to 16.8% (2011). @Liam Delaney You would be surprised how quickly access to income can become problematic when there is a difficulty in the parental relationship/separation/non-marital relationships. The DoSC has been looking at this for some time and has concluded that some universal element should be retained http://www.welfare.ie/EN/Policy/CorporatePublications/Finance/exp_rev/Documents/CISReviewFinal.pdf @bjg “Internet betting charge same as in shops.” Internet betting charge same as in north tipperary casinos! This from the IT summary “Salary cap of €250,000 for civil servants” From the speech it seems subtly different – note the “within a reasonable timeframe” for the State Agencies. That seems to be (excuse the term) kicking the can down the road “The Government believes there should be a maximum salary rate of €250,000 in the public sector. Only a few office holder posts have salaries above this level at present but there is a larger number in the State Agencies. While there are issues about the contractual position of incumbent post holders, I think the position of the Minister for Finance as a shareholder or statutory stakeholder in these companies can be used to enforce the objective of the maximum salary within a reasonable timeframe. The 10% reduction in the pay of new entrants to the public service contained in the National Recovery Plan will be applied to the salary rate of those appointed to hold office in the Judiciary in 2011. The €250,000 maximum will be applied to all such offices. A reduced maximum rate of pay of €250,000 will apply to the next President of Ireland. I want to record the significant contribution made by the current President who, since this downturn began, has waived a significant portion of her remuneration. I intend to make provision for these reductions in legislation.” @ceteris Yes both sides! That is exactly the point! But it is amazing that when one suggest that plenty of families will not miss the cut in the child benefit because they simply save it to pay for say, third level educatio, that the shrieking and wailing kicks in. @Aine This argument about no access to family income etc. What you really mean is stay at home wives not getting money from mean husbands. I think this argument is getting quite dated. If the wife/non-working partner can’t get money from their husband/working partner, that’s a relationship problem not a social problem to be solved by government making a universal payment. This is 2010 not 1970. The CB payment got way out of control as a lazy way of solving childcare problems. The correct policy is to cut it back and improve services to families who really need it. In the short term I’d propose – 149 million saved – give a million to Barnardos. In the long term, organised breakfast clubs, book rental schemes,better back to school grants, etc. actually, we’ve had this exact conversation before….let’s not repeat.. @ Ceterus given that the real fat in the public purse is protected by the Croke Park Agreement (for now), i think its a decent budget. Everyone, literally everyone, with the obvious exception of OAP’s, have taken a hit on this. The abolition of the PRSI ceiling, and the dragging into the PRSI net of ‘officeholders’ amounts to a de facto 4% marginal tax hike for all higher earners, outside of all the other changes. I think this is pretty significant, no? I would have liked to see the sword put to quangos, and the eradication of the property tax shelters a lot quicker, but other than that, i think it’s decent, probably not as good as a “theorethical” FG budget but a hell of a lot better than a “theorethical” Labout budget. Btw, Michael Noonan is becoming more and more impressive by the day. Tull, can you send me on some FG pamphlets? Not saying i want to join just yet, but i wish to learn more about you crazy kids… Also, Joan Burton giving out about someone on 15k a year paying 3% in total income+USC taxes was pretty surreal… @sarah carey A lot of wealthy families that have a few children rely on child benefit to finance the full time nanny / wife’s PA / taxi service. Surely you don’t want to deprive them of this? @Sarah No that’s not it at all. In the 1970’s we had a breadwinner model of tax & social welfare, wheareas now we’re moving towards a double-income basic model which leaves all who are not members of two-income households at greater risk of poverty, a risk which is increased again by caring responsibilities. Access to household income is another question entirely. We did not succeed in eliminating child poverty when we had more money than Croesus. There is a structural difficulty with family supports and addressing that will require more than adding more schemes. @Bond. Eoin Bond Yes. M.Noonan was restrained. He is on record saying he does not want to scare the horses. How FF can ever justify cutting carers and disability allowances is beyond me. They have handed SF a platform to massively increase their vote. Hitting the group in society least able to defend themselves (unlike the OAP) will turn out to be a monumental disaster for FF and Gormley. In the context of the 6b cuts the saving must be tiny for this sector of society. @Bond. Eoin Bond Yes. M.Noonan was restrained. He is on record saying he does not want to scare the horses. How FF can ever justify cutting carers and disability allowances is beyond me. They have handed SF a platform to massively increase their vote. Hitting the group in society least able to defend themselves (unlike the OAP) will turn out to be a monumental disaster for FF and Gormley. In the context of the 6b cuts the saving must be tiny for this sector of society. sorry. I am not in the habit of repeating myself I think massive savings can be achieved through reduction of SW fraud of child benefit by non nationals as per my previous post rather than messy means testing. There is another way of looking at it too. In the US child benefit is not paid directly.Allowance for dependents is generated through the tax system. So those who work ,are responsible and can afford to are more likely to have children.In Ireland the government incentives those on social welfare to have children .It rewards those in dysfuntional social situations by throwing money at them. @ Sean O “It rewards those in dysfuntional social situations by throwing money at them.” Eh, being poor and having children is a dysfunctional social situation? i have to say i thought Michael Noonan was excellent tonight. It’s the first time i’ve realy seen Brian Lenihan unable to wiggle free. Noonan has toned down the rambling metaphors a bit, which is a relief too Joan Burton made a good point on PrimeTime, that the cuts on social welfare and the low paid start from Jan 1st, or even tonight. Whereas the phasing out of tax reliefs at the top of the payscale is in many instances to be wound down over 4 years. Also I totally disagree with cutting carers. These people work for next to nothing, providing a socially crucial service and actually save the State a fortune into the bargain. Madness. I single it out as the most regressive measure in a budget full of austerity. @Ger ‘Also I totally disagree with cutting carers.’ and cutting the blind, disabled and handicapped. @Bond ”Eh, being poor and having children is a dysfunctional social situation?” No,but being poor and having a family expecting your fellow citizens to pick up the tab is wrong,in my opinion. The fact that people living in poor circumstances are also more likely to end up in dysfunctional social situations is well established. I thought the Prime time programme on social disorder last night illustrated that plainly. @Bond. I forgot to say that payments to carers allowance should not be cut,if anything these type of allowances are the ones which should be increased.Being disabled or ill is not a choice. Having children is a choice. @ Sean O “Having children is a choice.” While this is true, economically speaking we need the citizens of the country to reproduce. Its why almost every country provides some sort of incentive to have kids, whether its via tax credits or via a cash subsidy. You could argue that there should be no tax credit for the same reason. By giving a cash subsidy, the idea is that you are trying to bring children out of poverty, something which they definitely did not choose or were given a say in. By not being in poverty, they are more likely to be less socially dysfunctional and more economically productive later in life. Your attempts to place the burden of having kids on the parents seems to ignore the impact that this will actually have on the kids themselves. @sean o “It rewards those in dysfuntional social situations by throwing money at them.” +1 This is an actual case I know of – an ex convict (for a violent crime) who is on a Fas course – which of course is a sham – also has a house for which he has to pay €6 a month – and gets free viagra which he has been prescribed which he sells on the black market. I didn’t actually believe that they would prescribe recreational drugs – but apparently this scam is quite common. We live in cloud cuckoo land. There was a particularily pathetic moment on the six one news this evening. Dan Boyle was asked about the taoiseachs paycut, the interviwer said in spite of it, he was still being paid more than David Cameron, did he think this was correct? Dan’s response was “well not really, but its a step in the right direction…” I think that response kinda sums up the mentality you are dealing with. A step in the right direction…like we have to softly softly tip toe towards proper realistic renumeration for our public servants….for fear the earth might end if we did anything to major in that area….. now lets get back to cutting carers allowance and blind pensions and talking about how necessary and unavoidable it is..I always knew Dan Boyle was an unelected idiot, but that just sealed the deal for me @Bond …”You could argue that there should be no tax credit for the same reason.” In a previous post I argued that tax credits are the way to go as in the US as this facilitates responsible parenting by people who work . Where we may differ is that cash payments for child benefit is wrong in my opinion and leads to the situation we have in Ireland. @ Sean O “I argued that tax credits are the way to go as in the US as this facilitates responsible parenting by people who work” You also argued that having children is a choice and you shouldnt necessarily be rewarded for that choice or expect society to pay for your choice. But tax foregone doesn’t have any different impact on the budget than a cash subsidy. All you’re doing is saying that you’ll help working people have kids but you won’t help poor and unemployed people have kids. Given that poor people are gonna have kids anyway, and when those kids grow up they’ll be entitled to either commit crime or claim the dole, doesn’t a little investment in their lives when they’re growing up and being ingrained with values and education not make sense, rather than leaving than to their own devices? woohoo I’m better off! eh, is there an edit function 😀 @Bond ..”All you’re doing is saying that you’ll help working people have kids but you won’t help poor and unemployed people have kids…” Correct . No solution will be perfect,but the above option is the least worst one ,in my opinion. Bond. Eoin Bond… Says: ….By giving a cash subsidy, the idea is that you are trying to bring children out of poverty… But the subsidy goes to every parent, regardless of income, and that’s iniquitous. The plutocracy just got more plutocratic. @ Tony apologies, we were only discussing one side of the child benefit story above. I completely agree that it should either be means tested or treated as income. I see little point in giving a family that earns 150k a year child benefit, though i will admit there could be fairness angle on this given that these people are producing future economically productive members of society and are still faced with the high costs of raising children as well as paying large amounts of tax. My simple point is that if we are to deny it to anyone, it makes more sense to deny it to high earners rather than low earners, though Sean O, respectfully and with rational reasons i nonetheless disagree with, disagrees. @child benefit Olivier Thévenon (OECD) gave an interesting presentation on family supports at a European Commission event in June 2009. You can download it from http://circa.europa.eu/Public/irc/empl/demographic_change/library?l=/2009_events/assessing_2009-06-10/presentations/brussels10june2009pdf/_EN_1.0_ Family care includes a certain amount of work, with opportunity and direct costs for parents and carers. Cash and other benefits as currently structured do not offset loss of income, pension or social welfare entitlements or recognise care work; they also restrict the tax base. I just did a quick ru through the “single” category (category with fewest commitments and highest disposable income, on average) on the KPMG site. Any claims that the budget is “progressive” are questionable. People on €40k get hit by 2.1%, but people on €200k get hit by 1.5%. It’s only progressive in the €30k-€40k range (the area around the industrial average, where you can assume the heaviest salary distribution lies) and after that it falls off. Salary level Tax hit Proportion of income lost 20,000.00 -679.00 -3.4% 25,000.00 -929.00 -3.7% 30,000.00 -21.00 -0.1% 35,000.00 -491.00 -1.4% 40,000.00 -835.00 -2.1% 45,000.00 -885.00 -2.0% 50,000.00 -935.00 -1.9% 60,000.00 -1,035.00 -1.7% 70,000.00 -1,135.00 -1.6% 80,000.00 -1,270.00 -1.6% 90,000.00 -1,444.00 -1.6% 100,000.00 -1,624.00 -1.6% 110,000.00 -1,804.00 -1.6% 120,000.00 -1,988.00 -1.7% 130,000.00 -2,178.00 -1.7% 140,000.00 -2,263.00 -1.6% 150,000.00 -2,258.00 -1.5% 160,000.00 -2,748.00 -1.7% 170,000.00 -2,937.00 -1.7% 180,000.00 -3,032.00 -1.7% 190,000.00 -3,027.00 -1.6% 200,000.00 -3,022.00 -1.5% There could have been other ways to do it – like 2% flat on salaries above €40k (there is a 2% increment in the €30-€40k range), or progressive at 0.5% on every €10k band above €40k. Par for the course. @Peter Nice analysis, but wasn’t the whole point of this year’s tax changes to widen the tax base? i.e. to tax people who had previously not been paying tax? Didn’t higher earners get hit last year and the year before? @ Hugh Yes, that explains the noise around the €20k-€30k range. On the higher earners taking a bigger hit: I’d need to consider this in light of previous budgets, but as long as the government are still talking about “ability to pay” or “fairness”, then you would expect those on the top bracket to shoulder more more pain – or at least be affected more (nominal amount) than those on €180K – I’m not sure if there was an anomaly with the calculator, but that much seems odd. My main point: the data presents a clear-cut example that the changes to income tax are not progressive as the government are spinning it – and they are regressive for incomes >€40k in the category with arguably most desposable income. I’d like for Vincent Browne to see figures like these ;o) @Peter You will be very interested in this chart which shows that the 2011 tax changes have greatest impact on the lower paid and that the tax system is highly progressive only for low/middle income. http://www.planware.org/briansblog/resources/2011_tax_comparison.pdf Supporting comments on this chart and criticisms of the chart included in Budget documentation is given here http://www.planware.org/briansblog/2010/12/revenue-distorts-2011-tax-analysis.html @ Peter “the changes to income tax are not progressive as the government are spinning it” Sorry, but i honestly don’t remember hearing anyone spinning this as progressive (but i may simply have missed it). The govt has been pretty open about the tax base broadening impacting more on low earners than high earners, no? @ Brian A picture tells a thousand words! @ Eoin Here is what I caught: http://www.irishtimes.com/newspaper/breaking/2010/1208/breaking19.htm I got this on RTE: http://www.rte.ie/news/2010/1207/live_budget_updates.html “Mr Lenihan said the Budget would ensure that that the basic State Pension escapes unscathed, a move he believes would draw broad support. He called it a ‘highly progressive’ Budget in terms of taxation.” I have only one understanding of “progressive” when it comes to taxation. Maybe by progressive, he actually means regressive. It wouldn’t be the first time fine logic has been inverted! In any case, they have called it a “social tax”, which might lead you to expect something more equitable. I thought there should have been some effort to tackle the enormous problem of non nationals receiving state benefits.According to the CSO over 75,000 are on the live register and many thousands more are receiving long term benefits. The Labour party uses a figure of 20k euro required to maintain a single person on state benefits per year.For 75,000 people this amounts to 1.5 Billion euros. The original intent of free movement of people within the EU was to allow people work in other countries.There was no open ended commitment to provide social welfare to those who lost jobs here. This in part explains President Sarkozys reasoning in deporting Roma from France. The reason its important now is that we are being liable by the EU for debts to German,French and British banks for which the Sovereign has no liability.The EU has played hardball and got reparations for tens of billions of euros fo which this State should have no liability for. This government should have negotiated along the lines that we either go along with the four year plan but cease all welfare payments to EU citizens after three months of unemployment or default. Does anyone doubt which side of that argument the EU would have come down on.? This is nt an immigrant bashing post (so hold back the stoning). We simply cant afford this liability anymore.Germany ,I believe only opens its borders up in 2011,so we have given a lot more than the central powers. A further point worth considering regarding EU failure is that for the past three years Poland has had an unemployment rate lower than Ireland’s yet there is still a large influx from there (PPS nos. issued) and a negligible flow the other way. Munchau of the FT,pointed out the failure of the EU regarding labour mobility some months ago. Just watched the Primetime debate between Lenihan and Noonan. I’m no Lenihan supporter, but Noonan was being deeply disingenuous. I was terribly disappointed that he focused so much on critiquing specific cuts (I’m not commenting on the specific measures, but Noonan’s going on twas as bad as the classic “teachers, nurses and guards” whine) and he didn’t talk about anything major or structural. Comments are closed.