In its first Budget, the Government managed to generate a correction of over €3bn without touching headline rates of tax or welfare, apart from a VAT increase that will barely break even. Magic, surely? This post explores the magic trick and finds it relies on the sleight of hand of assuming the equivalent of 200,000 new jobs in 2012, while still not grasping the nettle of reforming the three main areas of Government spending: social welfare, health and education.
Ireland’s Budget 2012 is being released this week, over two days. The principal measure in relation to taxation is a two-percentage point increase in the standard rate of VAT, from 21% to 23%. This post separates out the reasons why this is a bad idea from the commonly cited fear about people going to buy “up North”. This is not about diverting consumption, this is about destroying it.
The last few Daft.ie Rental Reports have showed remarkable stability in rents in many parts of the country. This post outlines how rent supplement may be acting as a floor on residential rents in Ireland. It compares the ratio between average rents and maximum rent supplement in 2007 and now, which highlights just how serious the problem is. Working tenants can now effectively be outbid by welfare tenants, who have no incentive to haggle, in most parts of the country.
The last few days have seen the ECB reduce interest rates unexpectedly, leading to Irish policymakers and regulators threatening financial institutions who did not follow suit. Danish-owned National Irish Bank had planned on increasing its variable rates this week and indications today are that it will still do this. This post discusses that decision and what levers policymakers should – and should not – be using to protect current and future borrowers.
Making Ireland a more attractive place for FDI, via making it attractive for workers to come and live here is difficult when the environment is one of higher and higher taxes. This post examines Ireland’s changing competitiveness. It first looks at how a family’s mortgage repayment will change between 2005 and 2015. It also examines how after-tax, after-rent income in Ireland compares internationally, finding that significant tax increases are compatible with international competitiveness when offset by falling costs of accommodation.
The need to close Ireland’s deficit from €15bn to €4bn means that over coming years, €7bn in public sector expenditure will need to be cut. Social welfare payments – almost all of which are not means-tested – comprise one third of the €60bn in discretionary spending each year. This post outlines how to reform the system so that it is simpler and fairer, while generating €2bn in Exchequer savings.
Banking and credit facilitate economic growth and are among the foundations of modern, post-Industrial Revolution economies. This post explores the implications of living in Ireland, a country without the ability to borrow, either as a household or as a small business. It also focuses on the potential of online trading and why the current perverse policy of Irish banks in that area must change.
It’s become something of a clichĂ© in Irish public discourse to worry out loud about the banking debt being left to our children and grandchildren. Should we worry about this, though? This post outlines the most likely scenario for just much of a burden Ireland’s banking debts are likely to be for our grandchildren, focusing in particular on the role of economic growth and inflation.
This post examines Michael O’Leary’s suggestions in relation to Ireland’s income tax system, in particular making it simpler and ensuring everyone contributes but not too much! It uses recently published Revenue Commissioners figures for income in 2008 to estimate who would like the proposal and who would hate it, Government included. It concludes with a few tweaks to the proposal, including in relation to income earned through social welfare.
Last week, I was privileged to be invited to speak at the MacGill Summer School, which was celebrating its 30 anniversary. Throughout the week, there were various sessions, on health, education… the economy of course, and indeed political reform. One of the final sessions was based around the question “Is Ireland a country for young men and women?”. This post contains my speech.
