Ireland – Tax Revenue shortfall for 2008 to reach €8 billion plus (The 2009 current deficit is likely to come in at around €8 billion)

Figures released show a massive shortfall of close to €7.5 billion in the amount of tax revenue collected by the Government during the first 11 months of the year. Already revenue projections in the October budget are seriously out of line. The October budget forecast a total tax shortfall for 2008 of €6.5 billion. It is now probable that the shortfall for the year could exceed €8 billion. Tax revenue is 16 per cent behind projections made at the start of the year. VAT is €2.1 billion below expectations, capital gains tax is down €1.7 billion and stamp duty is €1 billion below target.

The 2009 Exchequer deficit appears headed for €16.5 billion and the associated General Government Deficit is likely to be 8% instead of the 6.5% projected in the recent Budget. The 2009 current deficit is likely to come in at around €8 billion.
These are horrific figures, which rule out the possibility of a financial injection by the government to reflate the economy. The government has absolutely no leeway. The over expansionary budgets in 2006 and 2007 by the FF/PD government led to an increase in public expenditure of 25% and also fuelled inflation. This was tantamount to pouring petrol on the raging fires of economic growth at a time when it was necessary douse the flames. This spending was supported by revenue from an unsustainable property boom.

The government is now trapped. It lacks the financial wherewithal to boost the economy. Internal revenue sources are shrinking. The property bubble has burst. Unemployment has reached 251,000 and will continue to rise sharply.

The FF/Green government will endeavour to tackle the problem by a combination of further public expenditure cuts and a reduction of public service numbers. It may also target public service pay. In a doomsday situation a 10% pay cut could not be ruled out.

Latest ESRI report paints gloomy picture on the economy:Ireland is now in recession

According to The Economic and Social Research Institute (ESRI) in its latest Quarterly Economic Commentary the economy will experience a recession this year for the first time since 1983, and a return to net emigration in 2009. Ireland of the Celtic Tiger is no more.

It expects that the economy will contract in size by 0.4% this year. The ESRI calculates that the volume of domestic spending this year will fall by 2.6 %. Investment spending is expected to fall by 14.9%. Real consumer spending growth in 2008 is expected to reach just 1%.
The ESRI predicts an economic growth of 1.9% for 2009.
It expects that net emigration will reach 20,000 in 2009.

The unemployment rate is forecast to rise from 4.5% in 2007 to 6% this year and 7.1% in 2009. The Government had a budget surplus of €5.2 billion in 2006. It will have a budget deficit of €7.4 billion in 2009 according to the ESRI. This represents a deterioration of more than €12.5 billion in the space of three years.
The ESRI predicts an inflation rate of 4.5 % for 2008.

Quite frankly many of the problems were foreseeable three years ago. In the run in to the 2007 General Election the FF/PD Government ramped up public expenditure. It rose by 13% alone in 2007. It undoubtedly helped FF win the General Election. However the flood of taxes into the Government coffers-which supported this splurge- stemmed mainly from an unsustainable property boom. Now the bubble has burst with house construction down from 90,000 three years ago to 40,000-45,000 this year.

The economy was growing strongly in 2005, 2006 and 2007. It did not need a huge injection of public expenditure, which just fuelled inflation. Richard Bruton FG spokesman on Finance railed strongly against this approach as did some economists such Dr. Alan Ahearne , David McWilliams and George Lee. Dr Alan Ahearne warned about the dangers of a crash in house prices. More recently Jim Power has been critical.
Unfortunately many economists were swept along on the tide of boom and bloom.
Critics were painted as prophets of doom who were talking down the economy.

A more prudent approach to Government spending from 2005-2007 would have allowed the Government some leeway. Now the cupboard is bare. There are precedents for the inadvisability of the budgetary strategy adopted by FF/PDs in 2006 and 2007.
The boom bust approach was adopted by FF in 1977-81. Its 1977 Manifesto was a winner with the electorate promising no rates and no car tax. FF inherited an economy, which had come out of recession and was growing solidly. The Lynch and Haughey Governments pump primed public expenditure –much of it funded by borrowing. By 1981-82 the economy was in serious trouble. The hardship of the 80s had its genesis in this irresponsible Manifesto.

In the run in to the 2002 General Election the FF/PD Government let public expenditure rip. Once more Charlie McCreevy slammed on the brakes in the wake of the 2002 General Election.
The FF/PD/Green Government is now facing a double whammy. Internally tax revenue is way below expectations, the housing sector is in free fall, inflation is close to 5%, and unemployment has risen by 48,000 in the last twelve months. Externally rising fuel prices and higher interest rates have impinged strongly on the Irish economy.

The ESRI expects the general government balance to show a deficit of 2.8 % of gross domestic product this year after a 0.3 percent surplus in 2007 and worsen to a 3.9 % deficit in 2009.
"On the face of it, a breach of the 3 % ... (EU Stability and Growth Pact) guideline in a single year does not signal the death knell of fiscal prudence and given our very low debt levels could well be afforded," it said in the survey.

This advice from the ESRI should be binned immediately. The country cannot buy its way out of the mess. Unfortunately hard decisions on public expenditure are necessary. The advice from the ESRI would return Ireland to the failed policies of the late 70s and 80s.
It is likely that the real tax burden will rise. This will be supplemented by increases in stealth taxes such as local authority charges, and by large public expenditure cuts. All in all not a pretty picture.

Irish Times /TNS mrbi poll shows FF support has returned to General Election levels as FF benefits from Cowen honeymoon

The adjusted figures for party support, compared to the last Irish Times poll in January, are:

• Fianna Fáil, 42 per cent (up eight points);
• Fine Gael, 26 per cent (down five points);
• Labour, 15 per cent (up three points);
• Sinn Féin, 6 per cent (down two points);
• Green Party, 4 per cent (down two points);
• PDs, 1 per cent (down two points
• Independents/others, 6 per cent (no change).

Undecided voters stood at 15% .

The results of this poll are distorted by the avalanche of positive publicity received by Brian Cowen since his election as FF leader. In fact there was saturation coverage. It was inevitable that FF would rise sharply from the 34% in the last poll. FF support is now at the same level as that obtained at the 2007 General Election. One expected that a photograph might appear showing Brian Cowen piloting an aeroplane. The adulation reached levels that are unsustainable in the long term.
FG support is at 26% just 1% below that obtained in the 2007 General Election. This is within the margin of error. In contrast to Cowen, Enda Kenny has been subjected to an ugly campaign of vilification by some elements in the media. Nevertheless he must become much more forceful on economic matters.

Both FF and FG are broadly speaking on the same level of support as obtained by both parties in the 2007 General Election.

Since this poll was taken last Monday, much gloomy economic news has seeped out in relation to building and construction, gas and electricity prices. In addition further serious problems have appeared in the health sector.

The ESRI report has a positive spin. Nevertheless when analysed there is little certitude in relation to the Irish economy. The report was a case of live horse until you get grass. Independent newspapers and the Irish Times emphasized the positive elements in the report as did RTE.
Soft publicity will not insulate the Government when public expenditure cuts bite sharply. An electorate spoilt by the unsustainable rise in government expenditure-13% in 2007- will inevitably feel withdrawal symptoms.

Labour is up 4% on its General Election returns -probably at the expense of the Greens and Sinn Fein.

It is time to wind up the PDs.

Latest Sunday Business Post/Red C poll shows FF down 4% on 2007 General Election.

Since the March Poll another was taken in early April in the immediate aftermath of the resignation of Bertie Ahern. The latest figures must be judged against the poll taken in the first week of April.
The following is the outcome of the latest poll taken from Monday 21st April-Wednesday 23rd April. In brackets are the percentage changes since the early April poll.

• FF 38% (-2%)


• FG 29% (+1%)


• Labour 10% (NC)


• Greens 8% (NC)


• Sinn Fein 7% (-2%)


• PD 2% (+1%)

FF support is down 4% on the 07 General Election. Meanwhile the Government is faced with 5% inflation, a 30,000 rise in unemployment in the last three months, a shambolic health service, a likely deficit of €5/6 billion and an increasingly disaffected rural electorate disenchanted with the WTO. Harsh decisions will undoubtedly erode Government support further.

FG at 29% is up 2% on the 2007 General Election. With economic storm clouds gathering FG must aim to drive its support up to 35% to ensure that it will participate in the next Government.

Labour has remained static having secured 10.1% in the 07 General Election. Sinn Fein has undoubtedly eaten into the potential Labour support base.

The Greens at 8% are up 3.3% on their General Election result and are in all probability a temporary abode for dissatisfied FF voters. If we add 3.3% to the FF poll result of 38% we are quite close to the FF General Election outcome of 41.6%

Sinn Fein is static having secured 6.9% of the vote in 2007 General Election.
Sinn Fein appears in recent years to be a refuge for disaffected FF voters who return home in a General Election situation. In previous Sunday Business Post/Red C polls Sinn Fein trended higher when FF dipped to the mid 30’s.

The PDs at 2% are down 0.7% on their 07 election result.

New Red C/Sunday Business Post Poll shows bounce for FF but comes with health warning

A new Sunday Business Post/Red C poll carried out last Thursday shows a 5% rise in support for FF when compared with the previous weeks Red C poll. However it comes with a large health warning.

On Bertie Ahern's resignation the media provided uniformly positive coverage for Brian Cowen. There was coverage of Brian Cowen the family man, Brian Cowen the singer, Brian Cowen the sportsman, Brian Cowen the political heavy weight. Opposition parties were deprived of the oxygen of publicity.
In addition only 500 people were sampled so there is a larger margin of error than for the previous weeks poll. Assuming the total sample is 500, and made up of equal numbers of men and women, the margin of error for each gender could be as high as 6%.

It is likely that Cowen and FF will have a honeymoon period. However it may not last long. Economic storm clouds are gathering. The Live Register has risen by 30,000 since December 2007. New house completions will drop to c45,000 in 2008. The country is heading for an Exchequer Deficit of €6 billion.

• The State of the Parties is as follows:

• FF 40% (+5%)


• FG 28% (-2%)


• Labour 11%(No Change)


• Greens 9% (+1%)


• Sinn Fein 6% (-3%)


• PD 1% (No Change)


• Others 5% (-2%)

Ireland-The PDs a rudderless party in search of a leader

At a meeting of PDs General Council in Dublin today, it was agreed to amend party rules so as to enable senators, county councillors and other party members contest the leadership. Up until now only TDs could stand.

The party entered the 2007 General Election with 8 TDs and returned with two. Immediately Michael McDowell resigned. Defeated TDs Liz O’Donnell and Tom Parlon have moved on to pastures new.
Since the resignation of Michael McDowell the party has lurched from crisis to crisis. It has been unable to select a new leader as neither of its two TDs -Mary Harney and Noel Grealish- is interested in the post.

In an act of political desperation it prevailed upon Mary Harney to function as acting leader. Mary Harney has indicated that she has no intention of contesting the next General Election. Noel Grealish TD comes from the FF gene pool and has been quite supportive of Bertie Ahern at the Mahon Tribunal.
He has had secret negotiations with FF with a view to jumping ship. He is essentially a conditional PD.


The PD party grew out of the split in FF in 1985. This essentially resulted from personality differences between Desmond O'Malley and Charles Haughey. There were also major differences on Northern Ireland. At the root of these differences were the convulsions, which engulfed the FF Party in the wake of the arms crisis. Haughey never forgave the Lynch wing of the party. The PDs consisted of anti Haugheyites, a ragbag of independents, some disillusioned FGaelers, carpetbaggers and extreme right wingers. Many of its founders-as FF members -supported the disastrous FF Manifesto of 1977 which was a major cause of Ireland economic difficulties in the 1980s. Chief among these were Desmond O’Malley Martin O’Donoghue and Bobby Molloy. They were political opportunists who saw a gap in the market. They targeted the right wing of the FG Party. They have long been a parasitic party.


The party espoused low taxation and liberal policies. Their liberalism on social issues was phoney. The overwhelming majority of party supporters were conservative on social policy.
Income tax rates were reduced through shifting the burden to indirect taxation. Taxation as a percentage of GNP is rising in Ireland. From 2002 to 2005 the burden of personal taxation has risen. The FF/PD Governments have relied heavily upon stealth taxes and indirect taxation to plug gaps in public expenditure. The PD input in the last FF/PD Government was negligible. The PDs were masters of the political three-card trick. They have consistently formed coalition governments with FF. Prior to the 2002 General Election they strongly supported Charlie McCreevy’s huge public expenditure splurge. Similarly in 2007 they supported a 13% rise in public expenditure in the run in to the General Election. So much for fiscal rectitude. Haughey and O'Malley have departed the political stage. There are no major ideological differences between FF and the PDs. The PDs no longer have a raison d'etre. This Coalition Government is an FF/Green Party government. There were no meaningful negotiations between the PDs and FF in the wake of the 2007 General Election. The PDs just make up the numbers.


Senator Ciaran Cannon comes from the FF gene pool. He lacks the political gravitas to lead a political party.-especially a party which no longer has any core beliefs. He will use the leadership campaign as a vehicle to increase his public profile and thereby increase his prospects of winning a seat in East Galway.
From 2002-2007 Fiona O’Malley has consistently taken up policy positions at variance with government policy. She has often adopted a semi-independent role. Much of her thinking is muddled.
Today General Secretary John Higgins announced his resignation. This is apposite
The PDs stand on the edge of the political precipice. It is time to wind up the party.

Ireland-Exchequer Deficit Blues

Ireland will have a deficit of €1.62 billion this year, compared with an Oct. 2 forecast of €1 billion, according to the Department of Finance. This contrasts with a budget surplus of €4 billion just a year ago.

The Government must bear much of the responsibility for the deterioration in the public finances. In 2007 there has been a 13% growth in the rate of public expenditure as FF and the PDs wooed the electorate. This paid political dividends as the FF/PD government duly returned to power with the support of the Greens and Independents. Already many of the FF election promises have been binned. Prior to the 2002 General Election the FF/PD government allowed public expenditure to escalate out of control. In the immediate aftermath of the 2002 General Election FF Finance Minister Charlie McCreevy set about reigning in public expenditure and introduced a raft of stealth taxes. He failed to index income tax allowances thereby pushing large numbers of PAYE tax payers onto the higher tax rate. Prior to the 2002 Election FF and PD Ministers denied that there would be public expenditure cuts.

A similar scenario to 2002 has now unfolded in 2007. The Government will once more cut public expenditure and introduce stealth taxes. Over the next 2/3 years it will build up a a financial war chest. As the anticipated 2012 General Election approaches public expenditure will once more mushroom. Brian Cowen and Dermot Ahern -during the 2007 election campaign -strongly berated Richard Bruton(FG) Finance Spokesman when Bruton drew attention to both waste and rocketing government expenditure. He can now claim retrospective vindication. Many in the media have spoken of Cowen in messianic terms.

In less than two years the ECB has raised Euro interest rates by 2%. This has knocked some of the fizz out of the housing market. Stamp Duty receipts have slumped and lay offs in the building industry are increasing rapidly. This crisis has been exacerbated by the failure of the Government to reform stamp duty. House prices are falling and negative equity looms on the horizon. Mortgage debt in Ireland is now €136 billion. There is also an astronomical level of credit card debt.

New house starts may fall to c 55,000 in 2008. The huge slump in property tax receipts looks set to continue in 2008. In addition a tightening up of bank/building society lending policies will further restrict the amount of credit available to house buyers. For too long the government has been over reliant on taxes from the property market to boost public expenditure. One eighth of the workforce is employed in construction. 20% of private sector workforce depends on construction.

Rising energy costs will reduce economic growth.This has implications for unemployment which is already rising. Rising unemployment will further depress tax receipts and damage consumer confidence.

For FG and Labour this was the election to lose.

Ireland-Noel Grealish A Conditional PD

The news that secret negotiations have taken place between Fianna Fáil and PD Dáil Deputy Noel Grealish with a view to him ‘jumping ship’ is hardly surprising. The PD party resembles a ship heading for the rocks. PD members are as scarce as snow in the Sahara in most constituencies. The appalling general Election performance appears to have been the coup de grace.

The PD party grew out of the split in FF in 1985. This essentially resulted from personality differences between Desmond O'Malley and Charles Haughey. There were also major differences on Northern Ireland. The PDs consisted of anti Haugheyites, a ragbag of independents, some disillusioned FGaelers, carpetbaggers and extreme right wingers. Many of its founders-as FF members -supported the disastrous FF Manifesto of 1977 which was a major cause of Ireland economic difficulties in the 1980s. The party espoused low taxation and liberal policies. In reality income tax rates were reduced through shifting the burden to indirect taxation. Taxation as a percentage of GNP is rising in Ireland. From 2002 to 2005 the burden of personal taxation has risen. The PD input in the last FF/PD Government was negligible. The PDs have consistently formed coalition governments with FF. Haughey and O'Malley have departed the political stage. There are no major ideological differences between FF and the PDs. The PDs no longer have a raison d'etre.

Grealish comes from a strong FF background so it is inevitable that he will return to his natural political home. Apparently he is waiting for the results of an study into the future of the party. PD councillors are in many cases contemplating departure from the party. Many will probably join FF. Others will join FG.

Ireland-Red C Opinion Poll analysis

According to the Red C opinion poll in tomorrow's Sunday Business Post there is little change in the state of the political parties.
The telephone poll was taken on Monday, Tuesday and Wednesday. This was before the provisional licence debacle and the controversy over Ministerial pay rises. The last poll was taken in September.

• Fianna Fáil 39 % (-1%).


• Fine Gael 27% (No change)


• Labour 10% (-1%)


• Greens 7% (No change)


• Sinn Fein 8% (+2%)


• PD 2% (-1%)


• Ind/Others 7% (+1%)

All changes are within the statistical margin of error. PD support is abysmal. That party which has been reduced to two TDs appears to have no future at this juncture. The rise in Sinn Fein support is within the statistical margin of error and no firm conclusions can be drawn from the 2% rise. That party has been quiet since September has achieved little of note. The Greens stand at 7%. This is a honeymoon period for them. Much of that 7% is soft and will probably melt away as the Government implements unpopular public expenditure cuts.

A 1% drop for Labour is insignificant. Labour must wrest support from the Greens and Sinn Fein. FG has held firm at 27%. The party will be pleased with this outcome, as it appears to have held its General Election gains. The challenge for FG is to drive its support above the 30% mark. FG will be confident of mopping up Green middle class votes in the long term.The drop of 1% for FF is marginal. However it is down 3% on the General Election result.

Ireland-Health Service Executive is a bureaucracy which must be reformed

During Dáil Questions today (Wednesday), the Minister for Health admitted that the number of Grade Eight Middle Managers in the health service had grown by 37% and said she hoped there was scope for voluntary redundancies, according to Fine Gael Health Spokesperson, Dr James Reilly TD. Dr Reilly highlighted the plight of patients awaiting admission to the National Rehabilitation Hospital which cannot now discharge patients because of the health cutbacks.



Interesting to note the use of the word hope by the Minister. The Minister has expressed no concern for frontline staff laid off. No talk of voluntary redundancies for them. No concern for the patients. What are her proposals to halt this madness?



As Minister for Health, Mary Harney must take hard decisions to reduce administrative costs of the HSE. The HSE bureaucratic monster was established by the last FF/PD government to streamline the health service. It could shelter the FF/PD politicians from the backlash which would inevitably occur when hospital closures and cutbacks occurred. Whilst front line services are being cut in places such as Sligo,top executives may get bonuses of around €20,000. The number of Grade Eight Middle Managers has grown by 37% . Can she justify this? Of course not.

The Health Minister is unwilling to admit that patients will be affected by Government-sanctioned health cutbacks. With the onset of Winter the crisis is likely to escalate.

Ireland-Why FG is consistent on Shannon to Heathrow issue

When the Government decided to part privatize Aer Lingus it justified its decision on the basis that the national interest would be protected by the retention of a 25% shareholding. It is in the national interest that the Aer Lingus maintains the Shannon to Heathrow route. So there is no contradiction in FG's stance of opposition to the Aer Lingus decision to axe the Shannon to Heathrow route. It is now calling on the Government to use the 25% shareholding in the national interest as was promised at privatisation. Multinational Companies, tourist interests and the general public in the Mid West are up in arms over this. These groups are not card carrying Socialists.

IF Aer Lingus were a fully privatized company and if FG voted for full privatisation then FG could not justify any attempted state interference. The State is still a large shareholder so it is as entitled as any other shareholder to defend its interests. A certain bogus orthodoxy appears to have developed around this issue. It is claimed that this smacks of socialism. Not so. If the FF-PD-Green Party Coalition has no intention of using the 25% state shareholding in the national interest, it should sell it.

Aer Lingus rejects request for EGM

It is hardly surprising that the board of Aer Lingus has rejected a request from Ryanair to hold an Extraordinary General Meeting of shareholders. It was never likely to provide a platform for its competitor and arch critic Michael O Leary. The Ryanair boss is unlikely to accept this decision without a fight.
Of course the Government itself with its 25% share holding could call an EGM. This will not happen as indications -from Government sources- are that the Government will not intervene to alter the commercial decisions of a private company.
Promises given prior to privatisation have been quietly binned. The retention by the Government of the 25% share holding was supposed to protect the national interest. In reality it was a sop to mollify opposition. The Government must now use the 25% shareholding or else sell it. FF-PD Governments have a strong record of selling the family silver.

Enda Kenny the Fine Gael leader said his party will fight to ensure there will be an ongoing air service between Shannon and Heathrow.
Government deputies from the Mid West face grave embarrassment in the Dail when the opposition puts down a motion calling on the Government to maintain the Shannon to Heathrow route. Willie O Dea's bluff will be called. Jackie Healy Rae will rave and rant and then vote with the coalition.
Put up or shut up time is rapidly approaching for government politicians.