Current Account »

• Lost your job? Had your income halved? Turn to Annex F

  April 8, 2009 @ 6:44 pm | by Laura Slattery

  One group of people who don’t have much of a voice in society had what could be their only source of income halved in yesterday’s budget. This group is people under 20 who are in receipt of the means-tested jobseekers’ allowance payment. According to Brian Lenihan, being forced to live on just €100 a week will “incentivise the young unemployed to participate in training programmes”.

  Uh huh. So now let us take a look at what training programmes the Government has made available to these allegedly (by implication) un-incentivised teenagers who find themselves among the 370,000-plus on the Live Register. After months of repeated calls to respond to the surge in unemployment (including the permanent shift away from heavy dependence on construction-related jobs), the Government finally offered up a few suggestions as to how it might tackle that whole problem.

  Annex F to the Supplementary Budget, subtitled Supporting Those Who Lose Their Jobs, begins by saying that the Department of Enterprise, Trade and Employment, the Department of Education and Science and the Department of Social and Family Affairs have “agreed a joint approach to activation” on the training and re-skilling front, which presumably translates as “we’re going to do something now”. (more…)

• Christmas is cancelled

  April 7, 2009 @ 5:26 pm | by Laura Slattery

  Despite almost two months of dire warnings about the contents of today’s emergency budget – euphemistically known in official circles as the Supplementary Budget – it is generally agreed to be even worse than expected for middle to high income earners. “This is taxation with a vengeance,” noted Ulster Bank economist Pat McArdle this afternoon. 

  But if there is one single measure that sums up the carnage, it is the cancellation of the Christmas bonus paid to social welfare recipients. Expect plenty of newspaper articles tomorrow with the same headline as this blog post.

  The Government said cancelling Christmas would yield €156 million in the eight months of 2009 and €171 million in a full year. The cut equals 2 per cent of the income of a person who relies solely on social welfare payments. While some deflation-watching commentators dismayed at the crippingly high rates of taxes that beckon would have preferred the Government to have taken a bigger swipe at social welfare spending, the loss of the Christmas bonus will no doubt be felt come December among the nation’s most vulnerable citizens: children living in poverty.

  Rather than kill morale in this way, the Government could have opted, to pick just one example, to introduce a 2 per cent rather than a 1 per cent levy on life assurance premiums, a measure which is expected to generate €140 million in a full year. Even if this levy also applies to mortgage protection policies, which it presumably does, it is fair to say that life assurance is a product that is generally paid by wealthier individuals – those who will still be able to splash out come the festive season.

• Budget dominates internet traffic today

  @ 5:25 pm | by John Collins

  Regardless of the content of this afternoon’s Budget speech it smashed a couple of records in terms of internet traffic. The Irish Neutral Exchange (INEX), the organisation which allows Irish ISPs and large corporates to efficiently exchange their internet traffic, had its record traffic volumes this afternoon. Just after 4.00 pm traffic spiked to 7.284Gbits/sec. The previous record was 5.345Gbits/sec on the last Budget day in October ’08.

  Meanwhile over on Twitter “bludget” became the fastest growing term in use on the service, or top “trending topic” as Twitter puts it. The term bludget came about after Marian Finucane stumbled over the word budget on her show last weekend. Suzy Byrne aka political blogger Maman Poulet liked it so much, because it captured the expected bludgeoning that people would receive, that she suggested it as the tag that people should put on their budget related Twitter posts. I wonder have the people at Twitter HQ in San Francisco figured out what Bludget is yet?

  Both stats show the appetite that now exists for online business news. Maybe Mr Lenihan should have considered an internet levy rather than the mooted SMS tax which never appeared.

• Cigarettes… but no alcohol

  @ 4:29 pm | by Laura Slattery

  In a bid to keep consumer enthusiasm for cross-border shopping in check, the “old reliables” were split firmly into two camps by the Government this afternoon: those that were deemed able to sustain a hike in excise duties without prompting a mass exodus to Newry, and those that weren’t.

  So in the first corner, long-spluttering nicotine aficionados will be coughing up another 25 cent per packet of 20, while diesel dependents will be paying 5 cent extra in excise duty. But in the second corner, and lucky to get away with it on the day that was in it, are drinkers and petrol users.

  Brian Lenihan said there was “no scope” for additional duties on either alcohol or petrol given the few hundred million that is already being lost to Northern Ireland through cross-border shopping. The crucial point here, especially in relation to alcohol, is that it is the desire to fill their car boots full of party-pack quantities of beer and wine that spurs people to get in their cars and head North in the first place, but during their sojourn they also pop into Sainsbury’s and do their weekly grocery shopping while they’re at it.

  Of course, there was no money in the public kitty to do the one thing that might genuinely curb cross-border shopping rather than just contain it: reduce the 6.5 percentage point VAT differential between the Republic and the UK.

• Peak property buyers vs the mortgaged masses

  @ 4:04 pm | by Laura Slattery

  The abolition of mortgage interest tax relief for non first-time buyers, which includes everyone in year eight or more of their mortgage, is just the latest example of Government tinkering with this relief.

  At every budget opportunity since the housing market reached its inglorious peak in early 2007, the Government has increased the relief for more recent buyers and decreased it for more established homeowners – an act that could be interpreted as guilt for its part in driving up property prices to levels that would make a New Yorker blush.

  In recent years, the monthly value of this interest relief for a first-time buyer, a status that lasts for the first seven years of the mortgage, has increased from €66 to €133, then to €166. Finally, last October, the Government introduced three different first-time buyer rates, with those in the first two years of their mortgage getting tax relief of €208 a month and the value steadily reducing thereafter, with the tax credit for “other buyers” reducing from €100 to €75 a month. This afternoon, the Minister announced that he was abolishing mortgage interest tax relief for these “other buyers” and restricting the relief to the first seven years of the mortgage.

  So is this right? People who bought their first homes in the last seven years are lumbered with mortgages that are exponentially higher than older buyers who were picking curtain patterns and putting skylights in their attics long before anyone in Ireland had even heard of IKEA. As interest rates increased, so too did the monthly tax credits. Except interest rates were already falling by the time the Government increased the rates of relief again last October: why else increase the rates again except as some kind of compensatory measure to those unfortunate enough to buy at the top of the market?

  Brian Lenihan signalled today that the relief will eventually be phased out for all, presumably as the generation of peak property buyers becomes a proportionately smaller chunk of the total ranks of homeowners. Encouraging people to buy homes they may not be able to afford will no longer be part of the tax system.

• Your country needs you – and your “dead money”

  @ 3:29 pm | by Laura Slattery

  Even if you agree that the Government’s structuring of the now greatly expanded income tax and health levies, which includes bringing people on the minimum wage into the tax net, is “progressive”, to use Brian Lenihan’s word – and I have a feeling that a lot of people won’t – the intended use of these extra revenues is galling.

  In 2007, 5 per cent of tax revenues was used to repay the interest on the national debt. In just two years, that percentage has increased to 11 per cent, Lenihan said in his speech this afternoon. “This is dead money that should be used to provide vital public services,” he said. Quite.

  A person on the minimum wage – circa €17,500 a year – will have to pay €350 a year or €7 a week under the new levies, or 2 per cent of their income, from May 1st. Just last October, the Government was pressured into doing a u-turn on its decision to include such vulnerable, low-paid workers in the original 1 per cent levy, with many commentators astounded that such a radical change should be made to tax policy. All that has changed as of today.

  “Too many to do not pay tax at all,” said Lenihan this afternoon, referring to the high-net worth brigade that is adept at tax avoidance. But it remains to be seen if the Government is successful in bringing the tax-shy rich into the tax net: sadly, for minimum wage earners, they are much easier prey for a Government that needs to raise cash quickly.

• Supplementary Budget… but no supplementary income

  @ 7:56 am | by Laura Slattery

  And now over to Susie Dent in Dictionary Corner… 

  supplement  noun
  Something which is added to something else in order to improve it or complete it; something extra: e.g. The money the Government raises in its emergency budget today will be used as a supplement to pour into the Exchequer coffers (and stop the country from going bankrupt).

  2 a part of a magazine or newspaper, either produced separately or as part of the magazine or newspaper: e.g. The Irish Times will publish a special supplement on today’s budget with tomorrow’s newspaper.

  supplement    verb
  to add something to something to make it larger or better: e.g. We will supplement our coverage of the budget in the newspaper with online updates, video feed of the Minister’s speech and occasional fits of blogging later today and throughout the week as the fallout continues. Find our dedicated budget mini-site here.

  supplementary      adjective e.g. the Government’s official name for the emergency budget is the Supplementary Budget. If you have a supplementary income, or indeed any income at all, get ready to pay supplementary taxes…

• Stockbrokers (and carers) united

  April 2, 2009 @ 1:03 pm | by Laura Slattery

  “Cutting respite care grant – backward step”, read the posters. But as a sizeable group from the Carer’s Association were marshalled by Gardai on the corner of Kildare Street this morning en route to the Dáil, in nearby no.6 Kildare Street economists were affirming the need for ”unpalatable” decisions to be taken in next week’s Budget.

  It seems unlikely that the nation’s estimated 161,000 carers, who are angry about the deferral of a national carer’s strategy and now fear cutbacks in the respite care grant, would have been too happy to hear economists from the Republic’s three biggest stockbroking firms – Davy, Goodbody and NCB – speak of such measures as cuts in welfare payments to match deflation and the broadening of the tax base.

  Presenting their joint multi-year strategy for how Ireland can get out of the current economic mess it’s in, the stockbrokers joked that such co-operation between the three competitors was “unprecedented”, given as NCB economist Bernard McAlinden noted, “normally we like to just ignore each other”. In order to replicate that spirit of cohesion around the country, the Government needs to step up the manner in which it is communicating the seriousness of the economic crisis to the public, it was suggested.

  McAlinden said he believed that social cohesion had improved – at least compared to the 1980s. But he acknowledged that this was a subjective view. ”Fairness is at the heart of it,” he said. “You need to see fairness and you need to see the [social] security net defined.”

  But is any amount of PR enough to stop a riot and/or real suffering if welfare payments are cut in response to CPI deflation? “You need a lot of communication to pull that off,” McAlinden admitted.

• How many Grand Slams will it take to save the drinks industry?

  March 23, 2009 @ 4:00 pm | by Laura Slattery

  The hysteric commentator on ITV’s Dancing on Ice final wasn’t afraid to embrace a few stereotypes last night when he posited that a victory in the Bolero for Co Kildare’s Donal McIntyre, self-styled hard man of undercover television reporting, would give Irish viewers another reason to tip alcohol down their throats – “not that they need a reason”.

   If only, the drinks industry must be thinking. After a “cold bath” in 2008, it would appear that not even a weekend of rugby-related armchair debauchery was enough to lift the spirits of Drinks Industry Group of Ireland (DIGI) chairman Kieran Tobin this morning as he made the case for a freeze on alcohol excise duty in the emergency budget. “I’m afraid the old reliables no longer really live up their billing,” he sighed, entirely dispirited.

  Last year was the worst performing year for the drinks industry in Ireland in 25 years, according to a report compiled for DIGI by DCU economist Anthony Foley. Sober sisters, cross-border shoppers and staying-in-is-the-new-going-out merchants all contributed to a 6 per cent decline in the volume of alcohol consumption last year, compared to an increase of 2.5 per cent in 2007. The decline accelerated in the second half of the year, suggesting that our flatlining personal finances were to blame for our lack of drunken cheer. “It is an unmitigated miserable set of figures,” said Foley. “2009 is shaping up to be a disastrous year.”

  Public health officials may celebrate at the thought that our spending hangovers may reduce the frequency of our real hangovers, but it looks like it could be a very small party. For Tobin, whose day job is communications and corporate affairs director for Irish Distillers Pernod Ricard, the prospect of further excise duty hikes in the forthcoming cluster bomb budget is not pleasant.

  Already, employment in the Irish drinks industry has retreated from 100,000 to 90,000. With on-trade volumes peaking in 2001, some 1,500-1,600 pubs have called time over the past six years. Meanwhile, Cork’s historic Beamish brewery has closed its doors, cider maker C&C has axed jobs at its Clonmel plant and Diageo has postponed its investment in a new Guinness factory. Another 9,000-10,000 jobs will be lost across all sectors of the drinks industry this year, Tobin predicts.

  Taxing the life out of alcohol, like any other tax on expenditure, will be subject to the law of diminishing returns, he argues. DIGI’s protestations may prove futile, however. The Government is scouring for simple and quick ways to raise revenue, meaning even measures that are (economically) counter-productive in the long term must be on the menu. The odds that the old reliables will be hit are sadly lower than the odds of TV commentators updating their patter of cliches about the Irish.

  McIntyre lost, incidentally, to Ray “Ain’t That a Kick in the Head” Quinn, not that he seemed to mind. We may now be drinking an average of less than 10 litres of pure alcohol a year for the first time since the 1990s, but the only ice we care about is the ice that comes in our vodka mixers.