THERE IS cross-party acceptance in the Dáil that the government has to make €4bn in savings in one of the most severe budgets in the state's history.
With little over a fortnight to go until finance minister Brian Lenihan wields the axe, nobody can argue he is in a most unenviable position.
So as he prepares his budget, the Sunday Tribune asked five people from various walks of Irish life to put themselves into Lenihan's shoes.
We challenged our 'Fantasy Finance Ministers' to come up with ways of making the necessary radical savings on budget day.
We asked economists of polar-opposite perspectives, two leading entrepreneurs and a woman with one of the most astute accountancy brains in the country to imagine walking down the blue carpet in the Dáil chamber on 9 December to deliver the mother of all budgets.
How would they make €4bn savings? What areas are ripe for pruning? And what, if any, areas of government expenditure are sacrosanct?
This year's government deficit will be approximately €22bn, despite substantial tax increases in last year's budget. Most of these tax increases have been counterproductive as tax receipts have fallen substantially. Savings of €4bn are hopelessly inadequate if this government is to prevent Ireland returning to a spiral of borrowing, excessive national debt, unemployment and emigration, which characterised the 1970s, '80s and early '90s, before the feckless ditherer Bertie Ahern came to power.
If I were finance minister I would try to identify €20bn savings in one year, and ask everyone to share in this short-term pain, for the near-term gain of returning Ireland's economy to budget surpluses and growth. This needs leadership and vision which would start by scrapping the useless social partnership. Here's how I would go about saving €20bn in 2010.
From 1 January 2010, I would close the more than 1,000 government quangos which currently exist, making all of the useless bureaucrats who populate them redundant and saving €8bn per annum.
I would require all public-sector employees (including the Dáil and Seanad) to work a minimum 40 hour week, with a maximum of 20 days annual leave. No public-sector basic pay would be cut, but all other allowances would be withdrawn. Public-sector pensions would all become defined contribution from 1 January 2010 as well. Any public-sector employee who doesn't like it, could resign, effective from 1 January and get a job in the private sector instead, where all of these terms are standard. Since this would improve productivity in the public sector by at least 20%, every fifth public servant would be made redundant and this would save €5bn.
I would implement the McCarthy report in full and save €5bn a year and reduce all social-welfare benefits, including children's allowance, by 20% saving €4bn a year.
I would also scrap the Dublin Airport Metro (saving €5bn), and sell all semi-state monopolies including ESB, Bord Na Mona, DAA, Iarnóid Eireann and Dublin Bus to the highest bidder, making a one-off saving of €10bn.
Since the above €32bn in recurring and one-off savings would eliminate government borrowings within one year, I would then reduce the tax rate for all people earning less than €70,000 per annum by at least 5%, to encourage/enable them to return to work and encourage employers to create more jobs in Ireland, rather than exporting them to lower-cost countries elsewhere.
I believe that €4bn is the minimum that should be taken out of the economy in 2009.
The introduction of water charges could raise at least €400m. Paying for water makes eminent sense, because anything we get for nothing, we do not respect.
A 20% cut in child-benefit payments, with some offsetting compensation for low-income families. The net gain from this could be as high as €400m. The taxation of benefits would make more sense, but would be difficult to implement and would take time to engineer. We do not have that time.
Increase the Corporation Tax rate to 15%. Such an increase could raise €600m. An increase in the corporation tax rate of this magnitude would be unlikely to do much damage to the Irish corporate base and would spread some of the pain of the fiscal adjustment between workers and the corporate world.
A 10% pay cut for earnings in excess of €50,000 in the public sector. This could save up to €500m in a full year. A 5% cut in the social-welfare bill could save €1bn.
An increase in duties on tobacco, alcohol and motor fuel will raise €600m. The rest could be made up by increasing the employee PRSI ceiling and the non-indexation of credits and bands. A carbon tax will raise at least €450m but it could be set much higher to raise up to €1bn.
Firstly, I would take a swipe at the Department of Agriculture as it spends €2bn a year. Farming has changed forever in recent years yet we are still spending colossal amounts of money on the department. We need to look at bodies like Teagasc and if there is no future in farming, why are we spending valuable government money on a dying industry?
As an entrepreneur, I believe that social-welfare payments are crazy. Giving €205 a week to an unemployed person is too high. An unemployed couple both getting €205 a week plus rent allowance and children's allowance could net €35,000 a year. The contrast to that is a working couple trying to struggle on meagre salaries and trying to pay their mortgage.
We need a radical cut in social-welfare payments and there should be a stiff penalty on social-welfare recipients found doing 'nixers'. I would have a gradual reduction in dole benefits over a period of time and I would parachute in a bonus payment of €500 if you leave the dole.
Elsewhere, there are 46,000 public servants earning over €100,000 and that costs €4.6bn a year. I would save half of that as there are too many higher-earning civil servants. We need a root-and-branch appraisal of what these people are doing. We should also focus on overtime payments, sick allowances and maternity payments which are all superior to the private sector.
I would close down Fás and save €1bn a year. That is what it was spending when we were at full employment. Fás is beyond repair. Training needs to be provided for the unemployed in a modern cost effective manner. Fás cannot reinvent itself to provide these services.
We also need to stimulate the economy by dropping the minimum wage, keeping income-tax levels the same to encourage people to stay in work, get the banks lending again and ignite small business. Just because we are going through a bad patch does not mean we should cut the Irish Aid budget and hurt people who do not even have food.
First of all, I recognise the extraordinarily difficult task Brian Lenihan has and I don't envy his position. It is extremely difficult to make €4bn cuts without affecting virtually everyone in the country in a negative way and as a politician, who is interested in getting re-elected, he won't want to annoy future voters. But it is very hard to see how he can avoid that. Equally, I would say that one of the heroes of political life in our lifetime would be Ray MacSharry who made the tough decisions when he had to and I think that should be a model for Lenihan to emulate.
In the short term, it may have adverse consequences for the current government but in the longer term they will be respected by the population if they stabilise the economy. My mother-in-law had a great saying "divide small, go over all" and it is hard to see how the €4bn cuts can be achieved without dividing small and going over all, with the best-off taking more of the cuts than the less well-off.
Ireland also needs to get its cost base down as we have lost our competitiveness and need to get that back.
The minister can either increase taxes or lower costs. My own preference is for lowering costs because having a lower tax base is part of a more competitive society.
Our low tax regime has attracted international investment so I wouldn't touch corporation tax. That is the number-one reason for multinational companies coming to Ireland.
In the public sector, where I work, we need to be more efficient. My colleague Colm McCarthy set out ways of making the public sector more efficient in his report and I think that should be implemented. We need more efficiency on the payroll side across the board in the public service. We have to do this for our children or we will land them with a millstone around their necks.
We should take the sharp shock of pain now rather than dragging it out over a longer period. Colm McCarthy has set out a very good template to follow.
Tax is already being borne by the better-off to a significantly higher proportion and I agree with that. If you further increase taxes or introduce a tax for the super rich, you make Ireland an unattractive place for wealthy people to work and that is not a good thing for everybody.
You want to attract people who will bring capital to Ireland and we want to make Ireland attractive for foreign investment. We have to be very careful not have the unintended consequences of taxing the super-rich.
I also have no doubt that there are opportunities for streamlining state agencies. This could be effective cost wise and make the agencies more efficient for doing business. At the moment it is difficult for people to know where to access state services and this will make it more consumer friendly.
The government should implement many of the 110 recommendations from the Commission on Taxation in regard to tax-avoidance expenditures. In doing this it could find at least €1bn in savings this year through removing avoidance mechanisms such as the tax emption for patent loyalties, the PRSI exemption for employee share options and many others.
There is still compelling evidence that income and wealth in Ireland is very concentrated among a relatively small number of individuals. In 2006, Bank of Ireland Asset Management estimated the new wealth, excluding the ownership of the family home, of the top 1% of Irish society at €70bn. Property has fallen by 40% from its peak and share prices have fallen significantly also. As a result, a conservative estimate of the current value of this net wealth is €40bn. A wealth tax of 2.5%, excluding the family home, would net the exchequer €1bn this year.
The introduction of the carbon tax would net the exchequer €500m next year. The ESRI analysis suggests that €20 a tonne be charged on CO2 emissions. Most of this would be levied indirectly on the consumer by an eight cent per litre increase in petrol, diesel and home heating oil. Industry would pay according to the weight of their emmissions.
The government has itself attempted to create a civil war between private and public-sector workers. The introduction of a new tax band with a top marginal rate of 54% for those earning over €100,000 would net €1bn for the exchequer next year. Those with the highest incomes from within both sectors would pay more, simply on the basis of income. This would counter the need to introduce what would be regressive taxes on low-paid workers. The figures illustrate that this course of action is best: there are 140,000 people earning over €100,000 in the state and nearly 50,000 of these earn between €150,000 and €1m. On the other end of the scale, 700,000 earn less than €20,000 with these included in the one million who earn less than €30,000.
As the Tasc report noted last week, the lower-income earners spend all their money in the economy while a significant proportion of the highest-income earners' money is saved or leaks out of the economy on luxury goods. Consequently, to tax the earners whose spending power is used to keep people in jobs would be perverse.
We could save hundreds of millions if we stopped paying rent allowances, job-seekers, welfare etc. etc to foreigners who have been brought here by Fianna Fail. Why are thousands of foreigners still arriving here every month?
That's right P McHenry... it's not us, the greedy, shortsighted and down right stupid irish that got ourselves in to this mess. It's all those foreigners that voted for the dimwits Ahern, Mcreevy and Cowen. It's all those foreigners that bought 4X4s and mega plasma screens and overpriced dogboxes of houses plus a holiday dogbox in the back of beyond.
Grow up P McH. This is a self inflicted wound. Now get over it.
P mc Henry.
there is a party in Britain called the BNP.Why dont you piss off over there and join them if you want to be a racist!
You are very quick off the mark with the 'r' word when somebody posts that there is very large expenditure by the state on non-nationals (possibly newly unemployed), who correctly see the level of benefits here are far superior to those available in their home countries. Some are arriving still in what can only be described as "Welfare Tourism". It's a luxury this country can no longer afford.
Brian,
There is a party in China called The Communist Party. Why don't you emigrate there if you don't believe in free speech.
Hi there, a foreigner here. Will I be given a chance to show my P60 before I get skinned alive, or does the amount of tax and PRSI I've paid not matter, because it's a matter of finding a convenient scapegoat?
http://www.ronanlyons.com/2009/11/13/...
I just want to say, that everybody was very happy then these foreigners were working for very little money, paying taxes and so on. But when the situation got bad you are saying that they have to leave Ireland. Nobody is getting anything for free. They paid all their taxes and bills same as you did. I think that it is unfair to blame foreigners for the current situation.
Typical bleeding hearts. In the face of blatantly true statements chuck in the racist card. It's obvious new arrivals are compounding the problem not easing it. Fair enough they didn't cause it but logic tells you to put it on hold 'til this mess is sorted out.
when the illegal Irish in the states are deported and you are willing to accept the strain they will have on the ecomony, then I will see your point of view.
What've the Irish in the states got to do with it? the new arrivals are contributing to the pressure on the system not the ones who are leaving.
that's right Mr FARRELL,and where exactly do you claim to hail from and why should you give a toss?
Illegal immigrants should be deported, no matter who, what or where they are.
Brian,I live in Australia and I don't give a toss. What about yourself?
FARRELL,Im a bleeding heart
you re a RACIST!
I d rather be me than you any day!
Whats worse is that you re a RACIST living in a FOREIGN land!
Just what I wrote to you about last week, Sunday Tribune, that the racist's would waggle their dirty tongues & set their crazed minds on the immigrant's who done most of the work in this country during the "Celtic (now, meow) Tiger". & Brian above, are you for real? I thought people like you vanished from the face of the earth in at least the last thirty years, after Ireland became modernized in its thinking & behaviour towards other human beings no matter their place of birth or colour of their skin. Seems I was wrong & there are obnoxious superior ilk’s who think they can pick on others & make the rules up as they go along. It's this type that need to be deported, even if they have nice Irish names which whose brain that the name represents is sick in mind & are dangerous to the rest of us in that they think they are superior human beings. But they are not...they are bullies & cowards & wrong in their "Mindsets"!
Brian perhaps you're upset. You forgot to answer my question. When I have a barbie the guests are spread right across the colour, creed and race spectrum and we discuss all sorts of subjects.We never fall out or call each other names when we differ.(It's called freedom of speech).
P.S my Aussie grandkids think Ireland is a foreign land.
I do not have anything against people leaving their own country when things are bad but we are such a small country and we have only got rid of the Brits out of the "so called" Free state a few years, (mind you there are hundreds of thousands of Brits still in the so called Free state, taking Irish peoples jobs) but I was in Tesco one evening and for the duration of my time there I was in shock, all foreign accents everywhere, Polish, Indian, African, and I other nationality's I could not figgure out, I actually felt I was in another country, I actually searched for some Irish looking people and was so glad for once to see an athlete. It took me a while to shake it off. Now I am not racist and I love to see our Afracian brother's here and I would like to think that the Irish try to make them happy in this country after all we have been tortured together over the centuries by a foreign hand, so I welcome our African brothers but to the rest, (especially the Brits) I want by country back and the Government only invited the rest of the foreign nationalists to help with the property bubble. Slainte.
V Gerrard,All countries in the world, including you'r own, have immigration and asylum laws which state that illegal immigrants should be deported. All racist?. Social welfare accounts for 38% of total state income, of which nearly half must be borrowed. The ECB will not allow any higher borrowings. With new PPS No's still being issued as before, who is going to pay?
Cut the Old Age Pension, Sick Benefit or the Health Service ?.
People who worked and payed their taxes are entitled to welfare payments, welfare tourists are not.Sanctimonious, self-righteous claptrap and puerile cat-calls will not change anything.
Michael O'Leary is the man to take over Ireland Inc- He's got the ideas that would put us back on track...
Okay that's the fantasy finance issue sorted- but reading the previous comments you'd start to wonder if the Klu Klux Klan had opened a new office in Dublin.
For the record 40 million people hold Irish passports. Irish love to travel and live in other Lands around the World.
So stop this nonsense about foreigners coming to live in Ireland as being a bad thing- The Irish are the last people to preach on emigration.
what a horrible little country you have there,infested with perverted priests,sleazy politicians,slimy business men,ignorant racists and on top of all that a CRAP soccer team!
As if that was'nt enough the Irish have to be the ugliest race of people on the planet..you did well to get the hell out of it FARRELL!
listening to the latest accounts of sexual abuses perpetrated by the catholic church,I can already predict the outcome.everyone is OUTRAGED for a few days and abolutely NOTHING changes!
You send citizens to jail for the pettiest of crimes while corporate crime is covered up.Even the Italians would not stand for this rubbish.
I am making an appeal to the good,honest people of Ireland who have remained uncorrupted to find the courage and honour to stop and change forever this evilness within your society.Forget about positive thinking..get REALLY angry and stay ANGRY.get out on the streets and STAY out on the streets.Do it for your children if you no longer credit your own self-respect!
and Yes FARRELL,I do give a toss,because no matter where you are in the world it is our duty as citizens of the world to stand up to injustices and help small manipulated and weak cultures who cant seem to help themselves!
Brian, it's obvious you give a toss but you're wasting your time. Do what I did. Leave them to it.
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Smug, arrogant, self-important, brain-dead insiders are some of the things that come to mind when reading most of the above. It was the thinking of just such that got us into the trouble in the first place.
Just a few points.
Putting thousands of so called 'useless bureaucrats' on the dole would just change the government department through which they were paid and denies the importance of public goods and externalities to the proper functioning of the market economy.
Increasing corporation tax would be lethal.
Calling the agri-food industry which earns nearly a third of net foreign earnings is brain dead stuff.
Building a wall west of Chapelizod and south of Newland's Cross and abandoning everything outside, as McCarthy has recommended, is hardly saving the nation.