The Stephen Donnelly Budget - fair?

edanto

I've a lot of time for Deputy Donnelly (helped canvass for him previously) and am very impressed today with the budget proposal he's put out.

http://stephendonnelly.ie/wp-content/uploads/2012/12/StephenDonnellyBudget2013.pdf

Key points

- No increases to universal social charge, property tax or PRSI payments and no cuts to front-line public services.

- Balanced and achieves the IMF deficit targets

How?

- Saving of €5bn by not paying IBRC Promissory notes
- Saving of €1.1bn by recouping the scandalous AIB pension top-up

€2bn in increased revenue (quote; "enforcing the effective rate of corporate tax at 12.5%; a financial transaction tax; a 5% reduction in tax exemptions; a tax on high-sugar, highfat foods").

€1.1bn in reduced expenditure (various).

To me, this is just sensible. The world won't end if we just let Anglo die. If we make that big decision, then we become more invest-able, and the rate to loan to us goes down.

What do you think of it?

Zamboni

I think anyone that wants to place a tax on fat should do more reading on the subject until they realise how wrong they are.

Chips Lovell

Let's see. He's proposing breaking the Croke Park Agreement by not paying increments. That would have consequences.

And I don't think he's factored in the costs of not paying the IBRC promissory notes. Or indeed given any explanation of how the resulting situation at IBRC would be managed.

edanto

What do you think would be the implications/costs of letting IBRC die?

Would it be more than the billions to be saved?

Godge

(1) An excellent article by Seamus Coffey below which rubbishes Stephen Donnelly's proposal on the promissory note. Easy enough to read and clearly sets out how Donnelly is wrong. For a start:

"The capital amount of the Promissory Notes was recorded in full in the 2010 general government deficit when Ireland ‘borrowed’ the money from Anglo/INBS."

http://economic-incentives.blogspot.ie/2012/12/the-promissory-notes-and-deficit.html

(2) The increments issue hits lower-paid public servants disproportionately, therefore not a runner since they are the ones who will strike.

(3) The financial transactions tax means goodbye to the IFC. Thanks Stephen for all the extra dole payments we will have to make

(4) Ditto on the coroporation tax and multinationals, particularly in the pharmaceutical sector. Would the last one to leave shut the door?

(5) Fat tax, we wouldn't just be illegally importing cigarettes and drugs, cans of coke and packets of smarties would be travelling across the border, I know:).


All of the above would either hit business or not raise or save the money he expects.

All of the above would appeal to the ordinary Joe in the street who doesn't want to pay up for yeterday's party.

iPringle

If he thinks you can actually raise €750m net from a financial transactions tax, he's very much mistaken.

The flow of trading activity from Dublin to London for any trades that don't involve European FTT counter-parties would happen overnight. When the Swedes implemented a smaller FTT in the 80s, something like 98% of their derivative trading left the country in a week. Incredible stuff. That doesn't just effect the financial markets, but would have a huge effect on the IFSC and their income tax derived from the largely high end jobs there.

It would also basically eliminate any high-frequency or algorithmic trading from the Irish marketplace as it makes their business model redundant, again losing highly paid jobs to London and sacrificing much liquidity in the markets.

Chips Lovell

So if I'm reading Coffey correctly, Donnelly doesn't even understands the promissory notes arrangement, let alone explain his alternative?

Godge

Vladimir Kurtains wrote: »

So if I'm reading Coffey correctly, Donnelly doesn't even understands the promissory notes arrangement, let alone explain his alternative?

yes

hmmm

We already have 1% stamp duty which is a financial transaction tax which brings in about 180 million a year. How are we going to generate 750 million?

By the way, the French FTT is set at 0.2%, a fifth of our stamp duty tax.

I'm glad at least one politician is calling for increments to be stopped.

I'm not sure what "enforcing the corporation tax rate" is and how it will bring in 500m

Any "cut" in healthcare costs by increasing private bed charges is simply yet another stealth tax on the middle class.

Good loser

He shouldn't have bothered. Unadultrated populism as you'd expect from an independent. Outdoes SF and FF.

No pain for 99% of the population/electorate.

Wibbs

TBH I was surprised to read this coming from him. Up to now he's been one of the most sensible in the place and his educational background gives him an actual qualification to be dealing in stuff like this(unlike 90% of the other TD's).

Chips Lovell

Wibbs wrote: »

TBH I was surprised to read this coming from him. Up to now he's been one of the most sensible in the place and his educational background gives him an actual qualification to be dealing in stuff like this(unlike 90% of the other TD's).

This is it exactly. On paper at least, Donnelly is smart enough to know what he's pedalling is magic beans type stuff. After his "we want our €64 billion back" stunt I began losing respect from him.

Of course, as an Independent, he's never going to be in a position where he'll have to put his money where his mouth is. Or should I say, put our money where his mouth is.

spank_inferno

As a Donnelly voter in Wicklow it seems rather odd.
He always has been one of the most sensible TD's & a lot smarter than the usual teachers, farmers & publicans that populate the Dail.

Perhaps he is trying to manouver himself to be more populist?

He was the last of 5 TDs elected narrowly beating a SF candidate narrowly I think.

Perhaps he feels the cold breath of SF on the back of his neck?

HellFireClub

Vladimir Kurtains wrote: »

Let's see. He's proposing breaking the Croke Park Agreement by not paying increments. That would have consequences.

Let's face them. Strikes are always contingent upon public support and it's nigh on impossible to see how the public in general will have any support for people on 50K plus salaries in secure jobs, thinking they have any grounds for protesting. I'm completely against those in the public sector on the average industrial wage (under 40K for the sake of argument), taking any more salary cuts, but as for those on 50K, 60K, 70K, etc, all the way up, serious surgery is needed there and if strikes are the outcome, then so be it. They won't have any public support, so strike away.

The ongoing refusal to face up to the unsustainable financial situation in our public sector when it comes to salaries over 50K, is just a ridiculous cowardly continuation of the policy of pandering to vested, organised, selfish interests, that caused these salaries to be inflated way above what they ever should have been allowed to reach in the first place.

Chips Lovell

Given that Croke Park has bene hitting its targets and that we'll have to negotiate another public sector pay agreement shortly, it doesn't make much sense to just throw a grenade at it and infuriate the people we're going to be negotiating with. Is that going to make them more or less likely to play ball?

-Aviron-

As people have pointed out there are some major problems with most of his proposals.

Not only that, this stands out for me:

One report estimates that such a tax would raise €188m.
Proponents also advocate reinvesting in healthy eating
campaigns. At €18m, this would leave €160m for the exchequer

Am I missing something here? Where did the extra €10m go? Did he even bother proofreading the document?

seamus

HellFireClub wrote: »

Let's face them. Strikes are always contingent upon public support and it's nigh on impossible to see how the public in general will have any support for people on 50K plus salaries in secure jobs, thinking they have any grounds for protesting.

I think you underestimate the public support they would have and which would build. Part of the purpose of striking is to turn the government/employer into the enemy of the public, even if the public don't entirely support you.

As much bitching goes on about the public service, when the busses are being run on a skeleton schedule by the army, there's no post, massive queues at A&E departments, difficulties getting welfare payments and a hundred million other little disruptions to a person's everyday life, the public won't stand firm and say, "No, to hell with that shower, we can manage without them". The public will turn on the government and blame them for everything. That's what strikes do.

The time for a hardline on the PS has passed. This government was handed down an agreement which for the time being is being stuck to by the public sector, so there's no good reason for the government to renege on it.

HellFireClub

seamus wrote: »

I think you underestimate the public support they would have and which would build. Part of the purpose of striking is to turn the government/employer into the enemy of the public, even if the public don't entirely support you.

As much bitching goes on about the public service, when the busses are being run on a skeleton schedule by the army, there's no post, massive queues at A&E departments, difficulties getting welfare payments and a hundred million other little disruptions to a person's everyday life, the public won't stand firm and say, "No, to hell with that shower, we can manage without them". The public will turn on the government and blame them for everything. That's what strikes do.

The time for a hardline on the PS has passed. This government was handed down an agreement which for the time being is being stuck to by the public sector, so there's no good reason for the government to renege on it.

The agreement was never meant to stand up in economic circumstances such as this, and there is a clause in the agreement that was put in there specifically to deal with a further serious deterioration in our economic circumstances, which is exactly what we are dealing with today. Then when the economy deteriorates seriously yet further again in the next six months, after the budget today, there will be an even greater case to be made for this whole ridiculous agreement to be set aside.

I'm not advocating cuts to anyone on 40K or less, but it is completely unacceptable that we have people in the public sector getting automatic increments at the moment, that is an absolute outrage. And people on 70K saying they will not take another pay cut, these people need to be told to snap out of it.

Sleepy

Why is everyone so keen to protect the salaries of those public sector employees earning less than 40k when all evidence points to them being the most overpaid by comparison to their private sector equivalents?

Chips Lovell

The agreement states:

“The implementation of this agreement is subject to no currently unforeseen budgetary deterioration.”

You can't really argue that our current situation is unforeseen.

HellFireClub

Sleepy wrote: »

Why is everyone so keen to protect the salaries of those public sector employees earning less than 40k when all evidence points to them being the most overpaid by comparison to their private sector equivalents?

I know people who were earning 36K-38K in the boom for doing a secretarial/admin type job in the private sector with maybe 5 years solid experience, the market is no longer paying more than 26K-28K (28K at a maximum), for the same activity to be carried out. Then we have people posting on threads such as this, people from the public sector, who have the sheer neck to say that there have been no across the board pay cuts in the private sector, this blind ignorance that huge adjustments have been happening all over the place, many people (half a million people), 500,000, have faced the ultimate "adjustment" when they found themselves out of work and adjusted down to 188 Euro a week on the dole if they are lucky.

When I read public sector comments on this subject, I despair for this country, they are living in a parallel universe. The same individuals would generally never have had to take a serious professional risk in their entire careers.

frankosw

HellFireClub wrote: »

I know people who were earning 36K-38K in the boom for doing a secretarial/admin type job in the private sector with maybe 5 years solid experience, the market is no longer paying more than 26K-28K (28K at a maximum), for the same activity to be carried out. .

Looks like they were overcharging during the "boom"...very common it was too.

Or maybe you could provide a link to show the jobs you're talking about a link with the 10k per year cut in wages that they have taken?

Something as outrageous as this is sure to have made the headlines.

southsiderosie

MOD NOTE:

Can we please stay focused on the Donnelly proposal and the actual specifics of the budget without descending into the usual broad strokes trench warfare over the public and private sector? Thanks.

Farmer Pudsey

Sleepy wrote: »

Why is everyone so keen to protect the salaries of those public sector employees earning less than 40k when all evidence points to them being the most overpaid by comparison to their private sector equivalents?

The reason is that money taken off lower paid PS will in a lot of cases be replaced by family or social benifit. They also benifit the least from the public service pension. Take a PS earning 35K with full service service they will retire on a pension of 17.5K which is about 5.5K more than the OAP and a lump sum of about 52K. Someone on 25K wages will only recieve pension about the same as the OAP and a lumpsum of 38K. They also pay a rate of pension levy that is not comparable with the benifit that they will recieve and there rates of pay were cut harder than other higher paid PS. All there pay cuts hit them at the low rate of tax and for some they may not have benifited from a reduction in taxation due to it.




Pension Levy details

* 5% on a salary of €25,000
* 6.4% on €35,000
* 7.2% on €45,000
* 7.7% on €55,000
* 8.1% on €65,000
* 8.5% on €85,000
* 8.8% on €100,000
* 9.2% on €150,000
* 9.4% on €200,000
* 9.6% on €300,000.

pay cut details

Public Servants earning over 200,000 will have a 15% pay reduction.
Public Servants earning from 165,000 to 200,000 will have a 12% pay reduction.
Public Servants earning from 125,000 – 165,000 will see an 8% pay reduction.
Other Public Servants with salaries under €125,000 will have:
A 5% reduction on the first 30,000 of income.
A 7.5% reduction on the pay between 30,001 and 70,000
A 10% reduction on the pay between 70,001 and 125,000.

So lower paid PS may have taken a net reduction in take home pay of 10% while higher paid PS due to taxation benfits may have only been cut by 11% net and mid range PS (between 50-125K) may only have recieved a 7-9% reduction in pay. These are just quick calculations. A PS on a salary of 70K will will recieve a pension of 35K so will benifit over the OAP rate by 23K if they have full service as well as a lumpsum of over 100K

Cuting the higher rates will make the PS pension bill more sustainable in the longterm. If higher paid PS were under paid/over worked we would see a higher turnover in this sector however I do not see a huge exodus from the PS by reducing wage rates of those in the 40K+ bracket and if it we had an issue with loss of specialists we could recruit them on short/medium term contracts.

OMD

Farmer Pudsey wrote: »

The reason is that money taken off lower paid PS will in a lot of cases be replaced by family or social benifit. They also benifit the least from the public service pension. Take a PS earning 35K with full service service they will retire on a pension of 17.5K which is about 5.5K more than the OAP and a lump sum of about 52K. Someone on 25K wages will only recieve pension about the same as the OAP and a lumpsum of 38K. They also pay a rate of pension levy that is not comparable with the benifit that they will recieve and there rates of pay were cut harder than other higher paid PS. All there pay cuts hit them at the low rate of tax and for some they may not have benifited from a reduction in taxation due to it.

But pension is based on final salary. How many public servants have a final salary after 40 years of €25,000?

RATM

HellFireClub wrote: »

Let's face them. Strikes are always contingent upon public support and it's nigh on impossible to see how the public in general will have any support for people on 50K plus salaries in secure jobs, thinking they have any grounds for protesting. I'm completely against those in the public sector on the average industrial wage (under 40K for the sake of argument), taking any more salary cuts, but as for those on 50K, 60K, 70K, etc, all the way up, serious surgery is needed there and if strikes are the outcome, then so be it. They won't have any public support, so strike away.

The ongoing refusal to face up to the unsustainable financial situation in our public sector when it comes to salaries over 50K, is just a ridiculous cowardly continuation of the policy of pandering to vested, organised, selfish interests, that caused these salaries to be inflated way above what they ever should have been allowed to reach in the first place.

I couldn't agree more. Ad would even go as far to say that it is not until we actually see public servants on strike that we know value is being had from any pay agreement

Let civil and public servants who are on more than €50k or €60k go out on strike if they don't like a pay cut rather than redundancy, they'll have zero sympathy amongst the public and will be shamed into going back to work. .

johnnyskeleton

Sleepy wrote: »

Why is everyone so keen to protect the salaries of those public sector employees earning less than 40k when all evidence points to them being the most overpaid by comparison to their private sector equivalents?

Because people have forgotten that public service has an element of "service" in it, and that getting that service more cheaply is a good thing.

Sleepy

Farmer Pudsey wrote: »

The reason is that money taken off lower paid PS will in a lot of cases be replaced by family or social benifit.

You think? Given the demographics, I'd wager that most lower-paid in the PS will have a partner who is also in employment and, as such, would be ineligible for such payments.

Regardless of that, this is akin to the "but sure if we make PS workers redundant we'll have to pay them JSB" line, it's almost irrelevant: if a saving exists (and it will: no PS job, no matter how "low paid" is going to pay less than the welfare entitlements the employee has).

Cuting the higher rates will make the PS pension bill more sustainable in the longterm. If higher paid PS were under paid/over worked we would see a higher turnover in this sector however I do not see a huge exodus from the PS by reducing wage rates of those in the 40K+ bracket and if it we had an issue with loss of specialists we could recruit them on short/medium term contracts.

I don't see a huge exodus from the PS by reducing wages full stop. Even if you were to eliminate the premium paid to Public Sector Workers and "only" paid them the same as their private sector equivalents you're not going to see many leave because, frankly, there's nowhere for them to go where they'd be better off.

creedp

Sleepy wrote: »

You think? Given the demographics, I'd wager that most lower-paid in the PS will have a partner who is also in employment and, as such, would be ineligible for such payments.

I don't see a huge exodus from the PS by reducing wages full stop. Even if you were to eliminate the premium paid to Public Sector Workers and "only" paid them the same as their private sector equivalents you're not going to see many leave because, frankly, there's nowhere for them to go where they'd be better off.

I must say its great to listen to 'all-knowledgeable' persons work out solutions to such complex issue.

K-9

southsiderosie wrote: »

MOD NOTE:

Can we please stay focused on the Donnelly proposal and the actual specifics of the budget without descending into the usual broad strokes trench warfare over the public and private sector? Thanks.

I'd remind everybody of the previous mod warning. There are other threads to discuss Public Sector pay, this is a general thread about the budget and Donnelly's proposal.