Current Account »

• Mini Budget on the cards

  November 4, 2008 @ 1:40 pm | by John McManus

  The Minister for Finance seems to have all but conceded that there will be a mini-budget next spring in his comments last night to Jamie Smyth, our man in Brussels , and reported on this morning’s front page.

  The current Budget, which is less than a month old is quietly being recast as more of a national wake up call than a statement of fiscal policy. And it’s not surprising given that a real handle on the out turn for 2008, and thus the basis for 2009, will not be obtained until we get the November exchequer returns next month.

  We will have full coverage in tommorrow’s paper of this afternoon’s Exchequer numbers for October. They will no doubt be shocking but are less significant than next month’s as November is a big month for corporation tax payments and VAT. If the November figures are bad, further spending cuts and tax hikes become imperative if the Exchequer is to be stabilised.

  One possible tactic might be to use the Excessive Deficit Procedure triggered by the European Commission yesterday as cover for another assault on the taxpayer. Under the ECD the Government must submit proposals to reduce the deficit to Europe. The time line for this – as pointed out by Goodbody’s Dermot O’Leary in his morning note today – is six months.

  Dressing a mini-budget next spring up as a response to the Excessive Deficit Procedure would be politically tempting for the Government. Firstly the pain can be blamed on Brussels rather than domestic incompetance and secondly it diverts attention away from the reality that a mini-budget would in effect be an admission that the current Budget is a failure and bringing it forward by two months was pointless.

• Polar bears welcome bicycle BIK initiative

  October 17, 2008 @ 9:26 pm | by Barry O'Halloran

  Barry O’Halloran

  It was the Budget’s cycle to work scheme that gave it away. It’s one of a number of measures designed to help cut greenhouse gas emissions. You can imagine the scene, the last of the polar glaciers, complete with cute polar bear cubs and furry seal pups, is about to slide forever into the sea, until, at the last minute, Brian Lenihan pants to the rescue on his mountain bike waving a plan to make bicycles for workers a “tax-exempt benefit-in-kind”. Phew … day saved! (more…)

• Mini-budget misery?

  @ 5:38 pm | by Laura Slattery

  The dust hasn’t even settled from what our colleague Miriam Lord called a “cluster bomb budget” earlier this week, and already the number crunchers are saying that the Government will have to (and should)  have a “mini-budget” early next year. (more…)

• What a difference a letter makes

  October 16, 2008 @ 1:09 pm | by Simon Carswell

  International debt ratings agency Moody’s, whose aim is to assess risk, rowed in today with its opinion on Brian Lenihan’s first Budget as Minister for Finance.

  The agency said: ”Despite the announcement of wide-ranging fiscal reforms, the public deficit is expected to be more than double the EU limit (no more than 3 per cent of GDP) next year, with a negative balance of €14.8 billion, up from an expected €11.5 billion this year. Until the economy picks up, or unless drastic fiscal reform occurs, the public deficit will prove an increasing burden on Ireland’s economy.”

  Fair enough, but it’s hard to agree with the subject line on the email from Moody’s issuing the statement: “Moody’s Economy.com: Fiscal Prudence for Iceland.”

  Getting Ireland mixed up with Iceland is not good given the current financial state of the Nordic country. Moody’s offered sincere apologies for the slip when it was pointed out.

  A misplaced letter could be costly in these highly turbulent times.

• Gender balance; Budget Families

  @ 11:57 am | by John McManus

  A reader writes:

  Once again I scan the budget family profiles in the Irish times to see if you will break tradition and feature a family where the woman earns more than the man, but once again I am disappointed. Surely madam editor has pointed out to you by now that such a rara avis does occur in
  Ireland!
  

  Applications for inclusion next year on a post card please

• The soft option?

  October 14, 2008 @ 5:06 pm | by Laura Slattery

  Mr Lenihan indicated in his budget speech opening remarks this afternoon that he wasn’t going to go for “the soft option”. But in pulling back the Government deficit to 6.5 per cent of GDP, there are some who will claim that that’s exactly what he did. (more…)

• Pain relief

  @ 4:48 pm | by Laura Slattery

  The cost of being sick is going up from next January, judging from Budget 2009. First of all, the medical card for over 70s introduced in 2000 has been abolished and will now be subject to means-testing, with a €400 annual cash grant to tide over those pensioners who fail to satisfy the income limits. Secondly, tax relief on medical expenses (that have not been already reimbursed by private health insurance) will only be available at the standard rate of 20 per cent i.e. if you spend €200 a year on GP fees, you can claim back €40.

  Before the change in today’s budget, higher rate taxpayers were able to claim back at the 41 per cent rate, or €82 for every €200 in expenses. In other words, they could benefit more from the relief than lower income workers – who are less likely to be covered by private health insurance anyway – which is why the Minister is right to say that this particular change will make the system more equitable. (more…)

• A levy on all our incomes

  @ 4:26 pm | by Laura Slattery

  Take-home pay in 2009 is going to be hit by a 1 per cent income tax levy, with people earning more than about a €100,000 becoming subject to a 2 per cent levy on the balance, Minister for Finance Brian Lenihan has confirmed in his Budget 2009 speech. The levy will be kept under review in light of the economic conditions, he said, and will ensure that taxpayers “pull together” to in a proportionate manner to help reduce the alarming exchequer deficit.

  So why didn’t he just raise the higher rate of income tax? The top rate was only reduced to 41 per cent two years ago – bringing it back up to 42 per cent would hardly have raised too many political eyebrows. But because this rate only applies to income above the standard rate cut-off point – up €1,000 to €36,400 for a single person next year – it wouldn’t have raised as much revenue (or therefore cost taxpayers as much money) as applying a 1 per cent levy to all income.

  Unfortunately this means that lower income workers – those who pay tax only at the standard 20 per cent rate – will also bear the brunt of the levy.  The standard rate tax band is there for a reason: to minimise the tax paid by the workers who can least afford to pay it.  The Minister’s measure may be “proportionate”, but is it fair?

• Lenihan to lead by example?

  @ 2:27 pm | by John Collins

  Posted by Simon Carswell

  Leading by example in what is expected to be one of the most severe Budgets of recent years with significant increases in taxes, Minister for Finance Brian Lenihan is expected to announce some reduction in pay to ministers and juniors, in the order of 10 per cent, we hear.

  This would trump last week’s surprise move by Fine Gael leader Enda Kenny who is taking a 5 per cent cut in his TD’s salary of €106,581. Kenny’s gesture received a lukewarm response from Fine Gael frontbenchers – it will be interesting to see how Fianna Fail and fellow government ministers respond to the announcement of a pay cut by Lenihan this afternoon.

• Budget doom

  @ 1:31 pm | by Laura Slattery

  Special income tax levies. Health cuts. College fees… The recession-struck nation will be listening attentively for these trigger words when Minister for Finance Brian Lenihan gets up to deliver Budget 2009 in the Dáil at 3.45 pm. In a bid to alleviate the gloom, the bookies are as ever taking bets on the length of the speech, the number of sips of water, the colour of his tie, etc. But what the The Irish Times will be keeping its ears to the screen for is the number of occasions that Mr Lenihan blames international factors for Ireland’s economic doom. (more…)

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