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Dublin: 11 °C Friday 19 October, 2018

Budget 2011: the expert view

We asked five experts what they made of Budget 2011.

Ronan Lyons, Economist – “It’s not nearly aggressive enough.”

The idea seems to have been to get to the €6 billion target in the easiest way possible. They’ve used a lot of one-off measures in order to get to the first €2 billion in savings – they’ve taken all the low-hanging fruit if you like. There are big cuts in capital expenditures; they’re going to raise €700 milllion by selling some things, like mobile phone licences – so in effect, they’ve only actually cut €4 billion off the central problem, which is that our spending is outstripping our income. What that means that every Budget is going to have to be as tough as this one for the next few years.

The only really substantial thing they’ve done is to bring 300,000 people back into the tax net. The reform of income tax brings us a little bit less out of line with our EU partners – it means our direct taxation will rise from €15bn to €18bn next year.

They’re not getting significant savings where they need to – they’ve hit areas like arts, sport, tourism and the Gaeltacht hard, but they’re small fry in the scheme of government spending. The areas where they really needed to make the cuts are in social welfare, health, education and income tax. I know people will think the income tax rates have been raised, but they’re still not anywhere near French or German levels. They’ve also gone backwards in some things, such as the property tax. They’ve left a nasty job for the next government to do.

I wouldn’t have called it brave, and I wouldn’t have called it draconian. It’s not an aggressive budget – it’s not nearly aggressive enough.

Dr Jane Suiter, lecturer in UCC – “Short-sighted electioneering”

This Budget points up the ongoing failure of our administrative system over the past decades; the fact that they can’t implement a property tax or water charges. I know the Greens were opposed to a flat rate water charge – but why couldn’t they have implemented a flat rate charge, and then offered a rebate to anybody who installed a meter themselves? We’re going to have to pay for our water ultimately.

I think the government took a lot of easy options, and left the hard stuff to the next government. Cutting capital spending – we know all the trouble that caused in the 1980s. We still have children in prefabs. Here in UCC, a lot of the students are saying “it’s not as bad as we thought.” The problem is that it IS as bad as we thought – it’s just the hard decisions have been kicked to touch. There’s a lot of tokenism at play here too – Brian Cowen has taken an 11 per cent cut, but the minimum wage has been cut by 12 per cent. It’s short sighted, and it’s electioneering.

Rory Meehan, Head of Tax with the FGS partnership – “Will people ever be able to retire?”

We now have a situation where employers and employees will have a problem negotiating salaries. In the past the income levy came in at a much higher rate but people will now be caught up in the new universal levy very quickly. People will have a huge problem negotiating a salary that they can live with.

The PRSI ceiling is also gone for employees so they will be hit with PRSI no matter how much they learn. Again, I see salary pressure coming in there.

The whole pensions area too has been so badly hit. One will wonder if people will ever be able to retire. It’s going to take people a long time to build up a pension fund that they can live on.

Do I think anything has been done to stimulate the construction industry? No. You could look at the stamp duty system, which has been simplified and at least people know where they stand. But by removing all stamp duty exemptions, I wonder have they have taken out the incentives for people to get their foot on the property ladder.

Margaret E. Ward, Newstalk Breakfast Business presenter and small business owner – “It’s a lame Budget”

It’s kind of like the Opposition said: where are the measures to stimulate the economy? Where are the measures to help small business owners, who are responsible for the majority of employees in the State? I don’t see anything here that’s going to stimulate business, or help small and medium enterprises. It’s a lame Budget from a lame duck government.

Stephen Kinsella, Lecturer in Economics, University of Limerick – “Two words describe this Budget: on script”

I look at what’s not there in this Budget. Everyone’s going to be talking about the income tax and those cuts are pretty swingeing, but they were well flagged. We also see the early parts of a property tax. No-one was really surprised that they put four cent on petrol. I am a little surprised that the scrappage scheme was continued, even for six months, but I don’t think the new Minister for Finance will continue with that.

Really there was no move to show or to say that the highly pro-cyclical nature of our taxes is going to change. These are taxes that, when things are going well, they bring in the Government lots of money. But when things are not, like they are not now, they don’t bring money in. What you want is a property tax that the Government will collect every year. That’s a pity, that’s a great pity. We really do need something like that to happen.

The big problem for me was: How far along in the four-year plan is this Budget supposed to be. Yes, a lot of the adjustment is taking place on the tax side and the capital expenditure side – we’re not building schools or roads. What they are not saying is how we should change how we are spending our money now. The focus is not on current expenditure.

The big elephant in the room is pensions. Freezing pensions towards the end of the year, that’s not saying much – we won’t have much inflation next year so it won’t have an impact on them.

Thirdly, I am personally amazed that they didn’t take a huge cut off the ministerial and Taoiseach’s salaries. If I were a Minister for Finance who wanted to show I was a strong leader I would have cut my pay in half. It would also absolutely put the two fingers up to the guy who was going to take the job next.

The only two words to describe this Budget are: On. Script. They were told to do this Budget exactly like this and they did it. Expecting creativity from these guys is expecting a little bit too much.

Read more from Ronan Lyons: Dude, where’s my six billion? >

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Jennifer O'Connell

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