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David Begg: Tax cuts caused crisis

  • 19-05-2010 11:40PM
    #1
    Registered Users, Registered Users 2 Posts: 785 ✭✭✭


    Ireland's adoption of a liberal economic model was a total failure and a major contributor to the country's economic collapse, Irish Congress of Trade Unions general secretary David Begg has said.

    Mr Begg said that by cutting its tax base Ireland left itself "totally exposed" when the economic crisis came.

    “In addition, the liberal economic model meant low regulation, which was disastrous for this country, facilitating the growth of a cosy, casino style capitalism driven by a tight, golden circle of acquaintances," he said.

    “Quite simply, on all the big issues — tax, regulation, governance and development — Ireland pursued all the wrong options."

    Speaking at the launch of an Ictu document on the links between official policy and the current crisis Mr Begg said that by reducing direct taxes Ireland became dependent on consumption taxes. "In some ways, it was an illusion as people still had to pay for services (such as GP visits) that in many other countries are free."

    The Ictu document warns that Ireland risks a repeat of the practices that led to the economic crash as many of the same bank directors remain in office.

    Paul Sweeney, economic advisor with the trade union umbrella group, said he fears reckless lending could begin again if and when the upturn comes. He said 17 of the same directors remain on the boards of Bank of Ireland and AIB.

    “It’s business as usual,” Mr Sweeney said. “If there are green shoots and if the economy recovers these people are bound to repeat history again.

    “This is our read of it and it’s quite terrifying.” Mr Sweeney said he believes there should have been a clear-out of the bank boards.

    “Everything could happen again. The recklessness, the overlending, which caused the banks to collapse,” he said.

    In its submission to the state-backed banking inquiry Congress said that if taxes had not been cut as much during the boom then the public finances would be more stable now.

    It claimed slashing taxes, especially from 2001 onwards, boosted private sector spending and inflated the bubble.

    The body welcomed Taoiseach Brian Cowen’s remarks to the North Dublin Chamber of Commerce in which he admitted that some of the Government’s policies, such as tax breaks, exacerbated the collapse.

    But it added: “However, his analysis is deficient. He neglected the pro-cyclical tax cutting which was the main cause of the collapse, the lack of regulation, the shareholder value model of company law and the fact that he did not abolish all the tax breaks and left them all in place for many years.”

    Congress also said it voiced opposition to tax breaks during the Celtic Tiger years and had proposed measures to dampen the boom, such as a land value tax and windfall tax on profits from land rezoning.

    It also highlighted its opposition to the explosion in executives’ pay, especially in the banks, deregulation and has expressed the need to overhaul corporate governance.

    Two separate reports have been commissioned into the banking crisis and both are due to be completed and submitted to Finance Minister Brian Lenihan by the end of the month.

    One is from Central Bank Governor Professor Patrick Honohan on the regulatory system, while the second, by Klaus Regling and Max Watson, will be a preliminary investigation into the crisis in the banking sector.

    http://www.irishtimes.com/newspaper/breaking/2010/0519/breaking62.html

    Of course he neglected to mention how the government expenditure went through the roof over the last decade :rolleyes:
    Had spending been kept in check, we might not be in a position where we are borrowing billions at a huge cost to the taxpayer.

    I'll accept his points on lack of corporate governance and poor regulation


Comments

  • Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    As a member of the central bank's board of directors, did Begg ever raise the issue of light-touch regulation?


  • Moderators, Entertainment Moderators, Politics Moderators Posts: 14,568 Mod ✭✭✭✭johnnyskeleton


    Surely the opposite is true? They can raise taxes overnight to the levels that they "ought" to be at. Indeed, by having low taxes (although I don't think Ireland is necessarily low tax) the government keep a reserve to be tapped whenever the country is a bit short.

    On the other hand, the explosion of spending over the last few years is not only currently causing the problems, but is proving to be a very difficult problem for the government to deal with. They don't seem to be able to reduce either the numbers or levels in the public sector and on social welfare and benefits.


  • Moderators, Entertainment Moderators, Politics Moderators Posts: 14,568 Mod ✭✭✭✭johnnyskeleton


    As a member of the central bank's board of directors, did Begg ever raise the issue of light-touch regulation?

    He tried to write a memo on it, but couldn't regulate himself enough to actually get it done.


  • Registered Users, Registered Users 2 Posts: 4,235 ✭✭✭The_Honeybadger


    He tried to write a memo on it, but couldn't regulate himself enough to actually get it done.
    LOL :rolleyes:


  • Registered Users, Registered Users 2 Posts: 1,582 ✭✭✭WalterMitty


    The skyrocketing of public expenditure over past 15 years with little or no improvement in public services is a damning indictment of the gov and the unions. We now spend over 50% of GNP on government expenditure which is similar to highest public spenders in Europe but we dont have anywhere near the services they have.

    http://www.finfacts.ie/irishfinancenews/article_1019701.shtml


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  • Registered Users, Registered Users 2 Posts: 3,553 ✭✭✭lmimmfn


    so hes claiming slashing taxes were a major contributor, while i agree with that, WTF was with increasing expenditure on PS wages( so we have low taxes but high PS pay, whats the difference in take home pay? higher taxes and even higher PS increases )? gimp, its alright to come all high and mighty now but he didnt do feck all when it was all in his members favour.

    Ignoring idiots who comment "far right" because they don't even know what it means



  • Closed Accounts Posts: 2,819 ✭✭✭dan_d


    I accept his points on the bank boards - they should have been cleared out completely - and regulation.
    After that, there's an awful lot of rubbish in that article. He's doing Bertie Ahern's trick....the crisis according to David Begg


  • Registered Users, Registered Users 2 Posts: 2,419 ✭✭✭Count Dooku


    zootroid wrote: »
    http://www.irishtimes.com/newspaper/breaking/2010/0519/breaking62.html

    Of course he neglected to mention how the government expenditure went through the roof over the last decade :rolleyes:
    Had spending been kept in check, we might not be in a position where we are borrowing billions at a huge cost to the taxpayer.

    I'll accept his points on lack of corporate governance and poor regulation
    He paid to protect incomes of union members on expense of everybody else and he will look for any excuses to justify why PS payroll bill cannot be reduced


  • Registered Users, Registered Users 2 Posts: 26,458 ✭✭✭✭gandalf


    He is right about one thing. The Directors of the Boards of the banks should be cleaned out and replaced.

    But he has some cheek whinging about lax regulation when he himself was on the board of the Central Bank and quite a few other senior Union representatives were on other boards of Semi-States. These lads had their snouts firmly in the trough along with the FF Politicians, the Developers and the Bankers and now they have the audacity to lecture every one else on tax policy and spending.

    The problem was over reliance on a transaction tax from property sales coupled with a huge increase in government spending on the Public Service. Now the Stamp Duty has dried up the cost of the Public Service costs and inefficiencies still has to be dealt with properly.


  • Registered Users, Registered Users 2 Posts: 19,044 ✭✭✭✭murphaph


    The neck on this Begg f*cker tbh.

    He was instrumental in the whole fcukin process!


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  • Registered Users, Registered Users 2 Posts: 12,089 ✭✭✭✭P. Breathnach


    Is this a "let's kick David Begg" thread, or a consideration of what he said?

    First, a clarification: the header (taken from the Irish Times) is not quite consistent with the content of the story.

    Begg said that
    - the liberal economic model was a major contributor to the country's economic collapse (not the cause)
    - cutting the tax base Ireland left us vulnerable when the crisis hit
    - we had weak regulation and crony capitalism.

    Was he wrong?


  • Closed Accounts Posts: 1,553 ✭✭✭Banned Account


    Is this a "let's kick David Begg" thread, or a consideration of what he said?

    First, a clarification: the header (taken from the Irish Times) is not quite consistent with the content of the story.

    Begg said that
    - the liberal economic model was a major contributor to the country's economic collapse (not the cause)
    - cutting the tax base Ireland left us vulnerable when the crisis hit
    - we had weak regulation and crony capitalism.

    Was he wrong?

    He didn't say:

    We and our members rode that Tiger all the way to hell - yeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeehawwwwwwwwwwwwwwwwwwwwww!
    Haven't seen him give back any of his pay increases that he justified due to the money the private sector was making.
    Bench - frickin' - markin' indeed.


  • Closed Accounts Posts: 39,019 ✭✭✭✭Permabear


    This post has been deleted.


  • Registered Users, Registered Users 2 Posts: 12,089 ✭✭✭✭P. Breathnach


    He didn't say:

    We and our members rode that Tiger all the way to hell - yeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeehawwwwwwwwwwwwwwwwwwwwww!
    Haven't seen him give back any of his pay increases that he justified due to the money the private sector was making.
    Bench - frickin' - markin' indeed.

    So it's a "kick David Begg thread", then.


  • Registered Users, Registered Users 2 Posts: 785 ✭✭✭zootroid


    Is this a "let's kick David Begg" thread, or a consideration of what he said?

    First, a clarification: the header (taken from the Irish Times) is not quite consistent with the content of the story.

    Begg said that
    - the liberal economic model was a major contributor to the country's economic collapse (not the cause)
    - cutting the tax base Ireland left us vulnerable when the crisis hit
    - we had weak regulation and crony capitalism.

    Was he wrong?

    Not wrong, but there's a lot he left out, high government expenditure for example. And it comes across as disingenuous when he criticises lax regulation when he was sitting on the board of the central bank (something I wasn't aware of, but looked up last night). He is cherry picking the causes to suit his own arguments, and absolving himself of any blame.

    If he is to stand up and criticise, it is only right that he receive criticism too for his own actions (or lack of them). Especially seeing as he sits on the board of the central bank.

    With regards to the liberal economic model being blamed for contributing to our current woes, it's not the model that's at fault, but how it's implemented.


  • Closed Accounts Posts: 1,553 ✭✭✭Banned Account


    So it's a "kick David Begg thread", then.

    No need to kick him - he's done it himself by blaming everyone around him and not having the knackers to admit that he'd done it too.


  • Closed Accounts Posts: 4,025 ✭✭✭Tipp Man


    So it's a "kick David Begg thread", then.


    Is begg coming out with this any better than Cowen saying he had nothing to do with it either??

    Lack of responsibility alive and kicking in this country


  • Registered Users, Registered Users 2 Posts: 26,458 ✭✭✭✭gandalf


    So it's a "kick David Begg thread", then.

    Well if he comes out and comments like he did especially given his position of collaboration with the partnership of greed in the past of course he is lining himself up for criticism.


  • Registered Users, Registered Users 2 Posts: 1,582 ✭✭✭WalterMitty


    The "liberal economic model" provided the endless cash that allowed his members to become amongst best paid in the world in their professions. Of course they werent complaining when greater than inflation pay rises , incrememnts and pay agreements were being implmented year after year for over a decade. The Irish public sector is like a spouse of business person who stays at home and does lots of important work but now it turns out the business person was living on credit but the spouse demands to maintain standard of living they became accustomed to despite the income being much much lower and debt rocketing to dangerous levels so that the home and assets are close to being repossessed.


  • Registered Users, Registered Users 2 Posts: 2,458 ✭✭✭OMD


    Over a 15 year period or so, the major beneficaries of tax cuts were low to middle income workers. These moved from being top rate tax payers down to basic rate tax payers or even out of the tax net altogether. On top of that the basic rate of tax was reduced from 35% to 20% (a 42% cut in tax rate).

    Did David Begg or the ICTU at any stage say that these people should not have tax cuts?

    During all the Partnership agreement discussions did David Begg ever say that ICTU wanted an end to tax cuts for low to middle income workers?


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  • Registered Users, Registered Users 2 Posts: 3,745 ✭✭✭Eliot Rosewater


    Begg said that
    - the liberal economic model was a major contributor to the country's economic collapse (not the cause)
    - cutting the tax base Ireland left us vulnerable when the crisis hit
    - we had weak regulation and crony capitalism.

    Was he wrong?

    He's certainly right on the second item. Tax rates seem to have fallen too fast during the boom in consideration of the outgoings. I don't think that a government should be running anywhere near a deficit while lowering tax. They were effectively trying to eat their cake and have it too (yes, that's the second time I've used that phrase today!): increasing spending while cutting tax and moving over to unsustainable forms of revenue to try and please everyone. Ideally governments would save for rainy days, so that when a recession did come they wouldn't have to raise tax and pinch businesses and employers further.

    But I think governments see money saved as money that could be put towards spending schemes (read: vote winners).

    I think the best method of evaluating the other points would be to compare Ireland to other countries. Why has Ireland suffered more than others? I think the government's pro-cyclical policies, such as tax breaks for building, contributed drastically to the bubble, and the large spending schemes are a major impediment to recovery. The PIIGS all seem to be linked by a common thread of large government spending. In that light, blaming the recession on liberal economic policy, which aims to reduce the size of government, would be misguided, in my opinion.


  • Closed Accounts Posts: 39,019 ✭✭✭✭Permabear


    This post has been deleted.


  • Closed Accounts Posts: 10,007 ✭✭✭✭thebman


    =
    But I think governments see money saved as money that could be put towards spending schemes (read: vote winners).

    IMO this is what links all the PIIGS nations.

    Along with a people willing to accept the above until it all falls down around them and then try to solve the problems when its too late.


  • Closed Accounts Posts: 583 ✭✭✭danman


    Give that man a biscuit, well said (David Begg).
    He's right of course.

    But one question,
    will he and his follow union leaders stay quiet when the enevitable happens and the lower paid start to get taxed. Leading to a lowering of Social Welfare so it isn't better to be on the dole than working?

    Somehow I don't see that sitting very well with them.


  • Registered Users, Registered Users 2 Posts: 13,011 ✭✭✭✭Sand


    @P. Breathnach
    So it's a "kick David Begg thread", then.

    As an unelected individual with immense influence over government policy through the so called "Social Partnership" and a seat on the Central Bank board, with responsibility for the banking system, he deserves a kick for the cheek of his myopic summary of the situation which conveniently passes all blame to a straw man construct, and absolves him and his members of any responsibility.

    Men like Begg are why a populist Labour party in government would be intensely dangerous for Ireland. They are utterly convinced of their privledges and rights, but totally unwilling to accept their responsibilities.


  • Registered Users, Registered Users 2 Posts: 4,121 ✭✭✭RichardAnd


    Sand wrote: »
    They are utterly convinced of their privledges and rights, but totally unwilling to accept their responsibilities.


    Haven't you just described 90% of the population of this country?


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