Eddie's Rocket: 'The New Coalition's Budget: Part 1'

pog it

I subscribe to Eddie Hobb's 'Rocket' newsletter. This is his reading of the Budget measures so far. Some of you may find something interesting in it. The last paragraph I've bolded but I think is known to all of you by now.

The New Coalition’s Budget – Part 1

The game, until Budget 2012 was to dream that there was a safer place, a better refuge from austerity. It’s now clear there is not. Vested interest groups shouted ideology across the divide at each other, in many cases devoid of any logic or an understanding that money is not an agricultural by-product of planting trees . Still we tried taxing the bejasus out of the economy but just look now at the result - collapsing tax receipts.

Nobody wants to hear this today when it’s popular to rage about cuts, but it’s the truth. The longer you try to raise taxes instead of cutting, the worse the economy becomes. Still the political instinct for self preservation never fails to try the economically impossible. In 1975 Ireland hit a deficit of -7.6% and spent the next 12 years getting it hopelessly wrong. Taxes as a percentage of GDP rose from 38% to 44% but spending was maintained, barely moving from 49% of GDP in 1975 to 48% in 1987. The politicians played politics while the economy died, growing at a paltry 1% pa. Ireland got increasingly poorer, our young left in droves. We weren’t the only country then led by chuckleheads. Austria spent 14 years getting back into balance and Spain 15 years by taxing instead of cutting.

By 1987 with debt to GDP at 123% Irish politicians simply had to cut, cut and cut. We couldn’t borrow another cent. Three years later after truly savage cuts, except on education, Irish GDP was roaring at 5%pa and the Celtic Tiger had started. We know how it ended. Public spending, much of it pay and pensions, gorged itself on once off property tax revenues. The power of public sector unions meant that yesterday’s cuts could not come from the inflated pay and numbers that characterised the tiger period. It is easy math. Social protection accounts for 38%, pay and pensions another 36%. Immunise one and you savage the other but predicting this inevitable juncture at the outset of the crisis was as about as popular as Jesuit support for Gallileo in Rome four hundred years ago.

Still despite the rhetoric, this Government’s first budget went after the lowest hanging fruit. Cutting capitation fees to schools is a community tax, meaning more cake sales, more mercy payments. Money to pay the heating is cut before pay. Reducing jobseekers benefit but not capping Bertie, Brian and Mary’s pension is cruelty. But it can’t last. The new coalition have simply bought twelve months at most. There is no way The Croke Park farce can stand against the cuts of Christmas future; €1.7bn 2013, €1.9bn 2014 and €1.5bn 2015. Yesterday is the smallest of the four at €1.45bn.

The announcement to move to multi-annual spending programmes and away from an annual budget circus that only encourages media leaks, backbencher histrionics, back room dealing and power plays by vested interests, is most welcome. But by next Monday it should be clear that all Minister Howlin is doing is fitting into the new model being prepared as part of the price of continuing Eurozone membership, a precursor to Treaty change.

You can forget all the guff about being back in markets and restoring economic sovereignty as Taoiseach Enda Kenny would have us believe is an achievable goal. Minister Howlin’s new template is being readied for the new Ministry for Finance in Brussels. The Dail and its annual budget will become to Brussels what Louth County Council is to us; of interest only to locals, an exercise in the illusion of self governance, ruthlessly controlled from the centre of power.
-Eddie Hobbs

2moreMinutes

Personally speaking, I'd take my neighbours cats opinion on our economic situation more seriously than I'd take Eddie Hobbs'. He (Eddie, not the cat) seems to have developed a serious case of bitterness and cheap sensationalism over the last 12-18 months that he previously didnt have.

RATM

Eddie is a populist, no doubt about that.

But the crux of his argument is correct, Ireland has at least another 4 budgets coming which are going to be worse that this one and there's not a hope in hell we can continue on the current track of honouring the Croke Park Agreement.

The country is broke yet we're still paying massive salaries & pensions to many in the public services.

Dr Galen

We ask for an OP, when posting a news story or such, to make their own comment on it. Their thoughts or opinions.

Care to elaborate OP?

Cheers

DrG

pog it

I posted this primarily as a source of independent summary analysis for people who might be interested in the content. I have a lot of respect for Eddie Hobbs. It would be impossible for any body to get everything right but Eddie made a lot of good calls and nobody can take that from the man.

I give several thoughts and opinions on these boards and am shocked at how the boards here have been deserted of late by other members who just got fed up of threads being locked, etc.

Go ahead and do it to this one. My own opinion is that I concur with what Eddie Hobbs is saying here and I stand shocked and dismayed at the lack of action by Irish people, to the extent where I am starting to be ashamed of this country, its government, and about 75% of the people.

thebman

You can forget all the guff about being back in markets and restoring economic sovereignty as Taoiseach Enda Kenny would have us believe is an achievable goal. Minister Howlin’s new template is being readied for the new Ministry for Finance in Brussels. The Dail and its annual budget will become to Brussels what Louth County Council is to us; of interest only to locals, an exercise in the illusion of self governance, ruthlessly controlled from the centre of power.

Simply don't see the logic for the above statement from the rest of the article. Makes no sense.

Dr Galen

pog it wrote: »

I posted this primarily as a source of independent summary analysis for people who might be interested in the content. I have a lot of respect for Eddie Hobbs. It would be impossible for any body to get everything right but Eddie made a lot of good calls and nobody can take that from the man.

I give several thoughts and opinions on these boards and am shocked at how the boards here have been deserted of late by other members who just got fed up of threads being locked, etc.

Go ahead and do it to this one. My own opinion is that I concur with what Eddie Hobbs is saying here and I stand shocked and dismayed at the lack of action by Irish people, to the extent where I am starting to be ashamed of this country, its government, and about 75% of the people.

Why would I lock a thread, when you have just made a very good summary of your views on the matter? Thats all we ask from an OP, and thats exactly what you have done.

Absolutely no issue from me at all, and if you have taken my post to heart, or me having a go, then I apologise, that isn't what I intended. All i wanted was you to do the above in conjunction with your opening post.

Cheers

DrG

Godge

I posted months ago on this forum that the Government could do this budget without cutting social welfare rates, public service pay or increasing income tax rates. They have done even better than I thought, managing to keep income tax credits untouched.

The shift in focus from taxing workers to taxing unearned income is to be welcomed.

Take two people. One if self-employed in a relatively new business building it up. He is creating new wealth. No matter what he earns out of his business, up to €100,000 or more, he sees no increase in income tax, incentivising him to work harder to make his business stronger and create wealth.

Take the other guy. He inherited €2m property from his parents, mortgage free, he has been clearing €150,000 from these, basically sitting on his arse letting the agents do the work. Well, he gets hit hard. Household charge, PRSI from 2013 on rental income. He might actually have to get up off his arse and start creating more wealth rather than just living on wealth created by a previous generation.

A very clever shift in tax focus, A similarly good one is the switch from 6 to 5-day JSB coupled with the USC exemption.

ardmacha

Hobbs may have something to say, but this is populist nonsense.
Events from 1975 were not quite a case of always getting it hopelessly wrong. The coalition government were making steps in the right direction until the '77 FF government came in opened the taps. The interest on the extra borrowing they incurred, which largely wasn't needed, made a big contribution to breaking things in the 80s.

Social protection accounts for 38%, pay and pensions another 36%.

What do these numbers mean? Pay and pensions are about one quarter of government expenditure.

And of course the government have reduced Bertie's pension and public wages have been reduced more than jobseekers, although they increased less during the boom. Someone can legitimately make a case for more, but untruths don't help.

fliball123

Godge wrote: »

I posted months ago on this forum that the Government could do this budget without cutting social welfare rates, public service pay or increasing income tax rates. They have done even better than I thought, managing to keep income tax credits untouched.

The shift in focus from taxing workers to taxing unearned income is to be welcomed.

Take two people. One if self-employed in a relatively new business building it up. He is creating new wealth. No matter what he earns out of his business, up to €100,000 or more, he sees no increase in income tax, incentivising him to work harder to make his business stronger and create wealth.

Take the other guy. He inherited €2m property from his parents, mortgage free, he has been clearing €150,000 from these, basically sitting on his arse letting the agents do the work. Well, he gets hit hard. Household charge, PRSI from 2013 on rental income. He might actually have to get up off his arse and start creating more wealth rather than just living on wealth created by a previous generation.

A very clever shift in tax focus, A similarly good one is the switch from 6 to 5-day JSB coupled with the USC exemption.

very true godge but I dont think there is much option for next years budget?? they have more or less hit everything else bar the 3 top ticket items PS pay, dole and Income tax...IMO all 3 of these will be hit next year

channelsurfer2

its the same aul sh**e from Hobbs.. ask him how all his investments are doing now and how much money he actually made for those poor fools that invested with his myriad of companies in foreign property.
Personally I would rather trust a dog barking on the street than take what he has to say seriously these days.

Godge

fliball123 wrote: »

very true godge but I dont think there is much option for next years budget?? they have more or less hit everything else bar the 3 top ticket items PS pay, dole and Income tax...IMO all 3 of these will be hit next year

Actually, there are a few things they didn't hit. They may have to refine their promises slightly but there is room for more. The pension tax relief cut could come back on the agenda, ditto the special reliefs for those over 65, remember a lot of the Section 23 and other property tax reliefs will have run out - the revenue will have a good idea how much these are costing and how much of a bounce in tax revenue for effectively doing nothing there will be gained.

On the expenditure side, the targets for cuts in overtime and allowances next year of 10% are achievable, I think with proper implementation of Croke Park, they could save another 10-15% the following year, mostly based around roster changes.

On general public service pay and pension, they will be paying out a lot of pension lump sums next March which won't be paid the following year, again generating an automatic saving.

If you read IRN, you will see that a lot of private sector companies are agreeing pay increases that will come into effect late this year and next which will boost tax revenues and consumer spending. If you don't believe me, the companies include Allergan, Baxter Healthcare, Covidien Tullamore, Essilor, Hollister, Janssen Pharmaceutical, Leo Pharma Cork, Medtronic, Merck Sharp and Dohme, Rexam Beverage Can, Bruss, Pfizer, Proctor and Gamble, Novartis, Allianz, Irish Life, HP EDS, Athy Concentrates, Barry's Tea, C&D Pet Foods, Irish Distillers, Monaghan Mushrooms, Pepsico, ConocoPhillips, Lisheen Mine, Musgraves, P&O Ferries, Port of Cork, PWA International etc. Some of these pay increases have already come into effect but haven't increased consumer confidence. I reckon it was groups like that Noonan expects to increase spending because their income tax was not increased.

Child benefit has not been exhausted for cuts. Some of the social welfare cuts of this year and last only affect new claimants and will take their time to deliver savings which will help in 2013 and 2014. Other tweaks to eligibilty are certainly possible.

Depending on how the external environment and the domestic numbers operate next year, I think that there is a fair chance that they will be able to avoid hitting the big 3 in next year's budget with similar tinkering around the edges as this year with hopefully more of the right tweaks to reward work rather than unearned income, be it property income, dividends or social welfare.

2014 might be a stretch too far all right, but the Croke Park agreement expires then so you may get your wish.

fliball123

Godge wrote: »

Actually, there are a few things they didn't hit. They may have to refine their promises slightly but there is room for more. The pension tax relief cut could come back on the agenda, ditto the special reliefs for those over 65, remember a lot of the Section 23 and other property tax reliefs will have run out - the revenue will have a good idea how much these are costing and how much of a bounce in tax revenue for effectively doing nothing there will be gained.

On the expenditure side, the targets for cuts in overtime and allowances next year of 10% are achievable, I think with proper implementation of Croke Park, they could save another 10-15% the following year, mostly based around roster changes.

On general public service pay and pension, they will be paying out a lot of pension lump sums next March which won't be paid the following year, again generating an automatic saving.

If you read IRN, you will see that a lot of private sector companies are agreeing pay increases that will come into effect late this year and next which will boost tax revenues and consumer spending. If you don't believe me, the companies include Allergan, Baxter Healthcare, Covidien Tullamore, Essilor, Hollister, Janssen Pharmaceutical, Leo Pharma Cork, Medtronic, Merck Sharp and Dohme, Rexam Beverage Can, Bruss, Pfizer, Proctor and Gamble, Novartis, Allianz, Irish Life, HP EDS, Athy Concentrates, Barry's Tea, C&D Pet Foods, Irish Distillers, Monaghan Mushrooms, Pepsico, ConocoPhillips, Lisheen Mine, Musgraves, P&O Ferries, Port of Cork, PWA International etc. Some of these pay increases have already come into effect but haven't increased consumer confidence. I reckon it was groups like that Noonan expects to increase spending because their income tax was not increased.

Child benefit has not been exhausted for cuts. Some of the social welfare cuts of this year and last only affect new claimants and will take their time to deliver savings which will help in 2013 and 2014. Other tweaks to eligibilty are certainly possible.

Depending on how the external environment and the domestic numbers operate next year, I think that there is a fair chance that they will be able to avoid hitting the big 3 in next year's budget with similar tinkering around the edges as this year with hopefully more of the right tweaks to reward work rather than unearned income, be it property income, dividends or social welfare.

2014 might be a stretch too far all right, but the Croke Park agreement expires then so you may get your wish.

Well lets just clarify one thing and this is for youself and the likes of Robbie if they cut PS wage I hope they do it fairly as in no one under 30k gets touched

leonidas83

I agree alot with what Hobbs had to say.
You dont need to be an economist to know tax increases and austerity is simply not working. You dont take more money out of an economy if you want it to grow, cuts need to be made and taxes need to be lowered.

We are running a deficit of nearly 16 billion a year because our public sector wage bill and social welfare are amongst the highest in Europe if not the highest. There is massive savings that we can made in both of these groups still if we had a government that had enough backbone to stand up to these vested interests.

Rising VAT and introducing a household charge is taking more money out of peoples pockets and discouraging people from spending, the very thing we need people to do more of. The retail sector has performed abysmally for the last three years and the government think the solution is to increase VAT, absolute BS.

Small to medium sized businesses are on their knees so what does the government do, increase fuel costs and motor tax. Thats really going to help them survive.

Although I think third level education costs are still very low in comparison to other countries, increasing the fees is another regressive policy which will resulting in more people leaving college or not attending at all. How the hell are we going to have an educated workforce if they keep increasing fees.

All in all, the government doesnt have a f**king clue what its doing or it does and is more interesting in keeping the various lobby groups happy rather than implenting cuts and changes this country really needs.

Godge

fliball123 wrote: »

Well lets just clarify one thing and this is for youself and the likes of Robbie if they cut PS wage I hope they do it fairly as in no one under 30k gets touched

Well, I happen to have a view that there are some people at all levels of the public service who are overpaid, some who are underpaid and some who are paid correctly.

For example I think that the maximum point of grades such as Clerical Officer and Special Needs Assistant are too high for the types of duties, hours of work etc. involved.

For Gardai, the range of allowances needs to be restricted but the rates of pay are probably correct.

Senior management, some of whom work 70-80 hours a week should be paid on a performance basis. Some of them are currently underpaid, but others are seriously overpaid. Does a Director of Services in Leitrim County Council deserve the same pay as a Director of Services in Cork City Council (let alone considering Dublin) yet the same salary scale applies? Some of the budgets and responsibilities put on people with salaries just below €100,000 is too much and they should be paid more. Assistant Lecturers at the bottom of the scale are paid too little while Lecturers at the top are paid too much. Psychologists are paid off the scale compared with the UK and Europe.

The point is that given the pay cuts and the pension levy already imposed which were bigger on the more highly paid, there is actually a need for a more in-depth examination of pay levels. Some of my views above may be correct, some may be wrong but I would stand over the basic assumption that there are differing levels of underpayment or overpayment across the public service now.

RATM

RATM wrote: »

...............

But the crux of his argument is correct, Ireland has at least another 4 budgets coming which are going to be worse that this one and there's not a hope in hell we can continue on the current track of honouring the Croke Park Agreement................

.
Isn't that in the bin from 2013?

ardmacha

Does a Director of Services in Leitrim County Council deserve the same pay as a Director of Services in Cork City Council (let alone considering Dublin) yet the same salary scale applies?

It is notable that little enough progress has been made on integrating local authorities, having a national fire service etc.

Assistant Lecturers at the bottom of the scale are paid too little while Lecturers at the top are paid too much.

This is of course also dependent on what they teach and whether they are in ITs or proper universities.

Discernment is needed.

Godge

leonidas83 wrote: »

I agree alot with what Hobbs had to say.
You dont need to be an economist to know tax increases and austerity is simply not working. You dont take more money out of an economy if you want it to grow, cuts need to be made and taxes need to be lowered.

We are running a deficit of nearly 16 billion a year because our public sector wage bill and social welfare are amongst the highest in Europe if not the highest. There is massive savings that we can made in both of these groups still if we had a government that had enough backbone to stand up to these vested interests.

Rising VAT and introducing a household charge is taking more money out of peoples pockets and discouraging people from spending, the very thing we need people to do more of. The retail sector has performed abysmally for the last three years and the government think the solution is to increase VAT, absolute BS.

Small to medium sized businesses are on their knees so what does the government do, increase fuel costs and motor tax. Thats really going to help them survive.

Although I think third level education costs are still very low in comparison to other countries, increasing the fees is another regressive policy which will resulting in more people leaving college or not attending at all. How the hell are we going to have an educated workforce if they keep increasing fees.

All in all, the government doesnt have a f**king clue what its doing or it does and is more interesting in keeping the various lobby groups happy rather than implenting cuts and changes this country really needs.

right, you say that "You dont take more money out of an economy if you want it to grow". I can debate that, but I won't, I will just accept it as a working assumption.

Explain to me how cutting social welfare and cutting public service pay is not taking money out of the economy (now I know it means not taking money out of your pocket).

Godge

ardmacha wrote: »

This is of course also dependent on what they teach and whether they are in ITs or proper universities.

.

does anyone on a lecturer grade in a university teach - apart from a few token hours a week?

leonidas83

Godge wrote: »

right, you say that "You dont take more money out of an economy if you want it to grow". I can debate that, but I won't, I will just accept it as a working assumption.

Explain to me how cutting social welfare and cutting public service pay is not taking money out of the economy (now I know it means not taking money out of your pocket).

No one is saying cutting both social welfare and public service pay will not take money out of the economy, it will but not to the extent its costing to state to keep them on their current levels. Read my post properly before dissecting it.

People are extremely fearful of the future, trying to save every penny they have, raising taxes to pay for both of the above only increases this anxiety and discourages people from spending further. This is another direct loss to the economy, the economy can do without the highest levels of public sector pay and social welfare in Europe but it cant do without a complete lack of confidence in its own economy.

Godge

leonidas83 wrote: »

No one is saying cutting both social welfare and public service pay will not take money out of the economy, it will but not to the extent its costing to state to keep them on their current levels. Read my post properly before dissecting it.

People are extremely fearful of the future, trying to save every penny they have, raising taxes to pay for both of the above only increases this anxiety and discourages people from spending further. This is another direct loss to the economy, the economy can do without the highest levels of public sector pay and social welfare in Europe but it cant do without a complete lack of confidence in its own economy.

You are forgetting that social welfare recipients and public servants are some of those people fearful of the future. Why should they be singled out for cuts more than you? If someone from the public service came on here and called for a special levy on private sector employees and businesses to pay for public services, you would be outraged at being singled out. Why shouldn't they be outraged at your post?

The constant threat to cut social welfare and public service pay coming from the shrill private sector economists is probably a greater drag on spending than any fear of more taxes.

leonidas83

Godge wrote: »

You are forgetting that social welfare recipients and public servants are some of those people fearful of the future. Why should they be singled out for cuts more than you? If someone from the public service came on here and called for a special levy on private sector employees and businesses to pay for public services, you would be outraged at being singled out. Why shouldn't they be outraged at your post?

The constant threat to cut social welfare and public service pay coming from the shrill private sector economists is probably a greater drag on spending than any fear of more taxes.

Nonsense, why should they be singled out?? maybe its because they are costing the state billions more than we can afford, the private sector is what will get us out of this mess, not exorbitant levels of social welfare and especially public sector pay. Take the blinkers off buddy. Taxing the ordinary worker is not working and the economy is in free fall.

Godge

leonidas83 wrote: »

Nonsense, why should they be singled out?? maybe its because they are costing the state billions more than we can afford, the private sector is what will get us out of this mess, not exorbitant levels of social welfare and especially public sector pay. Take the blinkers off buddy. Taxing the ordinary worker is not working and the economy is in free fall.

The economy is in freefall?

http://www.finance.gov.ie/documents/publications/meb2011/december.pdf


"After three successive years of contraction, real GDP is expected to return to positive growth this year, increasing by 1.0%, with the pace of expansion strengthening over the forecast horizon; growth of 1.6% in 2012 is expected to be followed by an average increase of 2.8% per annum in the period 2013 to 2015."

"On an annual basis, real GDP increased by 2.3% in the second quarter, following a 0.3% expansion in the preceding quarter (see Table below). Real GNP, by comparison, increased by 1.1%;

"For the year 2010 as a whole Irish real GDP recorded a decline of 0.4%. This represented a sharp moderation in the pace of contraction when compared to the preceding years.• As outlined in the Table below, GDP declined by 3.0% in 2008 and 7.0% in 2009 (over the period 2008 to 2010 real GDP contracted by a cumulative 10.2%)."

Why do people keep posting assertions that have no basis in fact? It is true that the economy was in freefall in 2008 and 2009. However, it has been stabilised. Since the beginning of 2010, the economy has been more or less flat and has shown slight growth. Subject to the external environment, stronger growth is forecast for the next two years.

The position will be clearer by the end of the week. A further cut in the ECB rate and a successful outcome to the Euro leaders discussion and those growth rates will be achievable.

FWIW, last week was the first time in a long time when I heard of three people who got jobs.

readyletsgo

I thought this topic had something to do with a new DEAL in Eddie Rockets! *sad face* ok.

pog it

Godge wrote: »

If you read IRN, you will see that a lot of private sector companies are agreeing pay increases that will come into effect late this year and next which will boost tax revenues and consumer spending. If you don't believe me, the companies include Allergan, Baxter Healthcare, Covidien Tullamore, Essilor, Hollister, Janssen Pharmaceutical, Leo Pharma Cork, Medtronic, Merck Sharp and Dohme, Rexam Beverage Can, Bruss, Pfizer, Proctor and Gamble, Novartis, Allianz, Irish Life, HP EDS, Athy Concentrates, Barry's Tea, C&D Pet Foods, Irish Distillers, Monaghan Mushrooms, Pepsico, ConocoPhillips, Lisheen Mine, Musgraves, P&O Ferries, Port of Cork, PWA International etc. Some of these pay increases have already come into effect but haven't increased consumer confidence. I reckon it was groups like that Noonan expects to increase spending because their income tax was not increased.

Didn't know about the IRN! Just wondering- are these companies collaborating on these increases? Or is it coincidence? Any reasons why they would be collaborating?

Anyone

No time at all for Mr Hobbs, still remember him trying to flog apartments in Eastern Europe at the end of the "boom" still telling people how much a good investment property was.

No idea why people listen to him, he has done nothing of note at all in his business life.

n97 mini

Rightly or wrongly EH has gone very anti public sector and their unions in recent times, which kind of surprises me. Being populist would be better for his career but he's clearly not making himself popular with that grouping.

Dannyboy83

Anyone wrote: »

No time at all for Mr Hobbs, still remember him trying to flog apartments in Eastern Europe at the end of the "boom" still telling people how much a good investment property was.

No idea why people listen to him, he has done nothing of note at all in his business life.

His reputation was torn to shreds, especially on internet forums, since 2009.
Some things may be true, but many of the things which have been written about him seem to have little basis in reality, or are distorted.

Why?
Well, from about 2009 onward, many of the times Begg, O'Connor & friends were on the radio, threatening the ordinary citizen, it was Eddie Hobbs who was sat across the table from them, trying to feed them a dose of reality.
From this point on, there were frequent attempts to ruin his reputation (the same went for one fairly prominent female spokesperson from IBEC).
It's fairly obvious what the motivation was here.

I'm not sure why there was such vehemence against Eddie Hobbs in particular, but I suspect it was because - rather than simply taking a political point of view; which can be disregarded - he supplied facts and figures, which is considerably harder to defend against.

If you check his pre-tv work, his stance is not out of line with his track record.