What big mistakes did the government make

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Whiskey

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With the benifit of hindsight, there were lots of things the government could have done in the years between 2000 and 2007 to avert the economic problems we are in

Taking hindsight out of the equation, what were the big mistakes the government made ?
What were the policies which were made which went against the consensus of what was right at the time the policies were made ?

Could it have been different if one of the opposition parties were in power, were they vocal in articulating prudent economic policies during the "bubble"?
 
Introduction of stamp-duty on homes
Tax incentives for new hotels
Selling of the Corrib gas field
Reducing our tax rates in the good times
Increasing the No.s in the public sector
 
Not paying off the national debt that we built up in the eighties.

We entered this crisis with the same level of debt as we exited the last one - about 40bn. Paying that off over the last decade would have taken some heat out of the economy during the mid 00's and given us more of a cushion to deal with what's happened.
 
Agree with previous posters. Would add that they thought that they were entitled to live the high life themselves and could just authorise anything for themselves by way of expenses, use of cars, jet, overseas trips, things like paying huge amounts on refurbishing bathrooms and offices that did not need it etc etc
The other thing to add is the evoting machines which they are still paying the storage for why they cant just throw them in the sea I don' know!
 
Not reducing admin numbers in HSE when the health boards were merged.
Increasing social welfare benefits by rates more than inflation.
 
Agree with the following:
  • Not reducing admin numbers in HSE when the health boards were merged.
  • Increasing social welfare benefits by rates more than inflation
  • Reducing our tax rates in the good times
  • Increasing the No.s in the public sector (Also, it's a paradox to pay productivity increases when you have huge increases in numbers taking place)
Also, windfall stamp duties should have been squirrelled away.

All of these would have enabled us to either reduce the national debt to Zero or invest more in the National Pensions Reserve, leaving us in better shape for the downturn.

Finally, and most importantly, the culture of bank regulation. Laziness and incompetence was being branded light touch regulation. Light touch regulation should mean less action the micro issues and a focus on ensuring everything is sound on a macro level e.g. after building 400,000 housing units over 5 years was it really prudent for the banks to be lending vast sums to developers to purchase fields the length and breath of the country? Or, how were people on €50k p.a. getting approval for €400k mortgages?
 
Populist polices:
Increasing PS numbers.
Increasing PS pay / Benchmarking.
Linking PS Pensions to benchmarked pay increases.
Increasing Mortgage Interest Relief.
Increasing Children's Allowance.
That other children's allowance thing.
Decentralisation (to Ministers constituencies)

Vanity projects:
National Convention centre.
E-voting.
Terminal 2.
National Aquatic Centre.
Decentralisation (gets in twice).

Gross and willfull financial mismanagement:
Light touch regulation.
Tax breaks, tax breaks, tax breaks. (Construction)
FAS.

Gross and willfull social mismanagement:
Planning.
House regulations brought in after the boom.
Water meters not installed during the boom.
The HSE.

Gets it's own category:
TD's unvouched and unjustified expenses.
TD's pay.
TD's perks.
Every TD, Senator and Councillor the length and breath of the country with their snout in the trough.
 
How many people work for the regulators office?
What is the function of the central bank? Is it regulation?

Because if both of these bodies are only concerned with regulation, and what we had was light touch - we're in for an employment boom when we move on to 'heavy touch' regulation!

And to stay on topic - I'd agree with what is being said above.
The HSE move without reducing admin numbers is a disaster that will haunt us for years. Benchmarking was a total con seeing as how it's not operating now when the conditions have dramatically changed.
Rubbish planning when it came to our cities, towns, villages and countryside will cost us all in the future.
Most of the employment gains in the late 00's were in the public sector and in construction. Alarm bells were ringing for those who were awake to it. We need more people who are awake running the show.
 
Howitzer - I agree whole heartedly with you. Great list.
I also think them not seeing the bigger picture in planning anything.
 
Howitzer said:
Gross and willfull financial mismanagement:
Light touch regulation.
Click to expand...

We never had light touch regulation in this country, merely a regulatory regime that was ridiculously inept and inefficient. This article explains why now we now need a proper system of light touch regulation more than ever before.
 
Indeed, some excellent points made by Howitzer.
One thing that hasn't been mentioned and I believe will be proven to be the biggest mistake is bailing out the bond holders in Irish banks.


T McGibney said:
We never had light touch regulation in this country, merely a regulatory regime that was ridiculously inept and inefficient. This article explains why now we now need a proper system of light touch regulation more than ever before.
Click to expand...

I'm with you on this. Article is interesting and concise. Maybe a little bit too concise but it makes valid points.
Anybody ever wonder why there are constantly new types of companies created in ares where there is no or "light touch" regulation, most notably technology? Yet when is the last time you heard of a small bank being created with one branch and a simple deposit and loan book for local people. The cost of the regulatory burden to enter the financial industry is so large, that someone with €500k cannot set up a simple loan bank to make 500 loans to businesses with a very simple contract of 12 monthly repayments plus interest. The regulatory costs would far exceed the €500k. And if that person operated outside the regulatory system they would be branded a loan shark.
One of the main reasons the fallout from bank failures is so severe is because of lack of alternatives. When you remove the burden of entry into a market place you make it easier for new competitors to enter and thereby spread out the risk of an entire industry, rather than concentrate it in a few.
 
Howitzer said:
Populist polices:
Increasing PS numbers.
Increasing PS pay / Benchmarking.
Linking PS Pensions to benchmarked pay increases.
Increasing Mortgage Interest Relief.
Increasing Children's Allowance.
That other children's allowance thing.
Decentralisation (to Ministers constituencies)

Vanity projects:
National Convention centre.
E-voting.
Terminal 2.
National Aquatic Centre.
Decentralisation (gets in twice).

Gross and willfull financial mismanagement:
Light touch regulation.
Tax breaks, tax breaks, tax breaks. (Construction)
FAS.

Gross and willfull social mismanagement:
Planning.
House regulations brought in after the boom.
Water meters not installed during the boom.
The HSE.

Gets it's own category:
TD's unvouched and unjustified expenses.
TD's pay.
TD's perks.
Every TD, Senator and Councillor the length and breath of the country with their snout in the trough.
Click to expand...


+1.. have to totally agree.. clear them out from the top down.. cut their wages and perks and expenses and see how many of them are left.. we have too many TDs and Senators anyway
 
I think its time to I tried to balance things up a little about our true "tax take" and also casting the blame on the "Bloated Monster" and "Overpaid Public Service" once again. I admit that the figures are prior to the bubble bursting but they are very acurate and very worthwhile pointing out.

Ireland's total tax take (29.3% of GPD) is well below the european average(39.3%) and according to figures publised by Eurostat in June 2010 we have the lowest tax take in the entire EU.

Between 1988 and 2007 total employment in Ireland grew from 1,110,700 people to 2,138,900. In 1988 the public service made up 24.3% of total employment. In 2007 the public service made up only 18.4% of total employment. Public Service numbers grew from 270,000 in 1988 to 368,000 in 2007. So over the 20 years, the public service grew by roughly 100,000 employees or 5,000 per year.

Education (which includes primary, seondary, third level, VEC's and IT's) makes up 30% of the public service employment, Health with 33%, Civil Service 10%, Gardai & Defence forces 8% and regional bodies such as Local Authorities 12%.

In 2006 the OECD reported that public sector spending had grown faster that any other OECD country apart from South Kores between 2000 and 2005. Ireland ranked 10th in the EU in public expenditure per head but when compared to GPD we were 25th of all 27 EU countries. The OECD stated that the public sector workforce in Ireland is a major employer but is relatively low by OECD standards and very low compared to Norway, Sweden, France, Finland and Belgium. The majority of growth in public sector employment was in health and education and this would be directly linked to the increase in our population and our ageing society. They also said that public sector growth had not kept up with population growth.

State Agencies (some visable and some not so, ie; appear to the general public to be offices of Departments but in theory are agencies) grew from roughly 150 in the 1980's to over 350 in 2008. The primary function of the majority of these agencies was and still is to deliver services to the public by specialist staff, services that simply could not be provided by civil servants. Some regulate certain industries (comreg, financial reg, taxi reg) and some provide an oversight and accountability system of the public service for the public (ombudsmans offices).

We, the public demand the best services, we demand the best education system with low pupil-teacher ratios for our children, we demand little or no waiting around in hospitals, we demand passports to be made available the day after we post them. We deserve the best possible service and this should be the standard from every sector of the public service. Our Public service should be as efficient as possible but in order to have all of the above it must be funded properly and managed correctly with any waste being stopped and any staffing issues immediatly resolved.


(all approx figures)


Garret Fitzgerald wrote a very good article in the Irish Times here [broken link removed]
 
Whiskey said:
I suppose this sums it all up

Tax receipts are around the same as they were in 2003, yet public pay and pensions have increased by 17 billion ............

http://www.independent.ie/business/...ll-has-risen-euro16bn-since-2003-2368677.html

I'm trying to understand how were such unsustainable increases allowed to happen, was it like the government giving into unions ?
Click to expand...

Without trying to kick off a public/private sector war, that figure of 17bn is just not believable. It would mean that the public sector pay bill in 2003 was only 3bn which is simply not true.

The Department of Finance says the public sector pay bill was 12.77bn in 2003 and 18.81bn in 2008, an increase of about 6bn. Source (pdf file from Department of Finance website)

Edit: Looked at the 2010 figures, and it seems the estimate for 2010 pay and pensions bill is 17.3bn, so I don't believe the state only spent 300m on pay and pensions in 2003
 
RonanC said:
Ireland's total tax take (29.3% of GPD) is well below the european average(39.3%) and according to figures publised by Eurostat in June 2010 we have the lowest tax take in the entire EU.
Click to expand...

But we all know that Ireland's GDP figures are distorted by the sales output of the foreign multinational sector. As a result, statistics based on those distorted figures are flawed.

Do the same exercise using the more meaningful GNP figures and you will arrive at a totally different result.
 
RonanC said:
Ireland's total tax take (29.3% of GPD) is well below the european average(39.3%) and according to figures publised by Eurostat in June 2010 we have the lowest tax take in the entire EU.
Click to expand...

If people want to compare our tax take to the EU average, shouldn't they also compare our public sector wages to the EU average?
 
multiple gross errors

Chris said:
Indeed, some excellent points made by Howitzer.
One thing that hasn't been mentioned and I believe will be proven to be the biggest mistake is bailing out the bond holders in Irish banks.




I'm with you on this. Article is interesting and concise. Maybe a little bit too concise but it makes valid points.
Anybody ever wonder why there are constantly new types of companies created in ares where there is no or "light touch" regulation, most notably technology? Yet when is the last time you heard of a small bank being created with one branch and a simple deposit and loan book for local people. The cost of the regulatory burden to enter the financial industry is so large, that someone with €500k cannot set up a simple loan bank to make 500 loans to businesses with a very simple contract of 12 monthly repayments plus interest. The regulatory costs would far exceed the €500k. And if that person operated outside the regulatory system they would be branded a loan shark.
One of the main reasons the fallout from bank failures is so severe is because of lack of alternatives. When you remove the burden of entry into a market place you make it easier for new competitors to enter and thereby spread out the risk of an entire industry, rather than concentrate it in a few.
Click to expand...

There were obviously major mistakes with balancing tax with spending.
The other problem was allowing the amount of credit not backed by assets (or by mortgaged property assets) to mushroom until it was so big it risked and destroyed Ireland's financial system.

What's amazing is the one of these on their own e.g. domestic credit bust, doubling of national debt should have been enough to bring down any government. But they are still here and voted in even when the tide was about to turn! (shows you how many people they paid up with populist policies).
 
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