How (Not) To Do Public Policy: Water Charges and Local Property Tax

Jim O’Leary has an op-ed about the Local Property Tax  in today’s Irish Times, based on his recent report, How (Not) To Do Public Policy: Water Charges and Local Property Tax, published by the Whitaker Institute at NUI Galway. The report was launched at a conference last month at NUI Galway featuring senior policymakers, public servants, academics and other experts who evaluated the strengths and weaknesses of the policy-making process in Ireland with a view to suggesting how the quality of policy-making might be improved. Highlights from that conference, including videos of Jim’s presentation and Robert Watt’s keynote speech as well as audio of the panel sessions can be found here on the Whitaker Institute website.

4 replies on “How (Not) To Do Public Policy: Water Charges and Local Property Tax”

Anytime I encounter comments or discussions about Irish economic policies I reach for my copy of William Kingston’s ‘Interrogating Irish Policies ‘ (2007) to ascertain if anything new(ish) is being mooted. The outcome is depressingly the same: nary a nowt. But sure lets move along. Nothing to worry our little hearts about.

I was unclear about Jim O’Leary’s IT OpEd piece until about two-thirds of the way through, when that heroic and wondrous adjective, Competitiveness, appeared. Folk should really try to refrain from using such mawkish terminology – unless they really do understand what it means in the context of contemporary Irish political economy. But lets move along to the substantive issue here: How do those persons liable for RPT actually discharge their liability? Well, it appears that they shall do so out of their ‘disposable incomes’ – that is, an income that may already have been subjected to a revenue deduction. Someone like to explain how reducing consumers’ incomes increases economic competitiveness? No? I thought not.

RPT is a deeply regressive form of personal taxation and should be replaced (if you really do want to have a property tax) by a VAT applied to the gross sale price of the property. However, there would need to be two components to be taxed. Firstly, the Value-of-the-Site-in-Use and secondly, the actuarial estimate of the full replacement cost of the buildings constructed on the site. A simple phone call to IFA headquarters will get you the first value. A site visit from a cost-valuer, the second. All residential property owners (whether taxpayer or not) shall be obliged to include these valuations as part of their annual submissions to Revenue. Is there a problem with this proposal? I reckon there might be.

In the final analysis a rising level of taxpayer (ie. voter) anger at the application of RPT will ensure its political demise.

Bye-the-bye. Would RPT valuations decrease if residential property values decreased? That eventuality will be ‘interesting’. Unless of course, someones have already figured out how to ensure upward-only residential property valuations in parallel with zero nett wage and salary increases (ie: percentage increases in commodity and service costs are greater than corresponding percentage increases in personal disposable incomes).

What happens if mortgage interest rates should double from 3% to 6%, or worse, from 4% to 8%. Unlikely I know, but not so with energy costs. These are at a ‘tipping point’. Increased energy costs always induce a recessionary event.

Brian….RPT is NOT a regressive tax. It just isn’t. And VAT on housing is bad enough without increasing it. Getting people to take out mortgages to pay taxes is about as bad idea as Ireland ever came up with.

Access to the video and audio streams of the conference is very helpful. With regard to the water charge débâcle, it appears that the broad conclusion is that there was an attempt to do too much too quickly. Of course, the only reasons that anything was being done and, then when government decided it could no longer avoid doing some politically unpalatable and difficult things, that a lot of things were packaged together in an attempt to square a plethora of competing vested interests can be traced back to some of the actions required for the fourth review (by end-Q4 2011) in the initial MOU of November 2010 with the Troika.

“To assist in financing need and to increase competition
– Building on the forthcoming report of the Review Group on State Assets & Liabilities the government will undertake an independent assessment of the electricity and gas sectors. State authorities will consult with the Commission Services on the results of this assessment with a view to setting appropriate targets.

In advance of the introduction of water charges
– The government will have undertaken an independent assessment of transfer of responsibility for water services provision from local authorities to a water utility, and prepare proposals for implementation, as appropriate with a view to start charging in 2012/2013.”

I’ve previously outlined the key inter-locking components of the cunning plan confected in response to these requirements:

It should not be surprising that the wheels came off and the one thing we can sure of is that no government will try anything as complex and difficult again.

It was also interesting to note the observation that the débâcle might have been avoided, or, at least, its impact curtailed, if there had been a stronger “culture of challenge” in the policy-making process. Personally, I find this verging on the hilarious. There was no shortage of evidence that the whole process was seriously flawed – but, of course, this evidence was not being generated within or being considered by the formal policy-making process. And anyone within the formal process who sought to present a challenge would find out very quickly how career-limiting, if not career-threatening, pursuing such a course could prove to be.

On the property tax question, it’s merely an illustration of the background behind the current housing crisis. The core housing policy in Ireland is that housing should be expensive, that property owners are entitled to endless upside, to be protected from downside as much as possible, and that nothing else matters. After the crisis it was (and is) explicit policy to inflate prices. And solid respectable property owners can’t be expected to suffer any consequences of that. Consequences are to be paid by those who don’t own property.

Makes me sound like a loony leftie (which I’m not). But it’s true.

On the water crisis, it was mostly because SF has no ethics and FF has neither courage nor credibility. They each dragged the other until FG was left high and dry and alone in a minority govt. Otherwise they might actually have done the right thing for once. And we’re again left with victorian infrastructure and no path to a solution.

Comments are closed.