Opinion This is a very dangerous pro-cyclical budget - the opposite of what we need

Discussion in 'Budget 2019' started by Brendan Burgess, 9 Oct 2018.

  1. Brendan Burgess

    Brendan Burgess Founder

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    No surprises.

    Despite having lotto wins in Corporation Tax and low interest rates, we are still borrowing to run the country .

    And paying €5 extra on social welfare to make it even more attractive not to work.

    When the next crisis hits, we will be in a deep deficit and will find it hard to borrow to cover it.

    Brendan
     
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  2. Delboy

    Delboy Frequent Poster

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    Last edited: 9 Oct 2018
    17bn for health and nearly 11bn for education. The next crash will hurt and hurt bad.
    Welfare increase a pure vote hook...at a time of near full employment, that makes no other sense.

    By my calculations that's the 3rd budget in a row where those in welfare have gotten more per month than I myself have. And FG are claimed as right wing by their critics :(
     
    Last edited: 9 Oct 2018
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  3. Firefly

    Firefly Frequent Poster

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    I firmly believe this kind of codology is to suppress the rise of Sinn Fein....
     
  4. RETIRED2017

    RETIRED2017 Frequent Poster

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    Did ya' not notice they were implementing these same old policies long before SF had a TD around the place,:confused:
     
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  5. RETIRED2017

    RETIRED2017 Frequent Poster

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    SF would not get away with the thing FG/FF are getting away with , Purple has no where to go so he will be voting for FG/FF to take over 50% of what he earns:oops::oops:along with all the other who have only FG/FF:confused: vote for more to be taken,
     
    Last edited: 9 Oct 2018
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  6. NiallSparky

    NiallSparky New Member

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    Does the contribution to the rainy day fund count towards the budget deficit? If this was excluded, would it be a balanced budget?

    Some of the giveways on current expenditure are still a bit grating, but would be interested to know about the above.
     
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  7. Brendan Burgess

    Brendan Burgess Founder

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    A very good question. I have done a summary here:

    Summary of the exchequer balance after the Budget

    upload_2018-10-9_16-50-18.png
     

    Attached Files:

  8. Opus2018

    Opus2018 Registered User

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    Hi Brendan,

    I don't think the Rainyday fund affects the deficit as it's recorded as being more of a pure financial transaction from a Central Government/General Government viewpoint. All the happens is cash moves from the Exchequer account to another account which is likely to be an Extra Budgetary Fund (like ISIF and formerly the National Pension Reserve Fund). In other words there is no expense and revenue items to record on the non-financial side of the accounts.

    Also don't forget, the General Government sector could run an overall budget surplus via the Social Security Fund and Local Government wont be included in the Exchequer figures.

    Best,

    Opus 2018.
     
  9. Brendan Burgess

    Brendan Burgess Founder

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    Thanks Opus

    I am trying to get my head around it.

    I suppose we know that it does not affect the deficit in real life.

    But what are they saying about it?

    The Minister says they have balanced the books. I don't think that they have.

    Brendan
     
  10. Opus2018

    Opus2018 Registered User

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    Last edited: 9 Oct 2018
    Hi Brendan,

    It depends on what you mean by who! Excehquer (aka Budgetary Central Government is running a deficit, but the Extra Budgetary Funds and Social Security Fund will being you up to Central Government and then finally adding in Local Government = General Government which might run a surplus overall (Local Government tends to run a balanced budget year on year) and I note that the Social Security Fund is in surplus again. We will know for sure at the Excessive Deficit Procedure return in April and October 2019 (for the 2018 figures) and April and October 2020 for the 2019 figures respectively.

    They're not saying too much about the rainy day fund otherwise. Also I don't see where the extra 700m is coming in for the extra Corporation Tax in 2018 - has this been formally included in the revenue for 2018?

    Best,

    Opus 2018.
     
    Last edited: 9 Oct 2018
  11. Brendan Burgess

    Brendan Burgess Founder

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    Hi Opus

    I presume that it has been included the normal figures?

    The allocation of it to the rainy day fund is purely mental accounting.

    My plan is to consolidate all these figures into one overall summary.

    I started the process here but got diverted and it was so complicated.

    I don't suppose you know of a good consolidated summary?

    Brendan
     
  12. Opus2018

    Opus2018 Registered User

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    Hi Brendan,

    I'm not entirely sure as it a) wasn't included in the initial DOF estimates for 2018 and b) we won't actually get it until November presumably? They may have course revised the CT estimates upwards but the announcement on this matter was quite recent wasn't it?. We'll know more for sure when the full year Exchequer returns come out in January, I guess. in real terms the increase in revenue is at least partially knocked out by the overspending in Health so the initial boost to the bottom line for the Government is negated somewhat.

    You might try the CSO Government Finance Statistics (GFS) return (last one was for Q2 2018 released on October 5 and also gives figures on the full year for 2017 (GG Deficit of 700 million or 0.2% of GDP). There should be a DOF estimate for the deficit for 2018 knocking around too but Eurostat don't publish this (Might be the European Commission), even though they (Eurostat) do receive it.

    Link to CSO :- https://www.cso.ie/en/releasesandpu...nmentfinancestatisticsprovisionaloctober2018/

    Let me know if you need anything more on this.



    Best,

    Opus 2018
     
  13. bubbletrouble

    bubbletrouble New Member

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    Saw some economists produce some warning signals about this budget too. It's akin to saying that Fianna Fail were balancing their budgets with stamp duty 11 years ago. John Moran was saying we're exposed to international economic shocks (but at least not to same extent in banking/property due to CB rules etc)...but this means we can't be relying on new windfall revenue from the likes of corporation tax to keep increasing spending.

    It's disappointing to see this type of budget arrive towards the peak of global output. We run the risk of having another balloon of a deficit if something strikes globally and we don't want to see the NTMA under severe risk for the next 18 months while they try secure 18 months of rolling over debt. Once we get over this 32 billion rollover period that would be a huge help.
     
  14. gnf_ireland

    gnf_ireland Frequent Poster

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    @Brendan Burgess The funny thing is if you ran your household budget the way the country runs it finances there is absolutely no way you would stay afloat.
    I can understand a budget deficit in poorer economic times, but as the cycle changes, you need to clear down your debt and try put a cushion in place to cover future shocks. Otherwise when you hit a bad few weeks (unemployment or salary cut) you have nothing to fall back on - only expensive debt where ever you can find it.

    In 2009/10, the country in effect had to go to moneylenders at high interest rates to stay afloat. In 2018/19, when we are supposed to be in a booming economy with high employment levels, we are barely managing to balance the books. We are literally spending all we can afford - with a minor rainy day fund.

    Unbelievable.. we should be targeting paying off some of the debt and a reasonable payment into the rainy day fund other than the spend, spend, spend approach.

    I am sure many like me would prefer if they kept my ~5 euro a week and paid it off against the national debt instead, or put it into a pension reserve fund (that cannot be raided) to help pay for my state pension when I come of age
     
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  15. gnf_ireland

    gnf_ireland Frequent Poster

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    I think there should be an incentive to work for anyone who has been on welfare for more than 9 months - especially in times of high employment. We should not be rewarding people who can work, not to work. We can discuss the merits of increasing the pension, disability benefit or Job Seekers Benefit (I think this is the one you get after you become redundant initially for 6-9 months depending on stamps paid). I do not believe Job Seekers Allowance should be increased at this time. Most of the people on this should have retrained over the last number of years - its time to put these skills to use.
    If they cannot find a job, then there needs to be a return to a community job scheme (similar to FAS or the old student summer job scheme) where the skills they have learned can be put to good use. If nothing else these sort of schemes get people into the working mindset, out of the house, interacting with others etc etc - all of which are very valuable to someones mental well-being.

    It is simply not good enough that those on Jobseekers Allowance continue to get "money for nothing". The whole social welfare policy needs to change to clearly be a safety net to support people if they lose their jobs to retrain and rejoin the workplace, not offer a long term lifestyle choice.

    I don't care if its only a minority who abuse the system, it sends out a very bad message to everyone who "gets up early in the morning" to go to work. Look at the general social media coverage of the budget and the same question is being asked over and over again - why are those on welfare coming out better from the budget than someone on the average industrial wage? This budget may have back-fired on FG dramatically, if an election is called any time soon !


    Personally I would prefer tax incentives for employers to take people off Jobseekers Allowance. This could include 0% Employer PRSI for 12-24 months for example, as well as additional on-going training paid for by the state. Ultimately it is difficult to break the unemployment cycle, but it needs to be broken during high employment times - not during high unemployment times.
     
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  16. joe sod

    joe sod Frequent Poster

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    very good points. I think Varadker and co are making huge mistakes, look at the criticism brian cowen and charlie mccreevy got when the recession hit for increasing social welfare payments so much before 2008, at least charlie mccreevy actually saved 20 billion in the pension reserve fund which was crucial in stopping ireland going like greece the last time when the greek government was forced to slash social welfare and public sector pay in order to get the bail out money from the EU and IMF.
     
  17. odyssey06

    odyssey06 Frequent Poster

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    Tax reductions are a lot easier to roll back than spending commitment increases. If you have it and want to 'give something back', to have something immediate in voters' pockets, then tax reductions are a better way to go.
    Priority should have been no increases in spending - except capital spending which is easier to vary year on year; reducing debt repayments; and then tax reductions.
     
  18. Firefly

    Firefly Frequent Poster

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    I agree. Giving people on the dole a fiver and giving people who work a fiver sends the wrong message. I would prefer if nobody got the fiver and it was used to either pay down the national debt or be put away for future pensions.

    If the government is hell-bent on giving out the cash, then I think 8 euro should go to the work and 2 to someone on the dole, and that's being generous.
     
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  19. RETIRED2017

    RETIRED2017 Frequent Poster

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    Best/sad part is the people retired like myself got both because I get the tax relief in my private pension also,
    The people who see the most taken in there wages/salaries are FG/FF supporters the most they are going to do is move from one party over th the other and then back again,
     
  20. Purple

    Purple Frequent Poster

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    Good point. The State bailed out pension funds (AKA bailing out the Banks) and bailed out depositors (AKA bailing out the Banks) and are now giving the same people increases in their pensions.