Budget Deficit down 40% in first half of year

darkman2

Yep it's true - the Budget deficit has almost halved in the first half of the year. Not paying into the Pension Reserve Fund and no further payments to Anglo Irish Corp helped the figures but it's a very good sign all the same. For example would the UK get their deficit down that quick? Not a chance. We like taking abuse in this country;)


Figures from Dept of Finance.


So we are on the way and I know it is painful for many but we have come this far and are doing well. We just need to go a bit further in the next year or so and tighten some more. But with growth having resumed the light is now visible at the end of the tunnel.


We are returning to a more positive place. That is in spite of the Government, not because of it btw.

ardmacha

Oh dear, a positive spin on things, this won't be popular.
What about the income tax, eh?

George Orwell 1982

From the Irish Times: http://www.irishtimes.com/newspaper/frontpage/2010/0703/1224273904682.html

The shift comes as Exchequer data for the first half of the year points to further stabilisation in the public finances, despite continued sharp weakness in income tax receipts. The latest figures, published by the Department of Finance yesterday, show income taxes were 5.8 per cent behind the Government’s expectations for the first half of the year. In June alone, income tax came in €84 million below forecasts.

....

On the expenditure side, the Government remains well behind its targets for capital spending in areas such as roads and schools, which came in almost €609 million below expectations.

Constantin Gurdgiev makes the same point about the "savaging of the capital expenditure budget" here: http://trueeconomics.blogspot.com/

You see, it appears that the Government has back-loaded capital spending while front-loading capital receipts. If that is true, expect serious implosion of deficit in Autumn. If not,m and the cuts to capital budgets are running at the real rate observed so far, expect mass-layoffs by late Autumn. Either way - things are not really as good as they appear on the surface (more on this 'capital' effect later).

....

Notice how all the improvement in deficit to-date gets eaten up by the banks? Well, this is simply so because when we are talking about the improvement on 2009, we are really comparing apples and oranges. Ex-banks in both years, there is virtually no improvement. Cum-banks both years - there is no improvement. But Minister's statement today compares cum-banks 2009 against ex-banks 2010...

Net voted expenditure by departments is running €141 million below expectations for June. Cumulatively, H1 2010 is below expected Budgetary outlook by some €500 million - 2.3% savings on the Budget 2010. Even more impressively, it is now 6.2% behind 2009, 'saving' us €1.4 billion. Not exactly the amount that gets us out of the budgetary hole we've dug for ourselves, but...

I'd love to stop at this point for a pause to enjoy the warm rays of achievement for Ireland Inc. But I can't - it's all due to cuts in capital spending - running some €609 million below Budget 2010 plan for the first xis months of the year. €400 million plus of this comes out of DofTransport budget. All in, current cuts to capital budget represent whooping 36% reduction on 2009 levels. Surely, this will cost many jobs in a couple of months ahead.

And on the other side of this equation - current spending is actually running ahead of Budget 2010 forecasts (actually made in March 2010, so no - DofF has not improved its forecasting powers, it simply is missing targets closer to its own estimation date). And this is true for the second month in the row. Overall, we are now in excess of forecasts by 0.5% and only 1.9% behind comparable figures for H1 2009.

AlekSmart

What about the income tax, eh?

Indeed that Income Tax figure represents the lit slow-burning fuse which once it reaches the tinder-box will blow us all sky-high.

The current Policy of making it inordinately difficult for those in employment to actually work,viz Working Time Directives and associated restrictive legislative measures,coupled with a continuing policy of maintaining direct cash Social Welfare benefits will never allow for a "Work Ethic" to take root in Ireland.

RichardAnd

AlekSmart wrote: »

Indeed that Income Tax figure represents the lit slow-burning fuse which once it reaches the tinder-box will blow us all sky-high.

The current Policy of making it inordinately difficult for those in employment to actually work,viz Working Time Directives and associated restrictive legislative measures,coupled with a continuing policy of maintaining direct cash Social Welfare benefits will never allow for a "Work Ethic" to take root in Ireland.

A frightening prospect but one I do agree with. A big misunderstanding is that all jobs being lost right now are as a direct consequence of the slump. Whilst it certainly will contribute, jobs are lost all the time in economies and even even in boom years, there were always people "between jobs" at any given time.

The big problem going forwards is that with job creation being so low, the natural job losses will not be replaced quickly, or at all, and thus our working population will slowly dwindle. The unemployment figures of 13.5 or so probably won't climb much higher as people will emigrate lowering it but others will follow behind to take their places.

So, what do we do? The simple answer is to create an environment where jobs can be created which is easier said than done. Cutting back on waste, whilst always a good idea, will only really buy us time.

Unless we get job creation, we're fighting a battle of attrition. If reinforcements aren't on the way then the castle will fall.

ParkRunner

RichardAnd wrote: »

So, what do we do? The simple answer is to create an environment where jobs can be created which is easier said than done. Cutting back on waste, whilst always a good idea, will only really buy us time.

Unless we get job creation, we're fighting a battle of attrition. If reinforcements aren't on the way then the castle will fall.

Instead of cutting capital expenditure further I believe the Government should reduce current expenditure further e.g. some parts of the social welfare can be trimmed and public sector pensions should be linked with the now reduced equivalent wage rather than the old higher wage. These savings can then be used on capital expenditure projects, which will create jobs.

England have actually increased their capital expenditure even with their massive deficit but in the long run it will pay dividends.

Jaysoose

The number of people going on the live register is still rising week on week along with businesses going under at a rate of 4 a day. The goverment has still failed to implement any sort of regeneration plan for the jobs being lost and has not addressed the overspend in the public service and we are expected to believe that things are somehow just magically sorting themselves out?

I have some magic beans for sale by the way.

RichardAnd

Jaysoose wrote: »

The number of people going on the live register is still rising week on week along with businesses going under at a rate of 4 a day. The goverment has still failed to implement any sort of regeneration plan for the jobs being lost and has not addressed the overspend in the public service and we are expected to believe that things are somehow just magically sorting themselves out?

I have some magic beans for sale by the way.

Can't argue with this but if we're honest, what can be done? I'm sure if it were simply to get thousands of people back to work, then it would have already happened.

This is my issue with FG's promise of 100k new jobs. Are we to believe that they are sitting on some magical solution that will create jobs in their thousands? I think not. Large scale job creation won't be seen until the next boom and once that's over, we'll probably be back in this very position.

danbohan

RichardAnd wrote: »

Can't argue with this but if we're honest, what can be done? I'm sure if it were simply to get thousands of people back to work, then it would have already happened.

This is my issue with FG's promise of 100k new jobs. Are we to believe that they are sitting on some magical solution that will create jobs in their thousands? I think not. Large scale job creation won't be seen until the next boom and once that's over, we'll probably be back in this very position.

and therin lies the nub of the problem , we may never get anywhere close to previous levels of employment here because so much of it was in a false construction bubble and many service sector jobs were dependent on that highly paid bubbles spending power , maybe brian lenighan snr was right when he said in the 80s this is too small an island for us all ,unfortunatley for the 200~K+ activily looking for work the oportunity to emigrate may be greatly decreased in this decade

RichardAnd

danbohan wrote: »

and therin lies the nub of the problem , we may never get anywhere close to previous levels of employment here because so much of it was in a false construction bubble and many service sector jobs were dependent on that highly paid bubbles spending power , maybe brian lenighan snr was right when he said in the 80s this is too small an island for us all ,unfortunatley for the 200~K+ activily looking for work the oportunity to emigrate may be greatly decreased in this decade

Yeah, that's exactly my take on it too. We were never a wealthy country and we never really had much to make us one. Ireland will survive this, rest assured but the Ireland of 2020 onwards will probably look more like the Ireland of 1970; you get lucky and get a job or you emigrate.

Jaysoose

RichardAnd wrote: »

Can't argue with this but if we're honest, what can be done? I'm sure if it were simply to get thousands of people back to work, then it would have already happened.

This is my issue with FG's promise of 100k new jobs. Are we to believe that they are sitting on some magical solution that will create jobs in their thousands? I think not. Large scale job creation won't be seen until the next boom and once that's over, we'll probably be back in this very position.

I agree that there is no quick fix but the total lack of movement on this by the current ff goverment is a major worry.

In all fairness they seem more concerned about stag hunting in meath at the minute.

RichardAnd

Jaysoose wrote: »

I agree that there is no quick fix but the total lack of movement on this by the current ff goverment is a major worry.

In all fairness they seem more concerned about stag hunting in meath at the minute.

I doubt the really are. The stag hunting, whilst I am totally opposed to such a twisted "sport", is being spun as a Red Herring.

I'm sure FF are doing something to at least try to create employment but to be honest, if someone is unemployed they need to look after themselves because no-one else will do it for them.

Powerhouse

RichardAnd wrote: »

A frightening prospect but one I do agree with. A big misunderstanding is that all jobs being lost right now are as a direct consequence of the slump. Whilst it certainly will contribute, jobs are lost all the time in economies and even even in boom years, there were always people "between jobs" at any given time.

Since Ireland entered recession the live register figure has increased by almost 200k - over 60%. Counter-intuitive as your view seems it might well be coincidence that this has accompanied the slump and that economic activity has no real bearing on employment.

What I am wondering is what other force is out there driving such a huge increase in unemployment if reduced economic activity is not the primary one. It seems an awful lot of people 'in between jobs'.

RichardAnd

Powerhouse wrote: »

Since Ireland entered recession the live register figure has increased by almost 200k - over 60%. Counter-intuitive as your view seems it might well be coincidence that this has accompanied the slump and that economic activity has no real bearing on employment.

What I am wondering is what other force is out there driving such a huge increase in unemployment if reduced economic activity is not the primary one. It seems an awful lot of people 'in between jobs'.

You clearly didn't read my post. My point was that jobs can be lost in the most healthy of economies. Companies go under for numerous reasons and whilst the recession has cause the majority of job losses, many have been lost for reasons not directly related. The recession is, however, the reason why people can't get back to work.

I am NOT attempting to claim that 450k people are between jobs. Perhaps that's not clear from my post but my point was that jobs go even in good time, the issue now being that there are not enough to replace the losses. I guess you could say we have a job deficit.

dan_d

As is posted on another thread....


http://www.breakingnews.ie/ireland/reports-banks-and-eircom-to-shed-4000-jobs-464111.html

Jobs will always be lost, regardless of the economic situation, but we shouldn't be shedding them in these quantities.

Jaysoose

RichardAnd wrote: »

I doubt the really are. The stag hunting, whilst I am totally opposed to such a twisted "sport", is being spun as a Red Herring.

I'm sure FF are doing something to at least try to create employment but to be honest, if someone is unemployed they need to look after themselves because no-one else will do it for them.

Its true that the stag hunting 'non event' is being used simply as a tool to deflect attention away from the real issues and it got them a week closer to their summer hols.

Im sure people are doing everything they can to get a new job but when they are trying to get into a marketplace that is flooded with people looking for the same positions what are they meant to do.

This ff goverment actively encouraged the current environment where businesses find it near impossible to keep going due to costs, our minimum wage is far to high..rents are for some reason upward only added to high rates and vastly more expensive base cost of products compared to other eu countries. I know the goverment dont directly control all these factors but they sure a **** didnt try to stop it when the taxes were coming the door.

Pete_Cavan

How about as a way of reducing the deficit means testing everything. Child benefit, medical cards, grants, state pensions, literally everything! I know one issue with this is that it would require a lot more staff in the Department of Finance to administer it but we could use it as a way off restructuring the PS, moving unnecessary staff from other departments. This would not cost anything extra in terms of PS wages and would deliver better value for money from the PS. It would also save money by only paying out to those who actually need it. It may not be a popular move but its not like that would be an issue for this government.

I am not an economist (obviously) but this seems like a good idea to me, although I may have an oversimplified view on this. What does anybody else think?

thebman

dan_d wrote: »

As is posted on another thread....


http://www.breakingnews.ie/ireland/reports-banks-and-eircom-to-shed-4000-jobs-464111.html

Jobs will always be lost, regardless of the economic situation, but we shouldn't be shedding them in these quantities.

Eircom were going under before the financial crisis so no big surprise.

The banks are bankrupt from poor business practices.

Hell these are the most logical, obvious job losses I've seen so far over the shop struggling to pay inflated rents the landlord refuses to reduce even though they knows they will have to if that business goes under to get anyone else to move in.

Denerick

Pete_Cavan wrote: »

How about as a way of reducing the deficit means testing everything. Child benefit, medical cards, grants, state pensions, literally everything! I know one issue with this is that it would require a lot more staff in the Department of Finance to administer it but we could use it as a way off restructuring the PS, moving unnecessary staff from other departments. This would not cost anything extra in terms of PS wages and would deliver better value for money from the PS. It would also save money by only paying out to those who actually need it. It may not be a popular move but its not like that would be an issue for this government.

I am not an economist (obviously) but this seems like a good idea to me, although I may have an oversimplified view on this. What does anybody else think?

There is plenty of fat in our welfare budget to trim, all it takes is political bravery. They should try mans testing the medical card again, the elderly won't be fit for another round of battles again. For Gods sake, its an absolute joke that people earning over 40k per annum get the same benefits as someone on 15k per annum. Its a nonsense.

danbohan

Denerick wrote: »

There is plenty of fat in our welfare budget to trim, all it takes is political bravery. They should try mans testing the medical card again, the elderly won't be fit for another round of battles again. For Gods sake, its an absolute joke that people earning over 40k per annum get the same benefits as someone on 15k per annum. Its a nonsense.

yes their is certainly options there , if we had politicial bravery we should first of all sort out public service thats where the real fat is , both unlikely to happen however

skelliser

What ye on about lads! sure havent ye heard, we have turned a corner!
stop talking down the economy!

Pittens

Some people love to be miserable.

1) The reduction in the budget deficit is pretty good.
2) It should lead to reduced borrowing costs.
3) That this happened and GDP grew is impressive.
4) Employment growth always lags ecomomic growth.

I know that there is little point being optimistic on Irish fora -t he taxi driver type mantra of "we are all f*cked" and "they is all crooks", probably believed by the same people who thought property would never fall, will predominate.

The statistics are good, better than would be expected. As an ex-pat - congrats. Well done. Stop whining.

WalterMitty

there is also the wefare trap being made bigger by falling wage levels due to labour oversupply and welfare being so generous(a man with family can claim something like 40K in benefits, only jobs he's being offered pay 30k,no brainer).

Welfare rates should be gradually declined and be based on specific baskets of goods(electricity usage,phone usage, basic food requirements, basic clothes requirements etc) and not throwing 200euro plus rent allowance plus medical card plus childrens allowance plus all the other things.
With food becoming cheaper (you can get 2litres milk for 1.29in many shops) and clothes attainable so cheaply in the likes of penneys and costs of telecommunications lower than ever why is the dole so high? The dole is only to survive on not to live a confortable life on. Some like the old and disabled may need a bit more to have some confort but not young fit people.
The dole in Ireland, even with our high cost of living is paradise to 90% of the world.

RichardAnd

dan_d wrote: »

As is posted on another thread....


http://www.breakingnews.ie/ireland/reports-banks-and-eircom-to-shed-4000-jobs-464111.html

Jobs will always be lost, regardless of the economic situation, but we shouldn't be shedding them in these quantities.

and strangely, it isn't on the RTE news site

Yes, I'd say the dole figures will be by a hefty measure before this year is out.

thebman

RichardAnd wrote: »

and strangely, it isn't on the RTE news site

Yes, I'd say the dole figures will be by a hefty measure before this year is out.

RTE don't post negative rumous, only positive ones or didn't ya know

Thats why they are so unbiased or so I'm told by those that believe it is just coincidence that this happens or that they shouldn't publish bad news rumours no matter how likely they are to be true or who is saying them.

You can keep anything a rumour until it actually happens so when they actually follow through will be the only time it will appear on RTE's site but don't worry, you'll a half dozen, we have turned the corner articles between now and then.

RTE the April fools all year round news site.

Yes this is positive news that they have got the deficit down but one has to analyze what has been cut and not meeting capital expenditure estimates is not good. I'd much rather see capital spending on target and bonuses reduced.

Powerhouse

Pittens wrote: »

Some people love to be miserable.

1) The reduction in the budget deficit is pretty good.
2) It should lead to reduced borrowing costs.
3) That this happened and GDP grew is impressive.
4) Employment growth always lags ecomomic growth.

I know that there is little point being optimistic on Irish fora -t he taxi driver type mantra of "we are all f*cked" and "they is all crooks", probably believed by the same people who thought property would never fall, will predominate.

The statistics are good, better than would be expected. As an ex-pat - congrats. Well done. Stop whining.

You'd get your head taken off in this country for suggesting anything like that at the moment such is the extreme self-flagellative state we are in.

Expect one of the new 'rock-stars' (economists) to launch a retaliatory opinion piece in the Irish Times tomorrow to tell us that this out of recession thing is purely definitional and we are utterly Donal Ducked.

The real test of how genuinely held that opinion will be will be the number of times the IMF is mentioned.

But there are many amateur economists around at the moment and the real way to be a good bluffer is to always say it's much worse than the guy you're speaking to thinks which implies that you have a deeper understanding of it.

RichardAnd

Powerhouse wrote: »

You'd get your head taken off in this country for suggesting anything like that at the moment such is the extreme self-flagellative state we are in.

Expect one of the new 'rock-stars' (economists) to launch a retaliatory opinion piece in the Irish Times tomorrow to tell us that this out of recession thing is purely definitional and we are utterly Donal Ducked.

The real test of how genuinely held that opinion will be will be the number of times the IMF is mentioned.

But there are many amateur economists around at the moment and the real way to be a good bluffer is to always say it's much worse than the guy you're speaking to thinks which implies that you have a deeper understanding of it.

Well it's the flip side of how people thought 5 years ago. 99% of people thought the boom would never end and now, they don't want to accept that the bust can end.

I believe that we're going in the right direction, perhaps not in the best way, but we're aiming for the right goal. That being said however, until the jobless figures start going down, we may as well still be in recession for all the difference it makes.

Powerhouse

RichardAnd wrote: »

Well it's the flip side of how people thought 5 years ago. 99% of people thought the boom would never end and now, they don't want to accept that the bust can end.

Yes, it's funny you say that because that's exactly what I was thinking. The reaction to the downturn is redolent of the excess mentality that gripped many people in recent years.

The ability to access information and give opinions instantaneously these days contributes to a strong degree too. I remember the 1980s well and people just got on with it and you didn't have ordinary people analysing stuff to death and try to outdo each other in predicting doom because the facility to do so was not there. There is an interesting anthropological angle to the reaction to the recesson.

RichardAnd

Powerhouse wrote: »

Yes, it's funny you say that because that's exactly what I was thinking. The reaction to the downturn is redolent of the excess mentality that gripped many people in recent years.

The ability to access information and give opinions instantaneously these days contributes to a strong degree too. I remember the 1980s well and people just got on with it and you didn't have ordinary people analysing stuff to death and try to outdo each other in predicting doom because the facility to do so was not there. There is an interesting anthropological angle to the reaction to the recesson.

That's true. I guess it's down to the simple availability of information these days because of the internet. If you type "ireland recession" into google you will get thousands of pages stating things from one end of the spectrum to the other though most are negative.

noodler

The differences in the deficit compared to the same period last year is put mainly down to €3bn each investments in Anglo and the NPRF last year.

But wasn't the Anglo recap last year €4bn?

EDIT:

DOF:

The year-on-year difference in the Exchequer deficit is largely attributable to €3
billion payments to both the National Pensions Reserve Fund (NPRF) and to
Anglo Irish Bank, which had been made at this point in 2009.

Scarab80

noodler wrote: »

The differences in the deficit compared to the same period last year is put mainly down to €3bn each investments in Anglo and the NPRF last year.

But wasn't the Anglo recap last year €4bn?

EDIT:

DOF:

The year-on-year difference in the Exchequer deficit is largely attributable to €3
billion payments to both the National Pensions Reserve Fund (NPRF) and to
Anglo Irish Bank, which had been made at this point in 2009.

The other 1bn was paid in July and August.

noodler

Scarab80 wrote: »

The other 1bn was paid in July and August.

Thanks man.

I knew their was something I was missing.

Scarab80

noodler wrote: »

Thanks man.

I knew their was something I was missing.

On the ball though

Mr.Applepie

If I recall an ERSI poll from a few years ago approx 16% of the working population were employed directly in the contruction industry. Is it really that shocking that our unemployment is so high?

Taxi Drivers

The improvement in the Budget Deficit is entirely notional. It is "better" by €6 billion but this is accounted for by the €3 billion NPRF and Anglo payments made in May and June 2009.

Part of the NPRF contribution is attributable to 2010 and we are just hiding the continued Anglo payments for the present. They will appear yet.

If we want a picture of the state of the public finances we can look at the current budget deficit. Taken from here.

Graph of Current Budget Deficits 2007-2010

Things are getting worse! The deterioration was mainly due to the continued collapse of tax revenues into the first three months of the year when tax was 15% down on the 2009 equivalent. Tax revenues for the second quarter were much better, down only 1.4% on 2009, albeit with Income Tax continuing to underperform.

Table of Q2 2010 Tax Revenues

Conclusion - the exchequer deficit is not getting any better. Tax revenue seems to be moving in the right direction (or going less slowly in the wrong direction at any rate) but Income Tax remains a significant worry.