Ireland:Government plans public sector pay cuts-5% reduction likely with further cuts to follow

2008 Exchequer figures released yesterday confirm a 12.7 billion euro deficit in the public finances after the tax take came in 8.1 billion euro less than what was predicted for the year. Last year's tax revenues fell to levels last seen in 2005. At the height of the construction and property boom in 2006, the Government took in €10bn on property-related taxes, almost a quarter of all tax revenues. The government allowed public expenditure to grow by 25% in 2006 and 2007. This rate of public expenditure growth was patently unsustainable. However it helped FF to return to power in the 2007 general election. FG Finance Spokesman Richard Bruton in 2006 and 2007 warned the government of the likely consequences of this policy. These dire consequences have come to pass. Unfortunately the property boom on which this public expenditure splurge was based could not be expected to continue forever.

The crash in Irish building and construction has decimated property taxes. Unemployment is heading for the 300,000 mark further straining government finances. The rise in the value of the euro is increasing pressure on Irish exporters whilst the international recession is further depressing the economy. In 2009 it is likely that Ireland will have a negative growth rate of around -4%. Ireland is now caught between its own internal economic problems and the international recession.

It is anticipated that the deficit could reach 21 billion euro in 2009 without further remedial action. A public sector pay cut is a certainty. 5% is regularly mentioned as a likely figure. It is more likely to be at least 10% in the longer term. Finance Minister Brian Lenihan and Taoiseach Brian Cowen intend to consult with the social partners. Decoded this means a public sector pay cut with the blessing of the unions.

Russia Cuts off Gas to Ukraine in Dispute over Payment and Price -Western European Supplies Under Threat

Gazprom (Russian state gas monopoly) has stopped its gas supply to Ukraine at 10:00am January 1 Moscow time due to unpaid debt, though 300,000 cubic metres is still passing through Ukraine, as Gazprom has promised to maintain supplies to Europe. Ukraine’s Naftogaz (state gas monopoly), claims that it sent 1.5 billion dollars to settle its debt. Gazprom claims to have received no money. The talks over the contract for the 2009 supply have collapsed with no agreement.

Ukraine according to Vladimir Putin had been offered a price for gas of $250 per 1,000 cubic metres, a large increase on the $180 it had been paying but significantly lower than the free market price of $418. Ukraine is believed to have offered US$201 per 1000 cubic metres. Ukraine's currency the hryvnia has halved in value in the the past six months. This increases repayment costs for gas to Gazprom. Kiev has however three to four months supply of gas in storage-17 billion cubic metres.

There are a number of possible implications. The cut off could cause a drop in pressure in the transit pipelines or the Ukraine could halt the flow to Western Europe as a negotiating tool. The largest consumers are Italy, Germany and the UK. The Ukraine has stated that it cannot fully guarantee the transit of gas through its country. However it appears today to have modified its position and guaranteed supplies to Western Europe. In January 2006 gas supplies destined for the EU were disrupted for several days in a similar dispute. EU countries must expedite measures to increase self -sufficiency in energy supply. This will involve the construction of more nuclear power stations and a greater concentration on renewable energy.

Sarah Palin Refuses Pay Rise and shows true leadership qualities

A very interesting report has appeared in the Anchorage Daily News concerning Governor Palin's pay. Members of Congress should take note.

A new state commission appointed by Palin recommends boosting the governor's pay from $125,000 to $150,000. The State Officers Compensation Commission says the lieutenant governor, department heads and legislators need more money too.
But if the commission pushes ahead with a pay raise, Palin won't accept the money, said spokesman Bill McAllister.

Palin is as usual showing leadership qualities. This is in marked contrast to Democrat controlled Congress where each member will receive a pay rise of $4,700. The anti Palin media continues to blacken her reputation with unfounded attacks and smears. It is largely silent on her self-sacrifices. As far as liberals are concerned Sarah Palin's biggest crime is that she is pro-life.

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.

Ireland –Government allocation to Local Authorities slashed for 2009-Rates to rocket

The Government-in the person of Minister for the Environment John Gormley is expected to slash support to Local Authorities by 13% in real terms. If as appears likely this is the case, rates on businesses will rocket. In addition water rates will climb steeply. This is stealth taxation in operation. It will escape analysis on budget day. Local Authorities –if deprived of an adequate Government subvention- will plug the gap by hammering businesses and agriculture. This will be the coup de grace for many in urban and rural Ireland. Water rates for farmers are already much too high. The FG Party has now advised councillors not to support such steep rises.

The Government should think again. It will kill the goose that lays the golden egg. It is just not fair to expect county councils and corporations to solve the government's funding difficulties. FF and the Greens face melt down in the Local Elections of 2009. In short the Government subvention cut is a massive stealth tax.

Obama Dupes The Middle Class On Income Tax Cuts (Effective Tax Rate under Obama would hit 60%)

Throughout this campaign Barack Obama and Joe Biden have continuously campaigned on the basis of providing a middle class tax cut. Unfortunately Obama has a strong record of voting to raise taxes. In fact Obama has voted 94 times to raise taxes. Obama has made promises totalling 1000 billion dollars. In addition the bailout of the banking system will conservatively cost another 700 billion dollars.

How will Obama fund the propose tax cuts and the huge expansion in socialised medicine? Quite simply the figures do not add up. Obama is not levelling with the electorate. He is a proponent of loony bin economics. Quite simply his promises will require a massive hike in taxes. He would double the capital gains tax to 28%. The net affect of this is that you will get far less when you sell your home or your 401K or your stock plan. He would double the dividends tax. That means that those who clip coupons from corporate stocks get less money.

He intends to increase the limit on Social Security taxes, which means that instead of paying 12 1/2 percent of the first $100,000, you pay it on everything that you're making.
The real tax rate is then 60 percent. See Dick Morris

In essence Obama's tax proposals are a massive con trick.

70% Hike in School Transport Charges in 4 Months

Today has seen another hike in school transport charges. Fine Gael School Transport Spokesman, Frank Feighan TD, said that today's announcement coupled with an increase just four months ago at Easter means that school transport charges have risen by 70% in four months. His statement goes on to say:

"Just last Easter, school transport charges increased from €33 to €46 per term for students in the junior cycle and from €51 to €71 per term for students in the senior cycle. Today's increase showed charges increasing further to €56 and €78 respectively. This represents massive increases of 53% and 70%.

"That school charges have been hiked by these huge amounts highlights just how little regard there is for the financial strain such a massive increase will put on families.
"Obviously, with increases in the cost of providing school transport - including fuel prices - and charges being held constant over a period of time, there may very well be a need to increase charges. However, 70% increases seem excessive and I would like to know how Minster Batt O'Keeffe can justify such a massive hike in just four months considering that rising prices will not account for such huge rises in such a short period of time."

Ireland- Live Register breaks 200,000 for first time this decade-Unemployment rate now 5.4%

The number of people signing on the dole for unemployment rose by 47,746 in the 12 months to the end of May. This is the highest level since January 1999.

New CSO figures just issued show that when adjusted for seasonal factors, the register rose to 207,300 in May. That's up 7,600 on figures for April and over 47,000 higher than May 2007. These figures indicate a massive 30% increase in one year as Ireland dips into recession. Job losses are now spread across the whole economy, not just the housing sector.
Ireland’s unemployment rate now stands at 5.4% - a half percentage point higher than at the start of the year.

The May Exchequer Return figures show that Ireland is headed for a €3 billion shortfall in taxes - on top of an already planned-for €5 billion Government deficit this year.
There has been a €10 billion reversal in our public finances. Ireland had a €2 billion surplus in 2006. Over the last two years the Government has increased its day-to-day spending by 65%. It must attempt to curb the increase in public expenditure at a time when unemployment has breached the psychologically important 200,000 barrier. It now has the worst of all worlds. Planned cuts will be painful and will trigger a backlash.


The massive increase in public expenditure contributed to the feel good factor, which helped to propel FF to election success in 2007. It is now time for retrenchment.
The 2007 General Election was the election to lose. FG and Labour politicians will thank their lucky stars.