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IBEC chief economist Fergal O'Brien says Budget 2014 could drop all of its new taxes and still bring Ireland within its deficit targets. Mark Stedman/Photocall Ireland

'Time to ease off on austerity and abandon planned tax hikes' - IBEC

IBEC says Ireland could drop the ‘new taxes’ planned for Budget 2014 and still meet the EU’s targets.

THE BODY REPRESENTING Ireland’s employers has called on the Government to abandon plans for €1.8 billion in new taxes over the next two Budgets – saying extra taxes would kill off Ireland’s delicate economic rebound.

The Irish Business and Employers’ Confederation (IBEC) says economic data for the first quarter of 2013 shows that consumer confidence remains fragile, with economic growth weaker than expected.

Its latest quarterly economic outlook (PDF), released this morning, says this weak growth could be killed off by levying further taxes and charges on consumers who still remain fearful about their finances in the medium term.

The group says the Irish economy will grow by 1.8 per cent this year – a significantly higher rate than projected by either the European Commission or the Irish Government – but that economies of other European countries could falter and drag us down.

“We need to press ahead with reducing public sector expenditure, but taking more money out of the economy through tax hikes is the wrong way to go,” said IBEC chief economist Fergal O’Brien.

“Fixing the public finances can only bring us so far – consumers need to see that the end is in sight before they will start spending again.”

O’Brien said the public had welcomed deals on the promissory notes, but that the public now needed to reap some of the benefits by having the burden of austerity lifted somewhat.

“The budgetary adjustment should be less than the €3.1 billion currently targeted,” he said.

“We now have the potential to abandon the planned tax increases and still hit a budget deficit of about 4.5 per cent, well below the target of 5.1 per cent.”

O’Brien said an adjustment of that scale would underline that Ireland remained committed to restoring order to its public finances, while limiting the damage that cuts could achieve.

A further €2 billion of adjustments is scheduled for Budget 2015, in order to conclusively bring Ireland within the 3 per cent debt limit set down by the EU’s excessive deficit programme and the EU-IMF bailout agreement.

Budget 2014 is to include €2 billion in spending cuts and €1.1 billion in new tax, while Budget 2015 is to have a further €700 million in tax increases.

Read: Brussels report says Irish economy will grow slightly less than govt forecast

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46 Comments
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    Mute Stephen Downey
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    May 7th 2013, 6:47 AM

    Is it just me, or has it been noticeable since probably the first large formal rejection of further austerity by Irish people(the rejection of Croke Park 2) that there is trend towards arguing against austerity coming from unlikely sources?
    Has the rejection of CP2 signalled an end of the subservient Irish? Thus, a new way forward is now needed.

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    Mute Padriag O'Traged
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    May 7th 2013, 7:01 AM

    CP2.1 will happen. There’s an important difference between the need to make the PS sustainable and easing off on personal tax increases

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    Mute Stephen Ring
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    May 7th 2013, 7:43 AM

    Great, another anti-fiscal-rectitude statement without any alternative as to the €13 billion hole in the exchequer revenues.

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    Mute Stephen Downey
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    May 7th 2013, 8:00 AM

    @Stephen Ring

    If you are referring to my statement, it’s actually pro-fiscal rectitude.
    It’s six austerity budgets that has a €13bn deficit, down from a €20bn deficit at the start of the crisis. That’s only about a third of the deficit closed. If we keep going the way we are going we will need another 20 austerity budgets, triple the USC charge (or equivalent in other taxes) and cut public sector pay by another 20-25%.
    Even then, the knock on effect would be to basically shut down the domestic economy.

    The alternative is to inflate domestic demand. This can be achieved through increases in wages, via legislation if necessary. This will increase spending, increase confidence, increase exchequer returns and reduce debt burdens. I know some businesses would go to the wall, but that is happening already. The difference is they will be replaced in a demand driven economy instead of the stagnated economy we have now.

    As for CP2, it is a complete sham. I was asked to work an extra 2.25 hours a week for free. I was not being as asked to return a higher productivity targets, my targets were to be left untouched. That means CP2 would mean less productivity, not more.

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    Mute Stephen Ring
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    May 7th 2013, 8:05 AM

    No, my comment was in support of yours, sorry if that wasn’t clear.

    I agree, we need to increase competitiveness via lower welfare and minimum wages combined with less beaurocracy.

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    Mute Itiswhatitis
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    May 7th 2013, 8:47 AM

    Stop paying foreign aid and atop givinf away billions in natural resources. Problem solved now get back in ypur box.

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    Mute Padriag O'Traged
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    May 7th 2013, 10:32 AM

    @StephenD so you wouldn’t do extra work in those 2.5 hours, just twiddle your thumbs & whinge? Do you only work to your targets, not try and exceed them? Nice attitude.

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    Mute Stephen Downey
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    May 7th 2013, 11:44 AM

    @Padraig

    Don’t be so stupid.
    If my target is 100units per week then a 6% increase in my hours would typically mean I should produce 106 units.
    As it is my targets remain 100 units per week. Due to the extra hours, it’s possible I may produce 106 units. But as long as my target remains at 100 then there is also the possibility that I may only produce 105, 104, 103, 102, 101 or 100 units.
    That is the whole concept of having a target – to achieve something within an agreed timeframe. The Croke Park 2 was a bogus deal doing nothing but inconveniencing public sector workers for no purpose (ie agreed increases in productivity) and trying to pull the wool over everyone else’s eyes by calling it ‘a reform of the public service’.

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    Mute Bren
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    May 7th 2013, 7:27 AM

    There has only ever been one country that was able to tax it’s way out of a recession and that was Great Britain during the industrial revolution. So unless someone in this country can invent some sort of mechanical device that the whole world will need and that will be mass produced and earn this country billions, we’ll never get out of this recession by austerity alone.
    People need to be able to purchase and inject money into the economy. More taxes = Less spending….it’s a very simple equation, it’s a pity the powers that be cannot understand that.

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    Mute Jim Brady
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    May 7th 2013, 11:29 AM

    More taxes = less [private] spending.
    But…less tax income = less public spending.
    Catch 22

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    Mute Bren
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    May 7th 2013, 2:08 PM

    But wouldn’t more private spending increase the VAT revenue ?

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    Mute Mary Ward
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    May 7th 2013, 2:53 PM

    All very fine unless the Govt has to take more out for guess who – BANKS . THE poor wee banks need more capital injection and remember the deal that B Cowen made for the 67 Billion followed up on by Kennay/Gilmore – that Ireland will capitlaise banks to the highest intnl standards and enter a programme so to od and if that means hauling croke park out again cos ECB not happy with liquidation of IBRC so be it. Now that the said programme also proveds for DWONISZING OF BANKS to fit economy – - oh no lets keep that bad banks the nama bank .

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    Mute Mary Ward
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    May 7th 2013, 3:01 PM

    There is a very interesting article on how The Govt of B Cowen had to go to the EU on wipkeia – Intnl Market just lost confidence in state being able to deal with

    1 ITS own debt the debt the state debt
    2 The Bank Debt
    3 The NAMA Debt.

    As to no 3 a debt that would be sovereign also if those loan transferred to the National Management Agency in consideration for BONDS the dreaded word bond, Government Bonds, and NAMA selling them for 200 Million when par value presumably purchase price was 800 Million with some sort of pay back clause at some if purchasers make money out of selling dead debt. I wonder are banks giving back bonds to the state – debt paid. Or is dail saying anything about it since our money PUBLIC FUNDS that we elect TDs to look after. on line I wish this IBEC man wold stop trying to delude people or is he deluding himself . Or WHO IS PAYING HIM

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    Mute Brian Biscuit
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    May 7th 2013, 7:34 AM

    More taxes = I spend less money!

    More pay cuts = I spend less money!

    146
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    Mute Tony Daly
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    May 7th 2013, 7:41 AM

    @ Brian Biscuit, your reality based equation is far too complicated for politicians and politicians to comprehend.

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    Mute John Burke
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    May 7th 2013, 6:52 AM

    Ibec are a shower of self serving twits.

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    Mute Bruce
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    May 7th 2013, 6:56 AM

    Wonderfully helpful contribution to the debate.

    Keep up the inspired and intellectual comments.

    (I hope you got the hint of sarcasm)

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    Mute John Burke
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    May 7th 2013, 6:58 AM

    Your my hero of the day, congratulations.

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    Mute Sean Flanagan
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    May 7th 2013, 8:32 AM

    You’re

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    Mute Tony Daly
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    May 7th 2013, 7:39 AM

    The Property Tax and water charges are political measures, not economic measures.

    Of course the impact of these taxes will be damaging to business, to employment levels and the taxes will exacerbate the level of mortgage default in the many households which are near the tipping point of default the taxes will cause immense social and economic hardship and cause a negative feedback loop on residential property prices. These impacts are all consistent with a right wing philosophy which favours the interests of capital over labour.

    IBEC knows that it is too late to reverse these taxes and it must have another game afoot.

    52
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    Mute WanderArch
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    May 7th 2013, 8:19 AM

    I don’t agree – the property and water tax are economical, people own houses and people need water. They’re two taxes that are fairly reliable.
    The stamp duty was reliant on a house market existing, and as we’ve seen over the past few years, there ain’t no house market, and where house markets did exist – they are at fractions of what they were a few years ago.
    Taxes have to be reliable in good and bad times – stamp duty was a tax that should never have existed on its own.
    Add to that, the fact that a government shouldn’t be spending much in a boom time, saving for the downtime so that when the private spending slows down, public spending can kick in thus providing some stability. Ireland pretty much went wild during the boom time in terms of public spending and now can’t iron out the low with a decent investment program, resulting in shoddy, half assed program’s like JobBridge, that essentially aim to get workers for half of nothing.
    In order to get stability in a country you have to have reliable taxes that will always make a good return and public savings. Entering this current downtime, Ireland had neither, which as we now know, was a recipe for disaster.
    Apparently the accountants view of “I’ll spend it while I have it” lingo ain’t all that good for stability. Who knew?

    21
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    Mute Joseph McGranaghan
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    May 7th 2013, 7:25 AM

    If the whole point of all these new taxes is to move us away from inequitable and unpredictable taxes towards a more sustainable model then why not slash VAT. Half it to 11.5%, that would lead to an increase in spending again.

    49
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    Mute Bruce
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    May 7th 2013, 7:06 AM

    I would have thought this is essential. I fully expect we will see retail figures for may and June take a nosr dive as a result of the property tax.

    Similar to the stagnation that happened in Q4 last year as people feared for the budget.

    A stimulus is needed to get people to spend money. One suggestion I have is that home owners are given €500 tax rebate on invoiced spending of €2000 on home improvements / home repairs in a year.

    I know people will say “my home is in negative equity”. Nevertheless it still needs maintenance and upkeep.

    The effects will be:
    1. Stimulate spending in white economy;
    2. Help unemployed construction workers and tradesmen get work. Every one person off the dole saves the state €20k.
    3. Boost to retail trade.

    I am certain it would be at least cost neutral.

    45
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    Mute Anne Gardener
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    May 7th 2013, 8:39 AM

    In the States your home’s value is re-assessed for property tax when you get maintenance or improvements on it. It’s unlikely people would throw even more of their hard earned money into their homes only to be penalised for it.

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    Mute padser123
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    May 7th 2013, 10:59 AM

    @Anne Gardener
    But that’s in the States!
    While your on the subject though – in a lot of Countries, landowner’s are taxed on “all” the land they own, and even more so on land that is lying idle. This is to make the landowner’s “use” (so they contribute to the economy – while paying the extra tax) the land & it also deters potential “speculators” from having an easy ride up to a property boom.

    Of course we don’t do things like that here. For example: Just “one” acre of land is subject to the LPT.

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    Mute Anne Gardener
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    May 7th 2013, 12:02 PM

    That’s right Padser in most countries that have a Property Tax it’s on all land as it’s been proven to encourage the most productive use of land. Here it’s only on homes and not a Property tax per se.

    I mention the States as it’s where our local government officials were sent last year to learn about local property taxes so I presume it’s the American model we’ll be following. Having said that a French friend of mine was very cagey about some work she was doing inside her home recently. She said she didn’t want to draw attention to the fact she was getting materials in in case she’d be re assessed. Back to the States though your neighbours may even get sniffy with you for getting work done as if a few houses improve their kerb appeal the whole street can get re-assessed.

    In the cases of my friends in France and Chicago they had both gotten their bills increased last year without the improvements or any change in services. 200 euro for the friend in France. 2000 dollars for my friend in Chicago. If the local authorities want more money they just take it..

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    Mute padser123
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    May 7th 2013, 5:10 PM

    @Anne
    I suppose I’d have to agree with you Anne. I am a little skeptical at the manner in which the LPT has been presented to us. It certainly lacks imagination. And it would seem, it could only get ‘more’ progressive.

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    Mute eastpoint
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    May 7th 2013, 6:37 AM

    Surely the entire point of austerity is to prove to the bond markets that we’re a safe country to invest in – we’ll pay our debts no matter what. Who cares if the people suffer!

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    Mute Tom Newell
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    May 7th 2013, 7:22 PM

    we have proved to the bond markets something alrite, we will roll over and have our bellies tickled to pay off the debts of the banks and the bondholders no problem and to hell with the people

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    Mute gingerman
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    May 7th 2013, 8:51 AM

    Ibec shouldn’t complain when the private sector workers with extra cash have to use it to pay for public services. Do they really believe that 300k people are going to accept slave wages and provide the rest of the country with a service?

    23
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    Mute The Red Devil
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    May 7th 2013, 9:17 AM

    As professed years ago Austairity will only drive this country further into the black hole- people don’t have any spare money to spend- shops shut down which u will see on any high street in the country- leads to more unemployment and more social welfare payments and less tax- cutting wages won’t work it drives people further into debt- big elephant in the room- mortgage repayments- wait till ECB raises the rates and they will go up quickly when they start cause we wil be in recession for years Germany won’t and they will want there money back- country will implode-Govt will walk away
    There is no real strategy here just screw the people to look good in Europe- make no mistake people We have not seen the worst of it yet- property prices its nonsense – people won’t have the money for the austerity and the house of cards will fall- nxt election the party who says they abolish property tax will win, but it won’t matter because we will be in such a hole at that stage people will be taxed so much we won’t be able to get out and owe so much money
    That’s my opinion lookin at it austerity hasn’t worked so far- I don’t know the way out if anybody does please share

    18
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    Mute Jim Brady
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    May 7th 2013, 11:35 AM

    Whatever phone, laptop or similar device you are typing on, send it back and exchange it for one with a full stop.
    >>>>>>>> . <<<<<<<<< one of these

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    Mute Tony Daly
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    May 7th 2013, 7:52 AM

    A comprehensive system of mortgage debt attenuation, at pre insolvency stage, would help reintroduce some limited consumer confidence. The yoke of mortgage debt and personal debt is far too heavy for most victims to be able to sustain.

    Recognise financial reality and start to write down excessive mortgage debt for those who bought their homes from 2001 to 2007, borrowed more than 90 per cent on an LTV basis and are not on tracker mortgages, as the first step.

    It is the unsustainable level of personal debt which will keep so many households in permanent penury.

    I have only 3 years to run on my mortgage and this does not personally affect me except as a tax payer but if we keep a large segment of society ground down by mortgage and personal debt, the feel bad factor will be pervasive and economically damaging.

    There are many stimulus measures which could help. Some are mentioned above and they all share the common viewpoint that austerity and cut backs don’t work at a time of nominal domestic and international economic growth.

    Pro cyclical and politically motivated policies don’t work from an economic perspective.

    Now is the wrong time for deflationary measures.

    18
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    Mute Dave Byrne
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    May 7th 2013, 9:59 AM

    Why is it that IBEC are called the employers representative and not the employers union? Anytime the likes of SIPTU/IMO etc are mentioned the word union is always bandied about, Also IBEC was very quiet about the BOI paying 800k to the CEO more than likely due to the fact that BOI/ESB etc pay subscription to them.
    Anyway getting back to income tax the government say that they haven’t touched the tax rate, Yet if you add up paye/usc/prsi which lets face it are another word for tax we pay a lot.
    I’m convinced that the muppets in government along with the Snr civil servants don’t know what it is like to be a normal joe soap of a worker, They don’t comprehend that slashing someone’s income by either wage reduction/more taxes is going have a knock on effect on how they spend what’s left of their disposable income.

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    Mute eric nelligan
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    May 7th 2013, 10:15 AM

    IBEC represent the self employed, all this talk of a 3rd rate of tax for the over 100k has them scared. Almost 17% of self employed earn over 100k compared to 3% of PAYE.

    The recent articles and reports on the low levels of corporation taxes paid as a percentage of income is also of a concern to them.

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    Mute Max Power
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    May 7th 2013, 9:31 AM

    Despite all the brave sound bites and bluster, a government will ALWAYS try to tax its way out of a recession. It’s easy for parties in opposition to say they wouldn’t do it, until they get into power and try actually do it. This country is ruined

    9
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    Mute Dafuq Usain
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    May 7th 2013, 9:50 AM

    sure the govt will have this place like north korea if they’re left at it , they’re well on target as it is

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    Mute Adrian Martyn
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    May 7th 2013, 9:40 AM

    This year will break a good many people unless we get some relief. Does the government not get it that there is only so much you can squeeze out of people already at breaking-point? Emigration is happening for a reason, dammit!

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    Mute Uncle Mort
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    May 7th 2013, 10:31 AM

    @Adrian, the ones emigrating are the very people we need to get this place going again, the ones we need to fight the useless sods posing as a government. Let us hope that some of them at least will stand and fight and not run away from the mess we are in.

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    Mute Adrian Martyn
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    May 7th 2013, 1:28 PM

    @Uncle Mort – running away? Bad choice of words! And as for (any) government, remember – they are only 50% of the problem. The other half of the problem is with those who keep electing them. We’ll have to sort out our own voting patterns first before blaming respective governments for all our problems.

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    Mute Uncle Mort
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    May 7th 2013, 10:26 AM

    Our subserviance to the EUSSR is shameful and will all have been for nothing when Merkle gets the boot in the coming German elections.The Germans were conned just as we were but we don’t seem to be working on a plan B to deal with the collapse Poor Enda is out of his depth with that lot especially as he seems to think this sham will go on forever.

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    Mute Kerry Blake
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    May 7th 2013, 7:52 AM

    Makes sense to me. Hopefully the government will start listening. Mentioning an economic rebound in that article is a bit optimistic.

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    Mute Michele Reynolds
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    May 7th 2013, 7:33 AM

    Must be shared

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    Mute Ignoreland
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    May 7th 2013, 11:41 AM

    I don’t see why the taxpayer should have to subsidise private schools at a time when there are cuts in the public education sectore. On a basic equality level, it’s not fair as you’re helping people who are in general more well off than those who send their children to the public sector.

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    Mute Ignoreland
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    May 7th 2013, 11:41 AM

    Oops! Wrong article!

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    Mute padser123
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    May 7th 2013, 10:44 AM

    He say’s we should still go ahead with cuts to ‘public sector expenditure’, but not to tax it. He does not give a definitive alternative. Reducing the ‘deficit target’ from 5.1% to 4.5%, is only extending the pain (just like the prom note deal).

    Just what is the ‘growth forecast’, 1.8%, 1.5% or 1.1%?
    Why go all gooey on our targets – now?
    Why don’t we ‘roll-back’, on some of the cut’s that were made over the past number of years?

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