Ireland's Unemployment Rate hits 6.7%-FG motion in Dail

According to the CSO, Ireland's unemployment rate now stands at 6.7% of the labour force, up from 4.6% this time last year. These horrendous figures were announced today.The Live register shows a seasonally adjusted increase of 15,800 during October. Ireland's deficit stands at 7% of GNP.

An FG motion in the Dail tonight calls for the following:

"The Government must overhaul FÁS and provide a public works scheme for the unemployed. We need to restore competitiveness and support business, especially small/medium enterprises. We can do this by freezing Government charges such as rates and development levies; bringing down utility costs for electricity, gas, water and telecommunications; investing in infrastructure, in particular broadband, road and rail; cutting back red tape; reversing the hike in VAT; suspending the pay deal; consolidating labour law and abolishing anti-employment provisions such as double pay for Sunday working in the catering sector, and crucially wasting no further time in recapitalising the banks so that business, large and small, can get credit."

The deficit has not been brought under control. A mini budget is likely in July of 2009 after the local elections to arrest the slide. Further cut backs may drive the economy into a deeper recession. Meanwhile unemployment will surely hit 300,000 by mid 2009. Looks like Hobson's choice for the government. The FF/PD government could have reined in public expenditure in the run in to the 2007 General Election. Instead it permitted a growth of 25% in public expenditure over two years. It might even have won the General Election without this. Now it may pay a heavy political price.Three rocky years lie ahead if we are lucky. Hopefully the fall in interest rates and fuel prices may offer some small respite.

Irelands Harshest Budget in living memory-Taxpayer and Consumer blues.

This budget was set against the background of a horrific deterioration in the public finances caused by the bursting property bubble in Ireland and by international factors. In the two budgets prior to the 2007 general election the FF/PD government allowed public expenditure to grow by 25%. This growth in public expenditure was supported by huge tax inflows from the property sector. Now that these have largely dried up the Government was left high and dry. The Government is now heist on its own petard.
This was an accident waiting to happen. Taxes from the property market are notoriously unreliable.

This is the harshest budget in living memory. Even to outline some of the harsh measures sends a chill through the bones.
There are some minor beneficial changes in Social Welfare Payments and Tax Bands allied to provisions geared towards innovation and R and D. There are some aids for the property market. However this is a TAKE budget which will raise an extra €2 billion in taxes. Government Borrowing is forecast at 6.5% of GNP. This is much too high. The EU requirement is 3%. In essence the Government must borrow €13 billion.

Income tax has been increased. A levy of 1% has been placed on all income up to €100,000 and at 2% on earnings over €100,0000. This is an income tax rise by another name. The PRSI ceiling has been raised also. Mortgage relief for non-first time house buyers has been cut from 20% to 15%. A €200 tax has been introduced on all benefiting from employer provided car parking in urban areas. Motor Tax rises by 4%/5%. Those who own a second property face a new € 200 tax. DIRT ,Capital Gains Tax and VAT have been raised.

The government has cut back financial support to local authorities so a massive hike in commercial rates and water rates will filter through.

Automatic entitlement to a Medical Card for all over 70s has been withdrawn. There is to be a 20 % increase in private and semi-private bed charges in public hospitals and Accident and Emergency charges are to increase by 50% from €66 to €100 for non medical card holders who attend A&E departments without a letter from their GP. The Drug Payment Scheme (DPS) threshold is being increased from €90 to €100 per month which, the Government says, will lead to savings of €15 million in drug costs.

The Registration Charge for Universities has been raised from €900 to €1500. The pupil teacher ratio in schools has been increased.
Petrol will rise by 8 cent per litre.
The budget will cost middle-income families an average of €2,500 per annum. There will be a €10 airport charge for passengers.
There are also some social welfare cutbacks.
The hair-shirt is back in Irish politics with a vengeance. It is likely that consumer confidence has been severely dented. In addition it is probable that two more harsh budgets may be in the offing.

Irish Public finances take another hit in July

Embedded from RTE.IE

Worst Deterioration in the Public Finances in History Sees Taxes Fall 9% Below Target.

"- Monthly tax take was €776m (18%) short of expectations

- this is by far the worst month so far for the public finances. VAT proceeds alone were €447m (or 20%) below expectations, while all major tax heads were significantly below target.

- For the year-to-date, tax receipts are now €2.2bn (8.9%) below budget expectations.

- Only last month, the Government produced a revised budgetary forecast predicting that the tax shortfall would be limited to around €3.0bn (a 6.1% shortfall).

- But if the current trajectory for taxes continues (and there is no reason to expect it to improve), and assuming the Government manages to limit spending in line with budget allocations (which is by no means certain), we can now expect the tax shortfall to be at least €4.4bn (8.9%).

- This would equate to a General Government Balance of around €6.2bn (3.3% of GDP), suggesting that Ireland is on course to breach the EU's 3% of GDP borrowing limits this year.

- These figures represent the worst deterioration in the public finances in the history of the State."FG

Ireland-Exchequer deficit is €5.65bn for first six months as recession looms.

The Exchequer returns show a deficit of almost €5.65bn for the first half of the year (2.75% of GDP). Tax Receipts at €19.127 billion are €1.45bn lower than anticipated for the first six months of the year. The lower tax receipts are due mainly to the poor performance of VAT and capital gains tax. The tax shortfall for the full year is expected to come in at €3bn. The collapse in the house-building sector has impacted strongly on tax receipts. Only 40,000-45,000 new houses will be built this year. The folly of over reliance on this sector is plain for all to see.

Total current receipts in the first half of 2008 were €19.525 billion compared to receipts of €21.124 billion for the same period in 2007.
Non-tax revenue in the first six months of 2008 was €398 million. This compares to €310 million for the same period last year.

Brian Cowen’s Government must administer some harsh medicine. The country faces swingeing public expenditure cuts and huge rises in stealth taxes as Finance Minister Brian Lenihan attempts to grapple with the problem. Increased exchequer borrowing will also help plug the gap. In addition interest rates will remain high as the European Central Bank grapples with inflation. Increasing interest rates at this time is economic lunacy and will serve to strengthen the Euro further. This will reduce exports from the Euro zone. Irish exports have begun to lag. Much of the Euro inflation has resulted from higher oil prices. So it is arguable that interest rates should not be increased.
Tightening of lending policies by the banks will hinder investment.

Pay rises below the rate of inflation will take further steam out of the economy. There is a danger of stagflation if public expenditure cuts are too severe.
In addition unemployment has risen rapidly in recent months. It broke the 200,000 barrier last month and currently stands at c207,000. Where is the purchasing power to come from if the consumer lacks sufficient disposable income?

In recent tears public expenditure has galloped out of control. It rose by 13% in 2007 in the run in to the General Election and by 50% over four years. Huge tax receipts from the then booming building sector funded much of this. The FF/PD Government erred in not restraining public expenditure. Excessive public expenditure fuelled inflation in an economy that was already growing strongly.
It threw petrol on the fires of economic growth. Restraints in public expenditure in good times would have provided the Government with some leeway.

There has been a tendency to dump on economists who warned that this scenario would unfold. David McWilliams, Alan Aherne and George Lee in particular have come in for strong criticism. Richard Bruton FG Spokesman on Finance has long criticised Government policy. Critics were accused of talking down the economy. Of course this is utter nonsense
Interestingly George Lee was referred to today on an RTE programme as George Gloom. Attack the messenger when you do not like the message. What utter nonsense. It is time for realism.
Some debate has cantered on the dreaded “R” word. The country is either in recession or about to enter a recession. It can weather the storm.

Ireland: House construction nose-dives

In 2006 approx 93,000 new houses were built. In 2007 this dropped to 78,000. The prognosis for 2008 is bleak with forecasts generally in the range of 40,000 to 45,000 house completions. The estimate for 2009 is even bleaker with suggestions that figures could drop to 37,000. In 2007, 20,000 construction workers were laid off
Clearly the bubble has burst.

There are a number of reasons for the slow down:

(1) The 2% rise in EU interest rates is a contributory factor.

(2) Uncertainty on the Stamp Duty issue contributed to the instability.

(3) Excessive house price inflation has priced houses out of the reach of many in the middle class.

(4) The Government tax takes is too high.

(5) The 5% general inflation rate has weakened purchasing power.

(6) Up to 200,000 houses remain unsold.

A major reduction in EU interest rates will not be sufficient to return the house building sector to health. Further reductions in VAT and Stamp Duty are required. The 200,000 overhang in unsold houses must be substantially cleared. A further substantial reduction in house prices is required. General inflation must fall substantially.

The implications for Government finances are quite severe. There was an Exchequer surplus of €2.3 billion in 2006. A deficit of €4.9 billion is projected for this year.
Tax receipts for January and February are 684 million lower than for the corresponding period in 2007 . VAT receipts for January and February are 7.3% lower than anticipated whilst Stamp Duty receipts are down 44% on the first two months of 2007. The unemployment hate has risen to 5.2%. A rocky road lies ahead for the economy.