Some Good News and Bad News (Live Register and Tax Returns)

RealityCheck

This evening the Live Register figures and the October tax returns have been released.

http://www.rte.ie/news/2009/1103/economy1.html

The good news is the live register figure has reduced by 11,500. This most likely reflect many people leaving the country to find employment elsewhere and many immigrants returning home.

The bad news is that the October tax returns are absolutely dismal. It now looks increasingly likely that the budget prepared in April will be out by 2 Billion odd. The tax returns are now at 2003 levels proving that increases in taxes dont necessarily mean increases in tax revenue. This surely fuels the calls for the 4 Billion in Budget savings to come from the expenditure side as it is clear we are taxed as far as possible.

NewDubliner

RealityCheck wrote: »

This surely fuels the calls for the 4 Billion in Budget savings to come from the expenditure side as it is clear we are taxed as far as possible.

If you cut the pay bill by 1.3bn. The tax receipts will go down by another 1bn.

nesf

NewDubliner wrote: »

If you cut the pay bill by 1.3bn. The tax receipts will go down by another 1bn.

Eh, where are you getting that number from? It looks very very high.

RealityCheck

NewDubliner wrote: »

If you cut the pay bill by 1.3bn. The tax receipts will go down by another 1bn.

Its hardly going to be that high ? worst case scenario ?

In the relative scheme of things, 1.3 billion is barely a drop in the ocean in comparison to what we need to cut back in future.

nesf

RealityCheck wrote: »

Its hardly going to be that high ? worst case scenario ?

In the relative scheme of things, 1.3 billion is barely a drop in the ocean in comparison to what we need to cut back in future.

Well the real issue is that 1.3 billion is funded by borrowings so the real cost is a fair bit higher.

The_Conductor

Slightly OT- but did anyone hear Brian Lenihan being interviewed on RTE? He blamed the reduction in tax receipts on unexpected lower salaries in both the public and private sectors. Apparently- he didn't cop that everyone is getting paid less.........

NewDubliner

nesf wrote: »

Eh, where are you getting that number from? It looks very very high.

Tax, PRSI, levies and Public Service levy give a marginal rate of about 60%. The VAT lost on the balance (when it's not spent) mean that of every 100 euro cut in public sector pay, about 72 will be lost in tax receipts. This does not take account of the loss of income to businesses where the money will no longer be spent, and the loss of revenue from their staff's tax and PRSI. So, my 72% estimate may be a bit conservative.

It's not a total rebuttal of the logic of cuts, but it does demonstrate the deflationary effect.

lmimmfn

Im sure im not the only one to took the total of the tax increase in April on my weekly expenditure.

The more we are taxed the less we will spend. Of course there's a point whereby we can't cut any more corners but at that point you'd nearly be as well off on the dole( with the current welfare rates ).

Its great that the live register is down though and i have noticed we're not listening to 200 jobs going every day or two on the news.

nesf

NewDubliner wrote: »

Tax, PRSI, levies and Public Service levy give a marginal rate of about 60%. The VAT lost on the balance (when it's not spent) mean that of every 100 euro cut in public sector pay, about 72 will be lost in tax receipts. This does not take account of the loss of income to businesses where the money will no longer be spent, and the loss of revenue from their staff's tax and PRSI. So, my 72% estimate may be a bit conservative.

It's not a total rebuttal of the logic of cuts, but it does demonstrate the deflationary effect.

Eh, that marginal rate is only for top rate earners and changes according to which bands you are in for PRSI, income tax and so on.

The deflationary effect is there but you have to take into account the borrowing that funds the 1.3 billion in wages and that the money for these wages when it's not being borrowed is coming out of the private sector anyway so it's not new fresh money. There's a deflationary effect for paying public sector wages in the first place anyway.

thebman

smccarrick wrote: »

Slightly OT- but did anyone hear Brian Lenihan being interviewed on RTE? He blamed the reduction in tax receipts on unexpected lower salaries in both the public and private sectors. Apparently- he didn't cop that everyone is getting paid less.........

My worry would be that they will reduce the entry level for people paying tax.

That wouldn't be a new tax like they've been saying. I think that is very likely TBH.

NewDubliner

nesf wrote: »

Eh, that marginal rate is only for top rate earners and changes according to which bands you are in for PRSI, income tax and so on.

Seems reasonable to assume that public sector workers are on top rate tax, or that the cuts will be directed at those who are.

nesf wrote: »

There's a deflationary effect for paying public sector wages in the first place anyway.

Only if you think that the public-sector adds no value at all to the economy. And, not all public sector wages are funded from taxes.

gurramok

What are the income tax receipts month by month to get a truer picture of the live register so we can rule out emigration and the return to education(plus Fas) factors.

The_Conductor

nesf wrote: »

Eh, that marginal rate is only for top rate earners and changes according to which bands you are in for PRSI, income tax and so on.

The deflationary effect is there but you have to take into account the borrowing that funds the 1.3 billion in wages and that the money for these wages when it's not being borrowed is coming out of the private sector anyway so it's not new fresh money. There's a deflationary effect for paying public sector wages in the first place anyway.

Remember you hit the marginal rate @ ~36k, which is not very high at all, when you factor a mortgage, no medical card, and the probability that your 2 income household will be a 1 income household for the foreseeable future.

In the public sector- for post 1995 employees, when you factor in the income and pension levies into the equation- the marginal rate is now ~59.6% for those just over the threshold (its lower once you hit the PRSI ceiling obviously).

With respect of the multiplier effect- obviously the deflationary impact of it is open to interpretation. For a small open economy- when I was doing my BBS- we used a multiplier of 2.8. Perhaps thinking has moved on since I graduated?

lmimmfn

Private Sector=Tax producer
Public Sector=Tax consumer

Simple as that

smccarrick wrote: »

In the public sector- for post 1995 employees, when you factor in the income and pension levies into the equation- the marginal rate is now ~59.6% for those just over the threshold (its lower once you hit the PRSI ceiling obviously).

So for private sector workers who get no employer pension contribution and have to fund 10% or so themselves before tax, that that should be considered a tax contribution for them likewise?

You could just get rid of the pension levy and PS pensions entirely and allow them to take private pensions like a lot of the private sector have to, surely this would save the state a fortune? and the PS would no longer have that levy.

NewDubliner

lmimmfn wrote: »

Private Sector=Tax producer
Public Sector=Tax consumer
Simple as that

No it's not.
Public sector provides services that help and enable people to be productive.

The_Conductor

gurramok wrote: »

What are the income tax receipts month by month to get a truer picture of the live register so we can rule out emigration and the return to education(plus Fas) factors.

CSO figures are showing a net migration- its a reasonable assumption that a large portion of these people are social welfare recipients, but obviously this is pure hypothesis. We can show a slowdown in the number of redundancies advised to the Department of Enterprise, Trade and Employment- however, the number of new jobs announced (which is speculative at best), continues to run below even these lowered figures.

So- in short- we're continuing to loose jobs, but at a slower pace than hitherto. Meanwhile the fall in the live register can only be accounted for- by our startling increase in net migration- which is once again at levels last seen in the late 1980s.

The big anamoly in all of this- is the massive increase in the Irish birthrate? Is it that people can't afford to go out and are staying at home and partaking of (ahem) other activities instead? It does seem counter intuitive in many respects........

Économiste Monétaire

smccarrick wrote: »

With respect of the multiplier effect- obviously the deflationary impact of it is open to interpretation. For a small open economy- when I was doing my BBS- we used a multiplier of 2.8. Perhaps thinking has moved on since I graduated?

A 2.8 government consumption multiplier?

lmimmfn

NewDubliner wrote: »

No it's not.
Public sector provides services that help and enable people to be productive.

i didnt say anything about services or all the good work done, i said the public sector's wages are either paid by tax intake from the private sector or by borrowings.

Private sector makes the money in a country, the public sector doesnt make the government money.

nesf

NewDubliner wrote: »

Only if you think that the public-sector adds no value at all to the economy. And, not all public sector wages are funded from taxes.

The public sector doesn't add value in financial terms. It's absolutely essential for social reasons apart from this but it's not a revenue generating enterprise in general. The public sector spends tax receipts it doesn't generate new ones, this is fine it's how it works and we need a public sector so really it's a bit of a non-issue.

NewDubliner

lmimmfn wrote: »

i didnt say anything about services or all the good work done, i said the public sector's wages are either paid by tax intake from the private sector or by borrowings.

Private sector makes the money in a country, the public sector doesnt make the government money.

Yes it does, people pay for essential services through their taxes.

nesf

smccarrick wrote: »

Remember you hit the marginal rate @ ~36k, which is not very high at all, when you factor a mortgage, no medical card, and the probability that your 2 income household will be a 1 income household for the foreseeable future.

You don't hit the maximum income, pension and PRSI levy levels at 36K.

smccarrick wrote: »

With respect of the multiplier effect- obviously the deflationary impact of it is open to interpretation. For a small open economy- when I was doing my BBS- we used a multiplier of 2.8. Perhaps thinking has moved on since I graduated?

Depends on how you model it. The multiplier effect of public spending has been subject to some very serious questioning over the past decade, it doesn't look like from the evidence that it is substantially greater than 1 (some studies found it to be less than 1!). In an undergrad course they wouldn't deal with such research and just post the theory which has it much greater than 1.

Edit: I should note that it's incredibly difficult to estimate the multiplier and all studies on it are open to criticism. If you step back and think about it though it's not that surprising that it'd be low. It's incredibly difficult for a central planner to know where's the best place to invest public funds for the purpose of generating economic growth and political pressures will ensure it is not spent with this as the guiding principle anyway!

NewDubliner

nesf wrote: »

You don't hit the maximum income, pension and PRSI levy levels at 36K.

Isn't average pay in the PS 50k?

Perversely, the government can make a great net gain by cutting pay of lower paid PS workers than by cutting pay from higher paid ones.

lmimmfn

NewDubliner wrote: »

Yes it does, people pay for essential services through their taxes.

nah, i just think you're taking the piss with this now.

The_Conductor

lmimmfn wrote: »

Private Sector=Tax producer
Public Sector=Tax consumer

Simple as that

You've obviously never studied economics. Its not as simple as that- despite what the gutter press would have you believe. Ireland has moved away to a large extent from an industrial base- towards a service sector. It is now the largest sector of the economy- and both the public and private sectors are significant contributors to it. Your argument is- unless you produce a tangible good- you don't produce? Yes? Well- if so- you are quite simply incorrect.

lmimmfn wrote: »

So for private sector workers who get no employer pension contribution and have to fund 10% or so themselves before tax, that that should be considered a tax contribution for them likewise?

I've worked for significant periods in both the public and private sectors. For the average public sector employee- the bulk of their pension is comprised of the contributory OAP. This is in common with the private sector. In the public sector- you do not get a public sector pension until you earn over 26k. It is only on the gross salary over this amount that you are entitled to a pension. In the private sector- you have both your contributory pension based on either defined benefit (largely closed) or defined contribution schemes. It is normal for employers to match employee contributions (this occurs in over 74% of companies- for tax purposes). This pension is in addition to the contributory OAP paid through PRSI contributions- unlike in the public sector- where your gross pension is reduced by it........ I've seen both sides of the coin- and the grass being greener on the other side of the fence is very much a myth.

lmimmfn wrote: »

You could just get rid of the pension levy and PS pensions entirely and allow them to take private pensions like a lot of the private sector have to, surely this would save the state a fortune? and the PS would no longer have that levy.

No- it wouldn't. You are assuming that the pension levy is ringfenced for future pension disbursements. Its not. Its going into the general kitty- and the perception is that its an income generating exercise, to service the additional debt taken on for the bank bail outs........

If the pension levy was ringfenced, and a true actuarial cost put on public sector pensions- using the COPC calculations- if you wanted a truely level playing field- you'd have to abolish the PRSI contributory pension for both public and private sectors, and start off with a blank slate.

The economic cost of providing a defined benefit pension for the public sector- would be seen to be quite high- when compared to a comparable private sector scheme- but only because the average age in the public sector, at 55.4, is almost 14 years older than in the private sector. This increase in age is worth almost 6% in additional costs on an actuarial basis. If you take a 25 year old in both the public and private sectors- the difference from an actuarial perspective, is minimal. The problem is you are not comparing like with like......

thebman

NewDubliner wrote: »

Yes it does, people pay for essential services through their taxes.

People don't pay for the services as they use them in many cases. It isn't comparable to payments for services in the private sector. Also it isn't voluntary so calling it pay is a bit much.

People fund services through taxes and use them if they need to but regardless of whether they need them or not they fund them through taxes assuming they pay taxes of course. People that pay tax also have to fund the services for people that don't pay tax since they don't contribute.

Seems a little more accurate to me.

The_Conductor

lmimmfn wrote: »

nah, i just think you're taking the piss with this now.

How is this taking the piss?
I'm perfectly happy for my taxes to pay for doctors, nurses, gardai, teachers and many other public sector employees- who perform very worthwhile tasks that the private sector either have no interest in supplying, the public at large do not wish the private sector to supply, or the private sector cannot supply on an economic basis (particularly the health sector).

You have to accept that the provision of services is a valid economic activity- the measure of a persons worth is not measured by units of tenable goods produced. We are not a manufacturing economy- we are a services economy- and of those manufacturing industries present in Ireland- their importance to the Irish economy is diminishing as a percentage of economic activity, year on year.

nesf

NewDubliner wrote: »

Isn't average pay in the PS 50k?

It depends on what areas you exclude or not. You can paint it as higher and/or lower depending on how you pick your sample. It doesn't matter really.

NewDubliner wrote: »

Perversely, the government can make a great net gain by cutting pay of lower paid PS workers than by cutting pay from higher paid ones.

Yup, crazy isn't it? There needs to be an across the board cut unfortunately. Just cutting the upper rates of pay won't do. We won't get a euro saved for every euro cut but that just reinforces why we need to make a substantial cut in public sector pay to achieve substantial savings.

Right now though the deflation from cutting public sector salaries isn't the problem, it's the enormous amount of debt we are going to be in. Borrowing a third of current expenditure just isn't an option. Reducing this deficit is going to be painful for everyone, not just public servants.

NewDubliner

thebman wrote: »

People don't pay for the services as they use them in many cases. It isn't comparable to payments for services in the private sector. Also it isn't voluntary so calling it pay is a bit much.

I had no intention to say it was the same as private sector. Just to debunk the notion that the PS is a dead cost centre.

lmimmfn

smccarrick wrote: »

No- it wouldn't. You are assuming that the pension levy is ringfenced for future pension disbursements. Its not. Its going into the general kitty- and the perception is that its an income generating exercise, to service the additional debt taken on for the bank bail outs........

maybe i picked it up wrong when i read the constitution( and im not trying to be smart here ), but doesnt it say that all tax revenue should go into the 1 pot, i know the levy is considered a tax but thats probably the reason?

smccarrick wrote: »

If the pension levy was ringfenced, and a true actuarial cost put on public sector pensions- using the COPC calculations- if you wanted a truely level playing field- you'd have to abolish the PRSI contributory pension for both public and private sectors, and start off with a blank slate.

Im 100% for this and it should have been done all along, however a lot of the PS would be up in arms as it would no longer be a guaranteed fixed pension in the same way that private sector pensions can be completely wiped by company closures or whatever.

I dont see how you would have to abolish PRSI contributory pension though? doesnt it apply to both private and public at the same rate? again i know it goes into the 1 big pot at the end currently.

smccarrick wrote: »

The economic cost of providing a defined benefit pension for the public sector- would be seen to be quite high- when compared to a comparable private sector scheme- but only because the average age in the public sector, at 55.4, is almost 14 years older than in the private sector. This increase in age is worth almost 6% in additional costs on an actuarial basis. If you take a 25 year old in both the public and private sectors- the difference from an actuarial perspective, is minimal. The problem is you are not comparing like with like......

surely this could fixed going forward( lol, Gift grub ) though? im only giving an example but where i work for recruits in the past few years get 0% pension contribution from the company and have to pay for all of it themselves.

I realise the younger fund the pensions for the older generation and those receiving pensions or about to retire, but they could take the hit now and at lease we would know where we stand.

smccarrick wrote: »

How is this taking the piss?
I'm perfectly happy for my taxes to pay for doctors, nurses, gardai, teachers and many other public sector employees- who perform very worthwhile tasks that the private sector either have no interest in supplying, the public at large do not wish the private sector to supply, or the private sector cannot supply on an economic basis (particularly the health sector).

You have to accept that the provision of services is a valid economic activity- the measure of a persons worth is not measured by units of tenable goods produced. We are not a manufacturing economy- we are a services economy- and of those manufacturing industries present in Ireland- their importance to the Irish economy is diminishing as a percentage of economic activity, year on year.

Its taking the piss because in simple economic terms the private sector pays for the salaries of the public sector. Yes the private sector cant exist without the public sector, im not on about that i said the public sector is a consumer of tax and the private sector is the producer of the tax revenue. It cant be made any simpler than that.

Put it like this, if the state was a company that cant sustain itself, you decrease expenditure, you don't increase the price of the product you sell.

NewDubliner wrote: »

I had no intention to say it was the same as private sector. Just to debunk the notion that the PS is a dead cost centre.

Nobody said it was a dead end cost centre, in fact i already said vital and important services are provided, i only put it in simple economic terms, in the private sector when things go to hell you dont kill the production line that feeds the company you have to reduce HR expenditure/building costs and what not.

Again this has turned into a public service/private sector standoff, at the end of they day with the disaster for everyone that is going to be the next few budgets nobody wins, i hear all this crap about pension levys' bloody hell everyone i know in the private sector is either on 3-4 day weeks, had their hours increased rather than reducing salaries or have been laid off, everyones taking a hit and its only the start of it, there are worse years ahead.

My wife works in the public sector so it not like things wont affect us in that respect.

The_Conductor

thebman wrote: »

People don't pay for the services as they use them in many cases. It isn't comparable to payments for services in the private sector. Also it isn't voluntary so calling it pay is a bit much.

In many cases they do. Look at the EUR120 I pay when I visit A&E, or the EUR100 a month I pay for prescriptions. Its not across the board- but would you go down the American route of putting an economic cost on all services supplied, and if you can't afford to pay- tough? This is not the European model. Ireland has been swinging between the Boston and Berlin models for years. Personally I would rather pay higher tax, and have a safety net for those less well off in society (with the exception of social welfare disbursements- which need serious reform)- than I would have a US based wild west approach........

thebman wrote: »

People fund services through taxes and use them if they need to but regardless of whether they need them or not they fund them through taxes assuming they pay taxes of course. People that pay tax also have to fund the services for people that don't pay tax since they don't contribute.

Seems a little more accurate to me.

What would you do? Make people pay for services as they use them, and abolish central funding of services? The country would fall apart.......

P. Breathnach

nesf wrote: »

The public sector doesn't add value in financial terms...

That depends on how you count things. Health and Education, for example, are two of the biggest budget expenditure heads. If they were not provided for out of the public purse, then they would be private sector activities and would be counted as transactions involving payment for value.

thebman

smccarrick wrote: »

In many cases they do. Look at the EUR120 I pay when I visit A&E, or the EUR100 a month I pay for prescriptions. Its not across the board- but would you go down the American route of putting an economic cost on all services supplied, and if you can't afford to pay- tough? This is not the European model. Ireland has been swinging between the Boston and Berlin models for years. Personally I would rather pay higher tax, and have a safety net for those less well off in society (with the exception of social welfare disbursements- which need serious reform)- than I would have a US based wild west approach........



What would you do? Make people pay for services as they use them, and abolish central funding of services? The country would fall apart.......

I never suggested anything like that

All I said is that it isn't the case that people pay for services at point of contact. I never said it should be like that.

It should be in some cases like when some D4 head needs her stomach pumped because she drank too much as the A&E fee won't cover the cost of the service provided in such a case yet it would be unnecessary to provide the procedure if the person had behaved responsibly.

Realistically there are people in the PS that do cover their wages and there are people that don't as the service they provide can't make money. Cuts are going to have to be made to both I believe but that is no different to people in an IT company cutting IT and sales staff salaries despite the sales people claiming they pay for their wages while the IT staff couldn't make such a claim despite creating the service the company sells.

Realistically many people could argue they cover the cost of their wages but it doesn't stop the country being over 20 billion in the red. Doing anything to reduce this is going to hurt the economy, its about finding what will hurt it least and cutting that IMO.

The_Conductor

lmimmfn wrote: »

maybe i picked it up wrong when i read the constitution( and im not trying to be smart here ), but doesnt it say that all tax revenue should go into the 1 pot, i know the levy is considered a tax but thats probably the reason?


Im 100% for this and it should have been done all along, however a lot of the PS would be up in arms as it would no longer be a guaranteed fixed pension in the same way that private sector pensions can be completely wiped by company closures or whatever.

I dont see how you would have to abolish PRSI contributory pension though? doesnt it apply to both private and public at the same rate? again i know it goes into the 1 big pot at the end currently.


surely this could fixed going forward( lol, Gift grub ) though? im only giving an example but where i work for recruits in the past few years get 0% pension contribution from the company and have to pay for all of it themselves.

I realise the younger fund the pensions for the older generation and those receiving pensions or about to retire, but they could take the hit now and at lease we would know where we stand.

What you don't realise- is that a significant portion of the private sector would also be caught out by this- it wouldn't be just the public sector.

Putting an actuarial cost on future pensions is a shocking experience (I've been involved in doing it for a few organisations). When you realise that an organisation of 1500 can have a balance sheet cost in excess of a billion associated with future pension liabilities, you get an idea of shocking it can be. Multiply this up 250 fold for the public sector- and you rapidly get an idea of the scale of the issue. However a large chunk of this is discounted through contributory OAP payments- which is similar in many cases to what people do on a personal basis in the private sector.

It is a bit mercenary to suggest wiping the slate clean- abolish *all* state intervention in the provision of superannuation benefits- and let everyone go and fund their own pensions. Buy unit shares in forestry funds, with staggered maturity dates- or however- as an asset class, it could be made work.

A big bug bear for many people in both the public and private sector is the non-contributory OAP- its almost identical to the contributory OAP. Why whack 8% of your gross income into a pension scheme for 40 years- when Bob down the road, who hasn't worked a day in his life- has the same income in retirement as you?

What do we do- get the government out of superannuation altogether- if people can't provide for themselves, they sell their family home or find another means of funding their twilight years? We're already starting on this course with nursing home charges, but the superannuation structure is still intact.

How do we dismantle what is obviously an inequitable scheme- when the vested interests have no interests in rocking the boat? If its accepted that the country is bankrupt, and people are forced to reconsider what our options are- as is the case, only it hasn't hit the public perception, perhaps a start could be made on this- but we'll still have the vested interests wailing about 'the most vunerable in society'. Hell, taxpayers are the new vunerable people in society........

The_Conductor

thebman wrote: »

I never suggested anything like that

All I said is that it isn't the case that people pay for services at point of contact. I never said it should be like that.

It should be in some cases like when some D4 head needs her stomach pumped because she drank too much as the A&E fee won't cover the cost of the service provided in such a case yet it would be unnecessary to provide the procedure if the person had behaved responsibly.

Go for it.
My sis is an A&E doc and I hear regular tales of the vast hoardes of drunks descending on A&E every Fri/Sat night from 11PM onwards. If they had to cover the costs of their own stupidity- perhaps they might think twice before taking that 20th vodka slammer.....

thebman wrote: »

Realistically there are people in the PS that do cover their wages and there are people that don't as the service they provide can't make money. Cuts are going to have to be made to both I believe but that is no different to people in an IT company cutting IT and sales staff salaries despite the sales people claiming they pay for their wages while the IT staff couldn't make such a claim despite creating the service the company sells.

And it happening in both the public and private sectors. The big difference is that its the experienced staff who are being let go (through enforced early retirements) in the public sector- while the private sector are holding onto a core staff who are damn good at their jobs. People don't realise how expertise is being destroyed in the public sector- it will hit home in the future- but at the moment, all that matters is the paybill.....

thebman wrote: »

Realistically many people could argue they cover the cost of their wages but it doesn't stop the country being over 20 billion in the red. Doing anything to reduce this is going to hurt the economy, its about finding what will hurt it least and cutting that IMO.

There are many options- but having a system where everyone sits around a table and tries to come to a concensus is a load of bollox. We need someone to make hard decisions and tell have the guts to stand up to folk and inform them of the hard medicine they are to imbibe. Concensus is a dead- it worked while we had money- we most certainly don't any longer.

RealityCheck

Regarding the the levelling off of the jobless figures you wonder have we reached the bottom or are we just in the eye of the storm.
While encouraging, I feel that the live register will start rise again in the new year as I feel some sectors are not holding together well at all.

Construction is still contracting with many major jobs finishing up and the capital budget being slashed by a billion. Also the number of house units being built in 2010 is set to drop to from 17000 to 10000 from this year. A recent report has shown that construction output is to contract by 25% in 2010 on top of the contraction to date.

Also another sector that is still in a bad way is retail. With many companies barely keeping it together this year, any further weakness may cause many failures and job losses come spring 2010.

The effects of the budget are as of yet an unknown, it may dampen down consumerism even further causing further stress on the services sector, particularly retail as mentioned above.

Overall things are looking better and we can cling to the hope that it has bottomed out. However, I would'nt be counting my chickens yet .

lmimmfn

smccarrick wrote: »

What you don't realise- is that a significant portion of the private sector would also be caught out by this- it wouldn't be just the public sector.

Putting an actuarial cost on future pensions is a shocking experience (I've been involved in doing it for a few organisations). When you realise that an organisation of 1500 can have a balance sheet cost in excess of a billion associated with future pension liabilities, you get an idea of shocking it can be. Multiply this up 250 fold for the public sector- and you rapidly get an idea of the scale of the issue. However a large chunk of this is discounted through contributory OAP payments- which is similar in many cases to what people do on a personal basis in the private sector.

no i do realise that the cost is astronomical, the UK has the same issue, they could change the retirement age to reduce the burden though.

smccarrick wrote: »

It is a bit mercenary to suggest wiping the slate clean- abolish *all* state intervention in the provision of superannuation benefits- and let everyone go and fund their own pensions. Buy unit shares in forestry funds, with staggered maturity dates- or however- as an asset class, it could be made work.

but we do need something like this, its been common practice for the past several years in the private sector, dont get me wrong, its crap for those that take those contracts however at lease excluding the current was thats needed at least the problem is sorted when the new recruits reach retirement age( even if the government only contributed 5-7% at least its a fixed cose that can be easily calculated rather than the current mess )

smccarrick wrote: »

A big bug bear for many people in both the public and private sector is the non-contributory OAP- its almost identical to the contributory OAP. Why whack 8% of your gross income into a pension scheme for 40 years- when Bob down the road, who hasn't worked a day in his life- has the same income in retirement as you?

i dont get you?, you get( are entitled to ) the state pension like Bob down the road but on top of that you get your contributory pension also.

smccarrick wrote: »

What do we do- get the government out of superannuation altogether- if people can't provide for themselves, they sell their family home or find another means of funding their twilight years? We're already starting on this course with nursing home charges, but the superannuation structure is still intact.

A better solution would be for the pensioner to live in their home until the inevitable, then if there are family members they can sell but the government gets their cut from that whether it be for nursing homes or state pension cost that wasnt contributed to via PRSI or whatever

smccarrick wrote: »

How do we dismantle what is obviously an inequitable scheme- when the vested interests have no interests in rocking the boat? If its accepted that the country is bankrupt, and people are forced to reconsider what our options are- as is the case, only it hasn't hit the public perception, perhaps a start could be made on this- but we'll still have the vested interests wailing about 'the most vunerable in society'. Hell, taxpayers are the new vunerable people in society........

Exactly, im a bit fed up with the bleeding heart 'society vulnerables' however this is the absolute best time to sort this, again though the vested interests would knock this down at the earliest chance.

Maybe the vested interests should be removed from the whole scheme, disassociate the TD's from the private sector, it sounds a bit mad but make their pensions private, treat expenses like in the private sector, no proof/receipt=no cash. And i dont mean that to knock the public sector, i just mean theres a direct conflict of interest between TD's and state reform.

smccarrick wrote: »

Go for it.
My sis is an A&E doc and I hear regular tales of the vast hoardes of drunks descending on A&E every Fri/Sat night from 11PM onwards. If they had to cover the costs of their own stupidity- perhaps they might think twice before taking that 20th vodka slammer.....

Youve hit the nail on the head, there should be 50euro cost for going to A&E no matter if youre on the dole or working( subtract it from the next weeks dole or remove it from tax credits for workers ), in fact even if you're on welfare there should be a penalty for going to the doctor, even if its only 1 or 2 euro.

nesf

P. Breathnach wrote: »

That depends on how you count things. Health and Education, for example, are two of the biggest budget expenditure heads. If they were not provided for out of the public purse, then they would be private sector activities and would be counted as transactions involving payment for value.

Ish. There wouldn't be a guaranteed drain of money out of the private sector and into the public sector if these were private industries and these sectors wouldn't automatically create Budget problems for the country when the country went into a downward cycle. There's also issues with how staff are paid, how pensions work etc that make public services very different to private ones.

thebman

RealityCheck wrote: »

Regarding the the levelling off of the jobless figures you wonder have we reached the bottom or are we just in the eye of the storm.
While encouraging, I feel that the live register will start rise again in the new year as I feel some sectors are not holding together well at all.

Construction is still contracting with many major jobs finishing up and the capital budget being slashed by a billion. Also the number of house units being built in 2010 is set to drop to from 17000 to 10000 from this year. A recent report has shown that construction output is to contract by 25% in 2010 on top of the contraction to date.

Also another sector that is still in a bad way is retail. With many companies barely keeping it together this year, any further weakness may cause many failures and job losses come spring 2010.

The effects of the budget are as of yet an unknown, it may dampen down consumerism even further causing further stress on the services sector, particularly retail as mentioned above.

Overall things are looking better and we can cling to the hope that it has bottomed out. However, I would'nt be counting my chickens yet .

If things level out, retail will reach a bottom soon after IMO as people spend what they an afford and if it looks like it is bottoming out, consumer confidence will increase and spending will increase and retail will likely jump back fast too not to previous levels (probably ever) but at least less bad.

Construction is screwed for IMO at least 5 years and probably more. I think the actual companies with empty developments are more screwed than the workers even as at least some of the workers will get employment in the future but many of these companies will go under as even if they have assets they won't meet future energy standards. Some of these will be in NAMA (some being unknown) and that is why IMO, NAMA won't work effectively and we are going to be left with another bill to pay. Construction workers can get jobs doing up existing homes to improve energy ratings and reducing energy bills for the owners. Better energy ratings will also increase value in future so this is where we can lessen the impact on contruction workers IMO. Then you have infrastructure projects which we need to get going badly and we can retrain construction workers to do these if they don't have the existing skill set.

In any case any change of an improvement or bottoming out depends on this next budget and I have little faith that the right areas/people will be targeted.

ghost_ie

Can someone explain to me how cuts in either the public or private sector pay or in social welfare can help the economy? This is probably a very simplistic way of looking at things but it seems to me that if you cut people's income the tax take from income tax is reduced, as are the receipts for VAT as people will have less money to spend.

thebman

ghost_ie wrote: »

Can someone explain to me how cuts in either the public or private sector pay or in social welfare can help the economy? This is probably a very simplistic way of looking at things but it seems to me that if you cut people's income the tax take from income tax is reduced, as are the receipts for VAT as people will have less money to spend.

Yes but much of the money was coming from unsustainable debt borrowing by people.

This has now stopped and we are in real world mode where we are living way beyond our means as we don't have that money.

That means private companies don't have as much coming in and have to cut costs including wages in many cases and the government don't have the money to pay wages or keep taxes at boom low levels.

Its not about saving the economy, its about not defaulting on our national debt and getting spending in all sectors to sustainable levels. The economy we had was unsustainable, we need to work towards developing a stable, sustainable economy. However at the same time, government expenditure must fall as nobody in their right mind would continue to lending to the government at current levels.

nesf

ghost_ie wrote: »

Can someone explain to me how cuts in either the public or private sector pay or in social welfare can help the economy? This is probably a very simplistic way of looking at things but it seems to me that if you cut people's income the tax take from income tax is reduced, as are the receipts for VAT as people will have less money to spend.

The issue is that we have to borrow more than 20 billion to pay the wages in the public sector and social welfare this year if we don't do something about this. This is about half what the total tax take this year will be so it's huge! The interest payments on borrowing this money will just make the deficit larger again next year because we'll have to borrow the same again just to pay the public sector and social welfare. The deficit will only begin to close on its own when the economy picks up again and tax take increases. This isn't going to happen this year or next year from the looks of things and at best we'll see a return in 2011 to economic growth but even that could be optimistic.

If not controlled borrowing spins out of control and can and will bankrupt a country.

NewDubliner

nesf wrote: »

The issue is that we have to borrow more than 20 billion to pay the wages in the public sector and social welfare this year if we don't do something about this. This is about half what the total tax take this year will be so it's huge!

Shouldn't we look at all borrowing?

nesf

NewDubliner wrote: »

Shouldn't we look at all borrowing?

We will have to borrow the majority of the deficit. The Government are looking for 4 billion in cuts, the deficit will be over 22 billion. If anything the Government are erring on the side of small cuts this year given the scope of the problem.

RealityCheck

ghost_ie wrote: »

Can someone explain to me how cuts in either the public or private sector pay or in social welfare can help the economy? This is probably a very simplistic way of looking at things but it seems to me that if you cut people's income the tax take from income tax is reduced, as are the receipts for VAT as people will have less money to spend.

But do we have a choice ?

Let me tell you, should any Irish government decide to postpone the adjustment in favour of wreckless borrowing you would quickly see fewer and fewer willing to lend to us. Interest would rocket and we would inevitably default. The only reason people are willing to lend to us is based on cutting our expenditure in the short to medium term. Should we renage on our commitments the international bondmarkets (and the ECB) will quickly pull the plug. So there is no choice.

There is one positive regarding reducing peoples wages. Ireland would become more competitive and business friendly. This will encourage economic growth over the medium to long term and overall revenue levels will increase again as employment increases.

All in all loads of pain in the next few years, but worthwile pain should we turn the country around .

RealityCheck

nesf wrote: »

We will have to borrow the majority of the deficit. The Government are looking for 4 billion in cuts, the deficit will be over 22 billion. If anything the Government are erring on the side of small cuts this year given the scope of the problem.

The best case scenario is we stabilise the deficit at about 12% of GDP.

Worst case, deflationary spiral effect causing a slight increase.

Leaving it as is, it will spiral out of control. It could reach 15% of GDP in which case we would be breaking our own records .

nesf

RealityCheck wrote: »

The best case scenario is we stabilise the deficit at about 12% of GDP.

Worst case, deflationary spiral effect causing a slight increase.

Leaving it as is, it will spiral out of control. It could reach 15% of GDP in which case we would be breaking our own records .

Yeah, 4 billion being enough is optimistic but honestly I'd doubt the Government could cut more and manage to stay in office.

No easy way out of this unfortunately.

The_Conductor

nesf wrote: »

We will have to borrow the majority of the deficit. The Government are looking for 4 billion in cuts, the deficit will be over 22 billion. If anything the Government are erring on the side of small cuts this year given the scope of the problem.

Our exchequer borrowing requirement for 2009 is in fact now projected to be marginally shy of 28 billion- which represents almost 60% of total expenditure.

The 4 billion in cuts proposed for the December budget is the thin end of the wedge- with a further 5 billion planned for the 2011 budget and another 4 billion the year after. If we are having this degree of ructions over the initial 4 billion- what the hell is going to happen next year and the following year?

Quite simply- the government has completely and utterly lost the run of itself and doesn't have the guts to stand up and inform the people of the harsh medicine it needs to take. Instead- its going to continue the never ending concensus approach- of debating in a never ending fashion with the 'social partners' how to achieve these cuts.....

Irish politics is almost uniquely in the modern world, almost feudal in nature- and based on parochial politics. Thus TDs, Ministers and councillors- do not support Ireland Inc- they support Bog na Boille- and they will fight tooth and nail for any largess they can deliver to their immediate constituents- with no thought of whether its for the greater good of the country or not. How else do we end up with gombeens like Jackie Healy Rae wielding such influence?

gurramok

Ahead of the live register figures this morning, Fas have said the following about job losses 'slowing down'
http://www.rte.ie/news/2009/1104/economy.html

Fas wrote:

According to FÁS in the three months from July to September, unemployment rose at its slowest rate in two years.

However, it puts this decline down to increased emigration and a lower number of young people in the labour force because many are choosing to extend their studies.

We still need those employement numbers as I don't trust govt spin on the figures.

30% of people in their 20's unemployed, 40% of the late teens, it is shocking on the young.

The_Conductor

And the largest single group are males aged 15 to 24.......

nesf

gurramok wrote: »

30% of people in their 20's unemployed, 40% of the late teens, it is shocking on the young.

It's not surprising, it's exactly how high unemployment works. It hits those with low levels of experience or those trying to enter the workforce hardest. It was the same in the 80s, the worst off unemployment wise were the young for the same reasons.

The older workers tend to have seniority and other things protecting them from the worst of it.

Firefox10

lmimmfn wrote: »

Im sure im not the only one to took the total of the tax increase in April on my weekly expenditure.

The more we are taxed the less we will spend. Of course there's a point whereby we can't cut any more corners but at that point you'd nearly be as well off on the dole( with the current welfare rates ).

Its great that the live register is down though and i have noticed we're not listening to 200 jobs going every day or two on the news.

Even though the job losses in my company were announced last January we let go 300 people here last friday and I myself will be heading for the dole queue in December. Alot of those job losses in companies announced over the last year have yet to be added to the live register numbers.