Thursday 10 February 2011

Election Commentary

Most of the Election Manifesto material from the various parties and the content of the debates has been depressingly thin on policies that have any chance of actually making a material difference to me or the country at large.

There are a few things being discussed that I like the sound of though:

  • FG’s proposal to change the Leaving certificate so Irish is no longer compulsory.
  • FG’s plan to overhaul broadband. I don’t believe the claims about direct employment there because broadband infrastructure deployment is capital not labour intensive so it will cost money we don’t have without meeting it’s main objective but in theory we’ll have great broadband options by 2014 even if it’ll be way too expensive for us paupers to afford.
  • FF\FG\Labour plans to overhaul the structure of the Dail\Senate. Not sure which plan I prefer and I don’t think there is any merit in doing this for reasons of saving money but any plan that tries to fix a system that is clearly broken is worth a shot.
  • FG (again) – An end to totally daft crap like the various construction tax write offs and upward only rent reviews. Both practices are obscene.
  • Labour – Burn some Bondholders.

Other than that I’ve yet to see anything that is really convincing. The fact that I like the flavour of more FG plans than others shouldn’t be taken as an indication that I’ve converted to the dark side although it does worry me that old age is slowly turning me into a blue shirt.

Adventurous policies I’d like to see but pigs will fly first unfortunately…

  • Dropping Irish as an official language. I’d go a lot a lot further than FG minor tweak – drop the pretence that there is any value in maintaining parity of access for Irish in all aspects of public life. It’s a joke, provides no benefit to the economy at large or the welfare of the overwhelming majority of the population. The economic cost of keeping it alive is enormous – given that teaching it consumes around a sixth to an eighth of all teaching resources at primary and post primary level. In effect that costs us around €1-2 billion a year keeping it alive, for no material benefit and frankly with pathetic results for all that cost. Overall the cost of maintaining Irish – covering the aforementioned education cost plus the duplication of all legislative procedures, legal documents and the various Gaeltacht subsidies pushes that number up well past €2 Billion per annum and it could be over €3 billion. If you are in favour of keeping Irish going then by all means pay for it yourself but I am not impressed with having over 10% of the taxes I pay going into maintaining it.
  • Go really aggressively green – build some nuclear power stations – Thorium by choice. Loadsa jobs, potential for some serious R&D upside, followed by serious export potential for the expertise gained, cheap power for decades, seriously cutting down on imported energy, hit our CO2 targets, Blah, Blah, Blah. Get in bed with the Chinese to fund it, they’ll love us for it and that would really give the Eurocrats something to chew down on. Your grandchildren will love you for it, and for a bonus you can have a healthy business selling medically useful isotopes and PU-238 to NASA so they can keep on exploring. Heck build a bunch and sell the power back to the rest of Europe - if we dropped Irish we could build 2-3 Giga-watt capable power stations per year, that’s about 50% of our current total capacity effectively for free. Which would you prefer keeping Irish on life support for €2bn per annum or free power for you and your children for the next 50 years? Net effect on the economy – by the time the first few come online [say 3 years, it’s worth being aggressive here] we’ll be saving a couple of billion per annum, making about €500 million profit on by products and we’ll have astonishingly cost competitive energy options for heavy industry.
  • Go back to the Catholic Church and get them to pay 100% of the costs of all of their past mistakes. Pass some laws to prevent them asking their parishioners for the cash – make sure it comes from the Vatican. We need the cash now folks, thanks, sorry ain’t good enough any more. I’d be looking for a couple of billion Euro there.
  • Revisit the pricing of our natural resources – I’ve no problem with Shell’s operation in Mayo or any of the rest but it’s absolutely insane that we do not impose a per unit levy\tax on the resources they extract. If it takes a complete revolution to do that alone it would be worth it. The Corrib gas field is estimated to contain 110 billion cubic meters of gas, at about 10kWhours/cubic meter that has a retail value of at least €30billion. I don’t see any reason why we can’t demand a good chunk of that up front – a levy similar to the corporate tax rate of 12.5% would yield a couple of hundred million a year for a very long time. And Shell ain’t short of the cash – they cleared $20bn last year.
  • An immediate end to closed shop pricing for professional services. This needs to apply to things like Medical Consultants, Lawyers and anyone else.who’s carved out a legally protected niche that allows them to command obscene fees. There’s easily a good chunk of a billion to be saved there in Government expenditures alone.
  • And someone needs to go through the HSE with an axe, a shotgun and a chainsaw and a BFG-9000. Easily cut out €2 billion worth of middle management. Put half of that back in to Nurses and keeping more hospitals\beds\emergency rooms open.

For starters.

There’s a good clear €4-5 billion in annual savings in there with the bonuses of loads major high tech heavy engineering jobs, increased competitiveness and better quality of life all round.

The reason we’re screwed is we’d never allow anyone to run the country who could even begin to contemplate things like that.

Thursday 3 February 2011

Questions for our Politicians

I just watched an utterly shameful display of political fuckwittery of the highest order. We had senior(ish) representatives from what are now apparently our four main political parties (FF, FG, SF & Labour) gracing our National airwaves in order to catastrophically fail to explain what their plans would be for tax increases and expenditure cuts if they happen to get into power. They seemed to prefer to call each other names and bang out shrill party slogans with obviously no intention of actually communicating anything substantive.

In the interests of getting this straight for myself (my numbers may be off by a billion here or there, it doesn’t make any difference) I took a look at the numbers.

We are currently running our country by spending €14bn more than we make. We make €33bn. In the long term a 3% (or ~€1bn) deficit is more or less OK so we’re searching for a way to tax more and spend less so that €13bn difference goes away by 2014 or thereabouts. Now this is down from a €17bn problem prior to December if I recall correctly. But that extra few billion will only remain saved if the incoming government does not backtrack significantly on the measures already taken by the outgoing FF crew.

So all of our friends on TV tonight needed to say where they will find that €14bn and none of them could offer up anything that convincingly demonstrated more than a few hundred million worth of ideas. At best they were talking about stuff they might do this year, not how they would actually get us out of this.

To put that number in some perspective, these are the important taxes and expenditures for 2007, 2010 and 2011. Between them they account for about 75% of the whole equation.

 

2010

2011

2007 (!!)

Income Tax

11.1

11.5

14.3

Corporation Tax

3.8

4.1

6.7

VAT

10.2

10.7

14.6

Excise\Stamp Duties

5.5

5.9

9.9

Education

-7.9

-8.4

-7.6

Social Welfare

-13.2

-14.2

-7.4

Health Services

-10.8

-10.6

-10.6

 

The 2007 numbers show just how extremely trashed the economy has been by the collapse – at that stage the four main sources of income exceeded the three main expenditure items by a more than 80%. Now income from them is 20% lower than the expenditure on those three alone.

Now ask yourself how any tweaking of the system can find €14bn in there without causing levels of hardship that are sure to cause a revolution.

Nobody is addressing this elephant in the room with any honesty – the numbers can be made add up but it’s got to be a combination of savage cuts in areas that haven’t seen real cuts yet (Education\Health), savage cuts in social welfare along with massive increases in Income tax, VAT and Excise. Corporation tax is a bust much as I would prefer it to be otherwise, any significant increase there will simply lead to offshoring of profits or disinvestment.

The problem with this is that the Irish population simply will not vote for someone who tells them that even if it is true and even if someone actually does manage to go so far as to implement it there will be blood on the streets. Note how outraged people are with the impact of the 2011 Budget, and just look at how trivial those changes actually were in the context of the immediate problem.

The other elephant in the room is that while growth could help make these numbers a lot more attainable the debt and interest burden required to fund ourselves until we get this into balance adds significantly to the problem – we’re running on a treadmill that’s accelerating there. And don’t forget that each €2bn in savings in expenditure translates into at least a 1% reduction in GDP if not more. So that’s another treadmill on top of the debt one that we have to race against.

Until someone puts some realistic numbers on genuine alternatives (wealth taxes that take into account the inevitable flight of wealth as a result, real property taxes, levies on natural resources (those gas fields off Mayo spring to mind) I can’t see how there’s any way out of this.

And I sure as hell don’t believe that any of our politicians have a clue how to do it either.

Tuesday 1 February 2011

Then and Now – Running a Country into the Ground.

Any monkey can run a business, or a country, when revenues are rising rapidly. It requires no skill to appear to be successful, because you can hide your mistakes easily and nobody asks hard questions when the money appears to be flowing. What does require skill and wisdom is recognising the danger that presents and acting pre-emptively to ensure that when your luck changes you are in a position to weather the storm.  Clearly none of our politicians have that skill, the promises made in advance of the last election are worth examining now as a measure of how they are all guilty.

I’m amazed that it now appears to be blazingly obvious to everyone that the tax base we had at the time was fragile and over exposed to construction. The fact that not one of the above documents gave the slightest indication that building a sustainable, recession proof tax base was on anyone’s mind a mere 9 months before the current disaster started to unwind is a good indication that the same people are not really equipped to get us out of this mess, regardless of party. Whatever options they put forward for consideration this time, they better show some better analysis of both sustainability and actual vision. It gets even worse if you go back further.

And don’t get me started on the Greens. Or Sinn Fein for that matter. At least the bloody PD’s did us all a favour and died out.

Primetime had a few notable numbers that we should all keep in mind with the election looming. Obviously we’re all aware of these, and the even more tangible reduction in net income after the last few budgets but it’s worth remembering that this is how badly screwed we are. And we would still be here no matter who had won the last election…

Despite last Decembers budget we are still running at expenditure levels that are almost 50% higher than revenues and this is before any of the punitive effects of IMF\EU “bailout” funding kicks in.

  2007 2011
Tax Revenues €48bn €33bn
Unemployment 158000 349000
National Debt €38bn €93bn
Deficit -€1bn (Surplus) €14bn (deficit)
Average House Price €340000 €191000

 

What I want to see is grovelling apologies across the board from all of these clowns and something that will genuinely convince me that they know how to [a] get us out of this and [b] make sure it can never happen again.