Bailing out the banks vs Current account deficit

F

Firefly

Registered User
Messages
3,492
This drive me mad.

I can understand the frustration by union bosses that we as a country are having to inject so much capital into our banks. But I believe the argument is populist. Lots of other countries have had to do the same. Also, this will ultimately be a one-off hit.

Ignoring the banking bail-out for a moment, the government is borrowing 400M a week (or 20BN a year) to fund the day-to-day current account deficit. This is indefinite borrowing. So, in the time the banking crisis first occurred (Sept 2008), we have borrowed 28BN (400m x 72 weeks) just to cover the current account deficit. Surely this is the elephant in the room.
According to http://www.finance.gov.ie/documents/publications/reports/2009/payanaljul09.pdf

pay as a % of Gross current spending is 35%. Therefore of the 400m we are borrowing every week, we are in effect borrowing 140m a week to pay for public sector pay & pensions. Why can't the union bosses face up to that?
 
Just a note on terms.

The Govt's budget is in deficit, yes.

Part of that budget is the Current budget.


But the Current Account of the national Balance of Payments is actually moving from deficit towards surplus.

[broken link removed]

As a nation as a a whole, we are borrowing less.

But, yes, the Govt is borrowing a lot.
 
Firefly said:
pay as a % of Gross current spending is 35%. Therefore of the 400m we are borrowing every week, we are in effect borrowing 140m a week to pay for public sector pay & pensions. Why can't the union bosses face up to that?
Click to expand...

Ok, so whats the answer. Cutting PS pay by 35%?
 
brigade said:
Ok, so whats the answer. Cutting PS pay by 35%?
Click to expand...

No, but accept that cuts have to be made and stop telling lies about the situation we are in. For example one of the bearded brethren was on The Front Line on RTE spouting about the government spending €20Billion on the bank bail out while beggering public sector workers to save €1Billion. That's just not true. The figures are incorrect and they know it but they continue to trot out the same lines. They are lying.
 
I accept that cuts have to be made, but at what point will it be accepted that PS have taken enough of a cut?
 
brigade said:
I accept that cuts have to be made, but at what point will it be accepted that PS have taken enough of a cut?
Click to expand...

Looks like public spending needs to be shaved by a further 8% this year or next, one way or another. I'd be expecting another tax hike as well.

None of us are going to have a say in how we're taxed. If you're in a public sector union at least you have the choice to decide whether you want to limit potential pay cuts by embracing reform
 
Hi Protocol...i think the figures you quote relate to our trade position. In fact the Revenue/Expenditure figures (which gives rise for the need to borrow) for the first three months of this year showed a deficit of 3.7 billion which was one billion more that similar period in 2009
 
brigade said:
I accept that cuts have to be made, but at what point will it be accepted that PS have taken enough of a cut?
Click to expand...

At the beginning of 2009 the government had a plan to close the deficit by 16 billion over 5 years (I think the EU have given them an extra year now).
If I was a union representing the PS, I would have asked the government how much of that is to come from the PS pay bill. Even if only 25% of the adjustments were to come from tax increases that leaves 12 billion in spending cuts. As PS bill is 1/3 of spending , it seems fair that 4 billion of these cuts must come from PS bill.

I actually think this is very achievable over 5 years but what worries me now is that have already introduced 6 billion of these adjustments it looks like the deficit is not going to be narrowed by the end of 2010.
 
brigade said:
Ok, so whats the answer. Cutting PS pay by 35%?
Click to expand...

No, it would be too much. But IMO further cuts need to be made. How much...don't know exactly, but proper economic analysis needs to be done. We just need to get our borrowing down big time.

We're 30 mins behind Greece. And even if that (IMF) never happens we are still putting a mountain of debt on our future generations. They're gonna have to pay for that in addition to generous PS pensions as well as an every increasing health bill due to the aging population....sounds like a big ask to me and an unfair one.

In the good days we had all sorts of plans. Transport 21 etc etc. This is the time more than ever where we need plans. We need direction and goals from the government such as - In 5 years time we're going to half our national debt, NAMA's new mandate is to actually make money for the taxpayer etc etc.
 
brigade said:
I accept that cuts have to be made, but at what point will it be accepted that PS have taken enough of a cut?
Click to expand...
When the books balance then there will have been enough cuts. We don't know when the books will balance.
 
Purple said:
When the books balance then there will have been enough cuts.
Click to expand...

In an ideal world yes, borrowing should only be used for capital projects that will yield a return to the taxpayer (not necessarily monetary). Current spending should be funded from current income. Otherwise it's like doing your shopping and paying your bills on the credit card and only making the minimum payments each month and letting the balance grow and grow.
 
Purple said:
When the books balance then there will have been enough cuts. We don't know when the books will balance.
Click to expand...


Which brings me back to the first post, which says pay is 35% of gross current spending. The more pay thats cut the less PAYE, PRSI etc thats taken in and the more eligible people are for FIS and medical cards. So will we ever get to a point where the books balance unless more people are taken of the dole queues and start contributing to the tax take?
 
brigade said:
Which brings me back to the first post, which says pay is 35% of gross current spending. The more pay thats cut the less PAYE, PRSI etc thats taken in and the more eligible people are for FIS and medical cards. So will we ever get to a point where the books balance unless more people are taken of the dole queues and start contributing to the tax take?
Click to expand...

I agree but in the short term there will have to be cuts in welfare and increases in the threshold for eligibility for FIS and medical cards. On top of that there will have to be increases in taxation and huge reductions in the tax bands to bring more people into the tax net.
 
Firefly said:
Ignoring the banking bail-out for a moment
Click to expand...

That's a bit like ignoring the cloud of volcanic ash - it's just too big to be ignored.

Firefly said:
we are in effect borrowing 140m a week to pay for public sector pay & pensions
Click to expand...
No - we're not. Whatever we are borrowing is being used to pay for public services - it's kind-of importannt to remember that these services are important.
 
Complainer said:
That's a bit like ignoring the cloud of volcanic ash - it's just too big to be ignored.
Click to expand...

They're seperate events though. If we didn't have to inject capital into the banks we'd still have to borrow to meet current expenditure


Complainer said:
No - we're not. Whatever we are borrowing is being used to pay for public services - it's kind-of importannt to remember that these services are important.
Click to expand...

Nobody is saying public services are not important. What I'm saying is that
35% of gross current spending (which we are borrowing 400m a week to pay for) is going on pay.
 
Firefly said:
Nobody is saying public services are not important. What I'm saying is that
35% of gross current spending (which we are borrowing 400m a week to pay for) is going on pay.
Click to expand...
Yep, that tends to happen when you need lots of nurses/teachers/parkies/H&S inspectors etc.
 
Complainer said:
Yep, that tends to happen when you need lots of nurses/teachers/parkies/H&S inspectors etc.
Click to expand...

So which is it - are our wages too high or do we have too many on the payroll (assuming we don't want to continue to borrow 140m a week)?
 
Firefly said:
So which is it - are our wages too high or do we have too many on the payroll (assuming we don't want to continue to borrow 140m a week)?
Click to expand...
Ah the old 'Have you stopped beating your wife yet' style of questioning returns.
 
You must log in or register to reply here.
Back
Top