Solutions To Borrowing

rumour

We, it appears are still addicted to borrowing and spending. Bottom line if we borrow 24bn this year how do we pay it back? We are headed for 24bn next year by the looks of things. Ultimately it will be down to the average person to contribute to putting it right. So I went looking for information. The following is unpalatable but the choices are don't believe the government don't believe the CSO and don't even look further or have a look at the enormity of the problem that faces us.

Consider ultimately that the Irish labour force will have to resolve the debts we are in. What happens if we were to balance the books for this year just on our spending. Its tricky to be precise but I hope this gives a good snapshot.

• 360,900 are paid by the government to work. 17%
• 289,610 are unemployed. 13%
• 1,526,980 are employed in the private sector. 70%

1887880 persons contribute approx €11.530bn in income tax

On average everyone in employment contributes € 6107.05.
To balance the books we need an extra €24bn.

If tax is the solution we need an extra €12,712 from everyone who is not unemployed, the total average annual tax bill needs to be €18,820

Average Wages
Public Sector
The CSO states the average wage in the Public Sector is €969.11/wk which is approx €50393.72 per annum. Reduce this by 10% on average due to the budget giving €45,354 per annum average. With an average income tax contribution of €6107.38 this is 13% of income
Private Sector
Don’t have solid figures but CSO state €716.09 average for all sectors. Clearly if the average for Public Sector is 969.11 and the Overall is €716.09 then the Private Sector Average must be €463.07. This is my biggest assumption so am open to correction here!
That is €24079.64 per annum contributing €6107.37 this is an average contribution of 25% of income.


To fix our problems and balance the books via tax on average looks like:

• Public Sector €45,354 -€18,820 or 41% income tax on average
• Private Sector €24079.64-€18,820 or 78% income tax on average

This creates a problem as the private sector on average has to survive on €101 per week. Clearly we have a problem as you will only drive this person to welfare where he can double that. Remember this covers only this year’s borrowings.
I foresee problems with the averages I have quoted above and everyone will dispute and cite exceptions.
Consider:
We cannot afford and are unable to raise the Private Sector average Income as we are uncompetitive; we need to encourage more business. All the other taxes are paid either by individuals or business, increasing them only adds to the woes. I do not see business as a magic pot of gold to be looted. Maybe I am wrong?
We could cut welfare, if we more than halved it people may still prefer to stay in bed such is the scale of the problem here.
Then we look at the Public Sector wages realistically they need to come down to balance the books.
If public sector wages were reduced on average to the same as the private sector then we would be borrowing less and we would have a chance.
I am not proposing the distribution of earnings within each sector nor the tax bands. The averages give a good idea of the scale of the problem.
Has anyone any solutions?

http://www.finance.gov.ie/documents/publications/other/2009/whitepaperfin2010.pdf
http://www.finance.gov.ie/documents/exchequerstatements/2010/endjulytaxreceipts.pdf
http://www.finance.gov.ie/documents/publications/prebudget09/PBOfinal.pdf
http://www.finance.gov.ie/documents/public expenditure/2010/revisedprofile.pdf
http://www.cso.ie/releasespublications/documents/labour_market/current/lreg.pdf
http://www.cso.ie/releasespublications/documents/earnings/current/psempearn.pdf
http://www.welfare.ie/en/press/pressreleases/2010/Documents/pr050810.pdf
http://www.cso.ie/statistics/sasunemprates.htm
http://www.cso.ie/statistics/empandunempilo.htm

ei.sdraob

the solution to our problems will be a combination of


* steep cuts (knowing the unions it will end up being in all wrong places with no productivity increases...)

* steeper taxes (sigh)

* exporting ALOT more (im not sure how this can happen without various costs being dramatically reduced)


OR

* plain old default and all that follows

Brussels Sprout

ei.sdraob wrote: »

* plain old default and all that follows

I've asked this in a different thread but didn't get a proper answer. What would happen if we defaulted?

Économiste Monétaire

rumour wrote: »

Private Sector
Don’t have solid figures but CSO state €716.09 average for all sectors. Clearly if the average for Public Sector is 969.11 and the Overall is €716.09 then the Private Sector Average must be €463.07. This is my biggest assumption so am open to correction here!

That's giving equal weight to each group, though. For example: Take just those in employment, about 1.888 million, and weight each group based this (1.526/1.888 and 0.360/1.888), and I get an average figure of €656.2 for the private-sector.

Looking at average wages is a poor measure of the public-sector wage premium. Public-sector workers are, on average, better educated than private-sector workers and have more experience, so you would expect them to earn more. The ESRI and the CSO published separate papers on the gap, controlling for age, education, gender, etc. and they found a gap of between 14-23%, if I recall correctly.

BornToKill

rumour wrote: »

If tax is the solution we need an extra €12,712 from everyone who is not unemployed, the total average annual tax bill needs to be €18,820

If you decide you need to balance the books over a year and not a longer cycle, and even if you decide that balance has to be achieved by taxation alone, why focus exclusively on income tax?

A person with enormous inherited wealth or one exempted from paying income tax contributes nothing at all under this scenario.

Trampas

what about cutting social welfare?

you can't tax your way out of it. You need people spending and taxing reduces this

ardmacha

Why doesn't everyone take a 20% pay cut and work a 4 day week, hiring an unemployed person to take up the slack?

ei.sdraob

ardmacha wrote: »

Why doesn't everyone take a 20% pay cut and work a 4 day week, hiring an unemployed person to take up the slack?

might work in public sector

but in private enterprises why in gods name would companies do something that will not increase productivity and might put them on hook for larger liabilities?

companies are there to make profit for shareholders not provide welfare

Scarab80

ardmacha wrote: »

Why doesn't everyone take a 20% pay cut and work a 4 day week, hiring an unemployed person to take up the slack?

What would work is everyone take a 20% pay cut, employers are then able to employ 25% more staff and increase productivity. No 4 day week.

Obviously this ignores employer taxes and capital costs associated with a larger workforce however this would be the solution in a free market system with under utilisation of labour.

View

Brussels Sprout wrote: »

I've asked this in a different thread but didn't get a proper answer. What would happen if we defaulted?

As ei.sdraob outlined in the first part of his post:

* steep cuts (knowing the unions it will end up being in all wrong places with no productivity increases...)

* steeper taxes (sigh)

* exporting ALOT more (im not sure how this can happen without various costs being dramatically reduced)

Ultimately, there is no other solution when you spend more than you earn.

ardmacha

might work in public sector

but in private enterprises why in gods name would companies do something that will not increase productivity and might put them on hook for larger liabilities?

companies are there to make profit for shareholders not provide welfare

So people in the public sector have to do everything and its every man for himself in the private sector and two fingers to society. That figures.

Nate--IRL--

ardmacha wrote: »

So people in the public sector have to do everything and its every man for himself in the private sector and two fingers to society. That figures.

Either way public or private it was a silly idea in the first place.

Nate

View

ardmacha wrote: »

So people in the public sector have to do everything and its every man for himself in the private sector and two fingers to society. That figures.

The borrowing problem that the state is experiencing relates to its spending V's its income, not that of - let's say - Microsoft or Intel.

The only two fingers to society around is from the public sector which is refusing to face up to that reality and is leaving the rest of society to suffer the consequences (i.e. higher taxes to pay for all the borrowing needed to fund that government spending).

WalterMitty

Économiste Monétaire wrote: »

That's giving equal weight to each group, though. For example: Take just those in employment, about 1.888 million, and weight each group based this (1.526/1.888 and 0.360/1.888), and I get an average figure of €656.2 for the private-sector.

Looking at average wages is a poor measure of the public-sector wage premium. Public-sector workers are, on average, better educated than private-sector workers and have more experience, so you would expect them to earn more. The ESRI and the CSO published separate papers on the gap, controlling for age, education, gender, etc. and they found a gap of between 14-23%, if I recall correctly.

That premium doesnt even include value pension(above amount contributed by employee) and the value of job security

Brussels Sprout

View wrote: »

As ei.sdraob outlined in the first part of his post:



Ultimately, there is no other solution when you spend more than you earn.

No, I understand why default is looking likely. My question is-what happens to us after we default? What are the direct consequences?

Knowing nothing about this but comparing it to a bankrupt person I assume that our access to future credit will be cut off and we'll have to live within our means. In other words we'd have to plug that 20 billion euro hole in our accounts by slashing costs and raising taxes. That will probably kill the private sector and result in the public sector walking out of their jobs in mass protest (like Greece). Then after all the young and determined emigrate we'll have to start all over with the dregs.

By this stage we'll probably have had to leave the euro and will be using some devalued banana dollar with super high rates of interest. With lack of anything to do and widespread despair a lot of people will return to the catholic church. This despair will also channel itself into literature creating another golden generation of depressing drunken novelists. This in turn will inspire several singer songwriters who will write charming ballads that shockingly sweep to Eurovision victory several times in a row further bankrupting us with excessive production costs. Another bonus will be that with all of the extra free time that children have that our football time re-emerge just in time for the World Cup in Qatar in 2022. Unfortunately citing excessive costs the FAI will pull out causing anguish and...........................ok you get the picture


So can anyone give me a real answer please

RichardAnd

Brussels Sprout wrote: »

No, I understand why default is looking likely. My question is-what happens to us after we default? What are the direct consequences?

Knowing nothing about this but comparing it to a bankrupt person I assume that our access to future credit will be cut off and we'll have to live within our means. In other words we'd have to plug that 20 billion euro hole in our accounts by slashing costs and raising taxes. That will probably kill the private sector and result in the public sector walking out of their jobs in mass protest (like Greece). Then after all the young and determined emigrate we'll have to start all over with the dregs.

By this stage we'll probably have had to leave the euro and will be using some devalued banana dollar with super high rates of interest. With lack of anything to do and widespread despair a lot of people will return to the catholic church. This despair will also channel itself into literature creating another golden generation of depressing drunken novelists. This in turn will inspire several singer songwriters who will write charming ballads that shockingly sweep to Eurovision victory several times in a row further bankrupting us with excessive production costs. Another bonus will be that with all of the extra free time that children have that our football time re-emerge just in time for the World Cup in Qatar in 2022. Unfortunately citing excessive costs the FAI will pull out causing anguish and...........................ok you get the picture


So can anyone give me a real answer please

I can only speculate however defaulting would turn us into economc outcasts. This means no more loans and that means we will have to face the reality of the 20billion hole in our pocket each year.

To balance the books, you could expect to see PS wages cut by 50% immediatly and SW benifites significantly reduced or stopped. This would mean that we have 300k or so PS workers on dramattically reduced pay and 450k people brought one step closer to destitution. In another thread, it was asked what might get people out on the streets well I think this might do the job.

As for private workers well the sudden short fall might result in a sudden tax increase. Also, the dramatic reduction in PS wages and dole would take a fortune out of the economy and would spell disaster for retail which means job losses.

As I said it's just speculation but I suppose we could look to iceland for an example. One frightening problem with this comparison is that iceland has less than 8% unemployment even after their meltdown.

rumour

Économiste Monétaire wrote: »

That's giving equal weight to each group, though. For example: Take just those in employment, about 1.888 million, and weight each group based this (1.526/1.888 and 0.360/1.888), and I get an average figure of €656.2 for the private-sector.

Looking at average wages is a poor measure of the public-sector wage premium. Public-sector workers are, on average, better educated than private-sector workers and have more experience, so you would expect them to earn more. The ESRI and the CSO published separate papers on the gap, controlling for age, education, gender, etc. and they found a gap of between 14-23%, if I recall correctly.

I'm not an expert here but if i've interpreted the info correctly thats the base line. I don't know for example if a weighting has already been applied to the CSO public sector figures perhaps you could advise?

If the CSO state public sector average earnings in 2009 are c€970/wk and all sectors earnings are c€716 (this does exclude agriculture forestry and fishing their contribution to the labour force is approx 5%). How can you up private sector income average to €656.2 and have a public sector income of €970 and come out with and average of €716???? Either the CSO all sector average is €716/wk is not actually that or the CSO €970/wk public sector figure is not actually that. Please advise.

By the way the €970 figure is broadly in line with the government pre budget 2009 paper that it accounts for 35% of spending.

Additionally if money has to be paid I see the averages as a very good way of quantifying the problem. There is a total pot of money that is earned by the government via income tax. Some people earn hundreds of thousands some get tens of thousands, but there is an average. There is also a distinction that it is quite dysfunctional to ignore, there is a category of worker we borrow money to pay. That category is the Public Sector and we have to face up to it.

Is their contribution to income tax the same as the other category the private sector. Weighting is a details question because it attachs premiums for qualifications etc. We are in trouble and to suggest that because the more qualified and more experienced public sector should be entitled to be paid more and hence we must borrow is a distortion based on a belief rather than equity or rational sense. Especially as the toll for paying this premium falls more heavily on the private sector.

That leaves only one other solution and it needs to be equitable, as I see it the Public Sector salaries have to be reduced, this is preferable to cutting jobs but cuts may be required also. The figures above only balance the books for this year.

dan_d

RichardAnd wrote: »

As I said it's just speculation but I suppose we could look to iceland for an example. One frightening problem with this comparison is that iceland has less than 8% unemployment even after their meltdown.

That is scary.

Though I think their population is far less than ours.

But still.

rumour

BornToKill wrote: »

If you decide you need to balance the books over a year and not a longer cycle, and even if you decide that balance has to be achieved by taxation alone, why focus exclusively on income tax?

A person with enormous inherited wealth or one exempted from paying income tax contributes nothing at all under this scenario.

First point is that this is what is required just to balance the books for this year. If we do not achieve it it will be worse next year.

You have a valid point in taxing inherited wealth, however you would need to decide that this is the route our country wants to take. If you inherit cash it seems simple the government should have cut, what if that wealth is property what value do you attach to it. Take a farmer inheriting the farm, whats its value? For that matter apply it to shares or investments. these are not so easily answered. Additionally you would have to address the equitable question that this would appear as a form of punishment for those who were prudent enough to avoid excessive borrowing. For this reason I do not see it as a solution. It is easy to imagine a bunch of wealthy people and say they should pay, but write the rules and apply them equitably. I think what you'll get is a major disincentive to create wealth which is the opposite of what we need. But thats only my opinion. Frankly I don't know how to do this equitably.

Exemptions from income tax are in my mind unequitable. We are all in this problem together so anyone who has an income must contribute.

rumour

ardmacha wrote: »

So people in the public sector have to do everything and its every man for himself in the private sector and two fingers to society. That figures.

Thats a bit disingenious. If the private sector take a 20% pay cut that means less income tax. Obviously you think it will be recouped via corporation tax as the business will be more profitable. But it is taxed at 12% and even at that business are struggling. The live register is evidence of that.

And in no way has it reduced our borrowing.

Idbatterim

why not get Bertie back in to sort things out, he was great at blowing money, maybe he would be great at finding savings too!

rumour

ardmacha wrote: »

So people in the public sector have to do everything and its every man for himself in the private sector and two fingers to society. That figures.

I have read your response again and perhaps have misinterpreted your intentions or jumped to a conclusion, if I have apologies. Figures to me are a clearer form of expression than language:o.

If your intention is that we should stick together and get the averages under control first (both public and private) then deal with the distribution within each sector I completely agree.

If the majority (the private sector) choose to operate as you've said above we will achieve nothing other than the creation of a black economy which only further adds to the problems of the country.

We need resolve to tackle the figures!!

rumour

Idbatterim wrote: »

why not get Bertie back in to sort things out, he was great at blowing money, maybe he would be great at finding savings too!

:pac::eek: I don't know the correct response.....I guess we have to make time for humour during the day!!

Idbatterim

I hear "when will we march in the streets" could I ask you who are people referring to exactly when they say this? The Irish people? the Public Servants? The unemployed? The Private Sector? The pensioners? The only ones who in anyway have anything to March about are the Private Sector and recently unemployed. Didnt you know the rest of them were being kept happy by borrowing 20 billion per annum?

rumour

Idbatterim wrote: »

I hear "when will we march in the streets" could I ask you who are people referring to exactly when they say this? The Irish people? the Public Servants? The unemployed? The Private Sector? The pensioners? The only ones who in anyway have anything to March about are the Private Sector and recently unemployed. Didnt you know the rest of them were being kept happy by borrowing 20 billion per annum?

Yes I know....I cannot comphrehend how up on 70% of the workforce in this country are expected to prop up 13% unemployed and 17% public sector workers. I simply don't know how we tolerate this.

However we do need a public sector, or put another way government does have some functions, like the bloody regulator who if he was in the army would be shot at dawn for falling asleep at his post instead of retiring with an enormous pension.

There are so many problems sometimes I think the only solution is 'regime change', new constitution and a cull of all existing political entitlements. Slim chance I think, so on a more pragmatic level i'd settle right now if we could just level the playing field and be honest about our problems, state borrowing and state spending.

ardmacha

There is no doubt that there is a high rate of unemployment caused by mismangement in the private sector, and this is a significant burden on those who remain in work. However the 17% in the public sector is not "propped up" by the private sector, it provides services which the private sector has to pay for. The 17% is low by international standards, even the UK has 4% more (and NI 12% more). Other countries can fund their public sector without any great difficulty. The reality is that the private sector is not paying its proper share of the cost, which explains a large part of the large deficit at present.

rumour

ardmacha wrote: »

There is no doubt that there is a high rate of unemployment caused by mismangement in the private sector, and this is a significant burden on those who remain in work. However the 17% in the public sector is not "propped up" by the private sector, it provides services which the private sector has to pay for. The 17% is low by international standards, even the UK has 4% more (and NI 12% more). Other countries can fund their public sector without any great difficulty. The reality is that the private sector is not paying its proper share of the cost, which explains a large part of the large deficit at present.

Did you read any of the figures in my opening post?

You are right the 17% in the public sector is currently not propped up by the private sector. We borrowing every little last cent of it, with no hope of paying it back. Do you at least agree that?

Regarding the services which you expect in your assertion,

ardmacha wrote: »

the private sector has to pay for.

Do we really need them all? If the answer is yes then the solution is to cut pay.
If the answer is no, then we can cut those services.

ardmacha wrote: »

Other countries can fund their public sector without any great difficulty.

Agreed, Switzerland is a good example, excellent services but nearly half the wage bill.

ardmacha wrote: »

The reality is that the private sector is not paying its proper share of the cost, which explains a large part of the large deficit at present.

The proper share of the cost must simply be what we can afford surely? This is fundamental to any solution. There is no magic pot of gold, where is it? do you really think the private sector are hiding money in their matresses? Have a look at income tax take for this year, have a look at unemployment figures? I've taken the trouble to provide links.

I've tried to be as objective as possible in defining contributions to tax, all the links are available in providing the figures. The public sector are paid more than the private sector and contribute less to the tax system as a proportion of their income. Unless of course you believe they are all lying???


If it were true that they are all holding out just to demonise the public sector that doesn't explain rising:

1. unemployment
2. company insolvencies and
3. emigration....

We still borrow to much what do you suggest we do to reduce it?

ardmacha

You are right the 17% in the public sector is currently not propped up by the private sector. We borrowing every little last cent of it, with no hope of paying it back. Do you at least agree that?

No. I don't agree this as it is not true. Hopefully you'll agree that it is not true.

Do we really need them all? If the answer is yes then the solution is to cut pay.

The solution is to pay for them. People in other countries pay for their water or their third level education, yet any suggestion that people here should pay for their services is met with a howl.

The public sector are paid more than the private sector and contribute less to the tax system as a proportion of their income.

Why on earth should they pay less to the tax system? The tax code is the same for everyone.

liammur

Brussels Sprout wrote: »

No, I understand why default is looking likely. My question is-what happens to us after we default? What are the direct consequences?

Knowing nothing about this but comparing it to a bankrupt person I assume that our access to future credit will be cut off and we'll have to live within our means. In other words we'd have to plug that 20 billion euro hole in our accounts by slashing costs and raising taxes. That will probably kill the private sector and result in the public sector walking out of their jobs in mass protest (like Greece). Then after all the young and determined emigrate we'll have to start all over with the dregs.

By this stage we'll probably have had to leave the euro and will be using some devalued banana dollar with super high rates of interest. With lack of anything to do and widespread despair a lot of people will return to the catholic church. This despair will also channel itself into literature creating another golden generation of depressing drunken novelists. This in turn will inspire several singer songwriters who will write charming ballads that shockingly sweep to Eurovision victory several times in a row further bankrupting us with excessive production costs. Another bonus will be that with all of the extra free time that children have that our football time re-emerge just in time for the World Cup in Qatar in 2022. Unfortunately citing excessive costs the FAI will pull out causing anguish and...........................ok you get the picture


So can anyone give me a real answer please

Countries like the US and UK will sneakily default by significantly depreciating their own currencies. This option isn't available to Ireland.
In Ireland's case the most likely path would firstly be a bailout by the IMF/EU. If there was a default on this bailout, we would be in the situation faced by the Argentians and other S American countries. For the consequences of such a default you can read about it here:

http://www.cepr.net/documents/publications/argentina_2002_09_03.pdf

The_Honeybadger

ardmacha wrote: »

There is no doubt that there is a high rate of unemployment caused by mismangement in the private sector, and this is a significant burden on those who remain in work. However the 17% in the public sector is not "propped up" by the private sector, it provides services which the private sector has to pay for. The 17% is low by international standards, even the UK has 4% more (and NI 12% more). Other countries can fund their public sector without any great difficulty. The reality is that the private sector is not paying its proper share of the cost, which explains a large part of the large deficit at present.

What is their proper share ardmacha? Do you truly believe there is the capacity to impose 25bn in new taxes on our working population?

As for mismanagement in the private sector, well that statement is just daft, the public sector is in charge of regulation and policy development, both of which left alot to be desired over the past decade, so it's impossible to blame any one sector, there were disastrous practices going on in both.

rumour

ardmacha wrote: »

No. I don't agree this as it is not true. Hopefully you'll agree that it is not true..

This is the core problem....it is simply not true and it is disengenious to give credence to the impression that we can afford all the services we provide. We are borrowing 24bn and spending 46bn in the current account. 35% of the 46bn is on wages. To clarify things as you apparently are not examining the figures.


Where are we going to get the money to pay for last years borrowings of 27bn and this years 24bn. By the way this does not include the banking fiasco. Thats 50bn owed, at the moment were paying approx 5% interest as a state on borrowed money thats 2.5bn in interest alone. Just to break even and manage to cover the 5% (paying nothing back) we need to find 2.5bn extra before the end of the year and hope that someone will give us money next year. Increasingly it is obvious that we are incapable of generating the money just to pay the interest. The state is now becoming the equivalent of the the person in the big house with the interest only mortgage that cannot even pay the interest while at the same time enjoys the lavish lifestyle. How long do you think this can go on for...would you give money to such a person? Either we as a nation rectify this or the people lending the money will.
The reason this becomes more serious is that our income is falling. Where in the Irish economy do you see growth rates in excess of 5% generating the extra 2.5bn to cover the interest. And that just deals with the last two years...what do we do next year?

ardmacha wrote: »

The solution is to pay for them. People in other countries pay for their water or their third level education, yet any suggestion that people here should pay for their services is met with a howl...

In an ideal world where government current account spending is not out of control you are right. Unfortunately we are in dire straits. And the principal should be an equitable balance of public sector expenditure against income. Currently they are not balanced, this is the problem. One solution is to demand the private sector to pay more money but in a shrinking pot how much more do you believe you should squeeze out of them.

ardmacha wrote: »

Why on earth should they pay less to the tax system? The tax code is the same for everyone.

I can't explain every detail and perhaps you could clarify some of the issues arising out of the CSO figures.

1887880 persons contribute approx €11.530bn in income tax

On average everyone in employment contributes € 6107.05 (11.5bn divided by 1.8mn employees)

Average Wages
Public Sector Wages
The CSO states the average wage in the Public Sector is €969.11/wk which is approx €50393.72 per annum. Reduce this by 10% on average due to the budget giving €45,354 per annum average. Based on 360,900 emplyees. With an average income tax contribution of €6107.38 this is 13% of income.
Private Sector Wages
Don’t have solid figures but CSO state €716.09 average for all sectors. Clearly if the average for Public Sector is €969.11 and the Overall is €716.09 then the Private Sector Average must be €463.07 (based on the remainder of employees). That is €24079.64 per annum contributing €6107.37 this is an average contribution of 25% of income.

So unless CSO figures are wrong, the private sector contribute significantly more in income taxes as it stands, and you want more from them??

I think you believe that the private sector is hiding money...if they are we must go after it, but 24bn I think will behard to find.
So ultimately we return to how do we reduce the borrowing? This is now not a matter of Public v private as soon none of u will have any control over it. Either we act now to solve this or the Public sector will face a very difficult future out of their control

BTW how do you insert a table here???

liammur

Realistically, you cannot compare public sector wages to private sector.
A better comparison imo, is to compare public sector wages across different countries. Irish public sector wages are particularly high on this basis.
There is definitely room for a sizeable cut particularly from maybe the age of 45 up where people didn't get caught with big mortgages.

hobochris

Is it Tuesday already?


You can almost set your watch by threads like this getting derailed into a public vs private sector argument.

A solution to this problem could be a government stimulus. They could give each person and business a vat free allowance and businesses an extra break/allowance on employment taxes, to encourage spending and employment.

So lets say they give each person €5,000 vat allowance that would mean, each person would have a €5,000 vat credit, which they use on any purchases they make, making the cost of goods cheaper to the consumer, encouraging them to spend, and recirculating money in the economy again.

BOHSBOHS

rumour

not all income tax comes from PAYE employments


why would someone earning 24k pay the same tax as someone earning 45k ?

answer they dont

in reality the person earning 45k will pay roughly 6 times more PAYE then the person earning 24k (assuming basic single and paye credits apply to each)

rumour

liammur wrote: »

Realistically, you cannot compare public sector wages to private sector.
A better comparison imo, is to compare public sector wages across different countries. Irish public sector wages are particularly high on this basis.
There is definitely room for a sizeable cut particularly from maybe the age of 45 up where people didn't get caught with big mortgages.

I'm not into what each person gets paid on an individual basis. As I've siad before some get hundreds of thousands some get tens of thousands. But there is an average. How the distribution works is a problem for another day.

The average public sector salary is higher than the private sector salary. The only problem here is that we are borrowing for the public sector salary not the private sector one. So we should look at whats involved.

Secondly, according to the figures and I would like someone to correct me the public sector contribute less on average to income tax than the private sector. Surely this in not right?

rumour

hobochris wrote: »

Is it Tuesday already?


You can almost set your watch by threads like this getting derailed into a public vs private sector argument.

A solution to this problem could be a government stimulus. They could give each person and business a vat free allowance and businesses an extra break/allowance on employment taxes, to encourage spending and employment.

So lets say they give each person €5,000 vat allowance that would mean, each person would have a €5,000 vat credit, which they use on any purchases they make, making the cost of goods cheaper to the consumer, encouraging them to spend, and recirculating money in the economy again.

And how have we reduced borrowing?

liammur

rumour wrote: »

The average public sector salary is higher than the private sector salary. The only problem here is that we are borrowing for the public sector salary not the private sector one. So we should look at whats involved.

So, a comparison with other countries is needed. Teachers here shouldn't be paid much more than teachers in Germany etc.
We shouldn't have some of the highest paid politicians in the world either.

hobochris

rumour wrote: »

And how have we reduced borrowing?

Government stimulate economy, after initial amount lost in stimulation, people and businesses spend more as money now moving in economy again, so more tax take and in turn the money borrowed can be paid off.

Expenditure will still need to be reduced but our debt can be paid.

Gus99

ardmacha wrote: »

However the 17% in the public sector is not "propped up" by the private sector, it provides services which the private sector has to pay for. The 17% is low by international standards, even the UK has 4% more (and NI 12% more). Other countries can fund their public sector without any great difficulty.

I assume you are excluding armed services, else to compare us with Britain makes little sense. And if if these other countries are funding the PS without any great difficulty, can you explain why there are huge cuts in numbers expected in the UK?

liammur

hobochris wrote: »

Government stimulate economy, after initial amount lost in stimulation, people and businesses spend more as money now moving in economy again, so more tax take and in turn the money borrowed can be paid off.

Expenditure will still need to be reduced but our debt can be paid.

Theoretically yes. However, in the meantime interest payments alone run into the billions.

hobochris

liammur wrote: »

Theoretically yes. However, in the meantime interest payments alone run into the billions.

At this stage that is something we are taking on the chin anyway.

liammur

Correct, but pouring billions in, in an attempt to stimulate the economy may not be the wisest of policies.

rumour

BOHSBOHS wrote: »

rumour

not all income tax comes from PAYE employments

True, but all employees pay tax on their income.

BOHSBOHS wrote: »

why would someone earning 24k pay the same tax as someone earning 45k ?

answer they dont

The average figures suggest otherwise. These come from the CSO and the DOF, do you have access to different figures?
As for why someone pays differently in the public v the private I am keen to know the answer also. I was hoping someone would challenge my figures and explain this to me.

BOHSBOHS wrote: »

in reality the person earning 45k will pay roughly 6 times more PAYE then the person earning 24k (assuming basic single and paye credits apply to each)

I am dealing with averages, in the public and in private sector. This is not a popular distinction but it needs to be talked about. The expected revenue from income tax this year is 11.5bn. This comes from 1.8m people in employment. 360,900 of these people are paid for by the government. At the minute the bill for these people is to a large extent being met by borrowing.
Obviously within each sector there are enormous distortions in contribution to the pot of money that is reported as income tax revenue. The minimum wage for example which is probably more prevalent in the private sector contributes (as far as i'm aware) nothing in income tax. Is this why we keep hearing broadening of the tax base??

However I'm keen to find solutions to borrowing, in the short term I see nothing but pain but if we could fix our current spending we could reduce our dependence on credit. This dependence is the genisis of all our problems both public and private.

rumour

hobochris wrote: »

Government stimulate economy, after initial amount lost in stimulation, people and businesses spend more as money now moving in economy again, so more tax take and in turn the money borrowed can be paid off.

Expenditure will still need to be reduced but our debt can be paid.

Under normal circumstances I would agree, but we have the cursed banks to deal with. Unfortunately as we are addicted to credit we need them to borrow from. (protecting Irish banks is only protecting foreign bond holders in irish banks, these foreign bond holders are the same community of people we borrow from).
The only way out of this cycle is the break our addiction to credit. This is why I ask what are the solutions to borrowing?
Until we resolve this we don't even have a mechanism for sorting the economy.

rumour

liammur wrote: »

Correct, but pouring billions in, in an attempt to stimulate the economy may not be the wisest of policies.

The general consensus on this is that you are correct. The states are doing it to no avail, they are printing money like there is no tomorrow, this is a combination of pumping more money into the economy at the same time devaluing the dollar with the net effect of making the USA poorer. The English have done it and the ECB.

Fiscal prudence is now taking hold as both europe and the UK realise if we continue at this we will be impoverished. The wealth is being transferred to the BRIC countries and its happening at an incredible pace.

Having said that some stimulus will be necessary. Even if the IMF came in some money would be provided for capital spending but I think wages would be decimated. We're broke.

rumour

liammur wrote: »

So, a comparison with other countries is needed. Teachers here shouldn't be paid much more than teachers in Germany etc.
We shouldn't have some of the highest paid politicians in the world either.

That is a useful place to start and regarding salaries I agree on both fronts. However I was hoping to avoid getting to far into how the public service should administer itself. Personally I would be much more reassured if we were told unambigiously, we have 'x' amount of money and this is how we will spend it, we are not borrowing.

Maybe we want to spend it all on health or all on education as needs dictate, but my sole caveat would be we can only operate within the amount of money as a country we earn. I see this as a startegic equitable solution that reduces our dependency on borrowing.

liammur

rumour wrote: »

That is a useful place to start and regarding salaries I agree on both fronts. However I was hoping to avoid getting to far into how the public service should administer itself. Personally I would be much more reassured if we were told unambigiously, we have 'x' amount of money and this is how we will spend it, we are not borrowing.

Maybe we want to spend it all on health or all on education as needs dictate, but my sole caveat would be we can only operate within the amount of money as a country we earn. I see this as a startegic equitable solution that reduces our dependency on borrowing.

In the ideal world, yes, that would be great.

But how would we justify for instance, the state merc to bertie for the rest of his life? the big payouts to the ex financial regulator, ex fas chairman, the huge pensions etc

rumour

liammur wrote: »

In the ideal world, yes, that would be great.

But how would we justify for instance, the state merc to bertie for the rest of his life? the big payouts to the ex financial regulator, ex fas chairman, the huge pensions etc

Simply its not justifiable...but unless we agree to turn off the tap of easy money we will never sort it out.

liammur

The ones with most to lose are the politicians so unfortunately I can't see it happening.

rumour

liammur wrote: »

The ones with most to lose are the politicians so unfortunately I can't see it happening.

Yes, and I was hoping to engage some of the more vociferious supporters of our public services generally evident on these threads, but strangely when a few figures are put on the table SILENCE....

As an aside someone asked here what happens if we default. For me its pretty simple we are in the middle of defaulting...

#15

liammur wrote: »

So, a comparison with other countries is needed. Teachers here shouldn't be paid much more than teachers in Germany etc.

That's fine, but will working hours be reduced in line with German teachers then?