# ICTUs "10 Key Recommendations for Budget 2013"



## Firefly (23 Nov 2012)

Deiseblue drew attention to the ICTUs "10 Key Recommendations for Budget 2013" in another thread and I thought it would be a good idea to critique it. 
[broken link removed]

I'm not an economist or anything, but I'm happy to have a go.....apologies for the editing...

*1. Undertake an investment stimulus of €3bn a year for three years to create*
*some 100,000 new jobs overall and boost GDP by 2% per annum.*


Funding to come from 
1. European Investment Bank
2. Private Pensions
3. Commercial Semi-States / State Holding Company
4. National Pernsion Reserve Fund

I would argue that each of the above are charged with, at a minumum, to not lose money. For 2-4 inclusive, they can probably earn 4% by simply lodging their money with the ECB. So, to raise funding, the government would have to offer some sort of bond to repay those that are willing to invest in this jobs program. This rate would IMO be quite high as the state of the State's finances are such that we required a bail-out from the IMF/ECB in the first place. So, assuming a rate of 6%, the cost of this funding after year 3 would be 540 MILLION a year in interest for 100,000 jobs (assuming that's a valid figure). I presume the ICTU is not suggesting the stealing of pension funds whereby a certain percentage would be forced into "investing" in this?

*2. Introduce a new 48% tax rate for individual incomes over €100,000,*
*along with a 1% Wealth Tax. Profitable corporates must contribute*
*more (by restricting write-offs) abolish SARP, tackle tax fugitives*
*and clamp down on evasion and avoidance.*

Taking the first proposal first. I've argued here before that at some stage, as these taxes beging to mount, that people with good jobs will just decide to leave as it's just not worth their while staying. Well, I can now confirm that a work colleague of mine has done just that. He is an IT contractor and has recently upped sticks with his whole family precisly as a result of this. 

"Profitable corporates must contribute more" - sadly these seem few and far between these days. Whether we like it or not, we live in a globally competitive world, where large companies can move their operations at the flick of a switch. I'm not saying we shouldn't rule out higher corporation tax, but having this listed as Number 2 in the top 10 proposals from the ICTU just shows how mis-aligned they are.

There are an esitmated 54 high net worth individuals living abroad classed as "tax exiles". http://www.independent.ie/national-...h-are-tax-exiles-reveals-revenue-3276761.html 

The proposed 200k tax on these would bring in *10m* assuming full compliance and zero collection costs / admin. Nothing to be sniffed at, but this would only cover what we are borrowing for a few hours

Agree with tax evasaion and this should also include illegal dole claiming etc.
Tax avoidance is fine IMO if it's within the law.

*3. Introduce the Financial Transaction Tax - 10 EU countries have already*
*agreed to do. The tax could raise €500 million annually for Ireland.*

Not only does the ICTU want us to agree with this, it wants us to introduce it! We might well recoup the 500m estimate in year one, but if you were the CFO of a bank in the IFSC how or why would you continue to defend your Dublin operations? 

*4. The EU must mutualise Ireland’s bank debts, which were run up by*
*private banks. *

And so say all of us. What has this got to do with the budget though?

*5. Deal effectively with the Irish Pension crisis with policies that boost*
*pension take-up and phase in the reform of state pensions (raising the*
*age for pension take-up) to allow workers time to adjust and prepare.*

I can undertand the first part of this proposal, but I am seriously having difficulty parsing the latter section.

*6. Extend the period of adjustment to 2017 and reverse the planned ratio of spending cuts to tax rises.*

The reason we are in a bail-out is that we could not afford to raise money on the open market and the reason for this is that investment houses all over the world deemed us to risky. The IMF and ECB stepped in and sadly, they have (quite rightly) attached a few conditions for the money lent to us. By all means ask, but I wouldn't hold my breath

*7. Congress supports Labour Market Activation but it must be fair and*
*focused on encouraging people into the workforce and not just a way of*
*managing expenditure cuts. Broaden the apprenticeship system and*
*introduce a Youth Guarantee to help link young people to skills training*
*and the workplace.* *Increase the effectiveness of monitoring of employment standards to staunch the haemorrhage of tax revenue being lost because*
*of misguided public procurement practices.*

I would plead with anyone out there to please help me understand what the last sentence of the above means? 

*8. Effective policies are needed to address poverty traps and fuel*
*poverty. There must be far greater efforts to tackle inequality. The new*
*eligibility criteria for the state pension, for example, impacts most severely on women. The level of cutbacks in disability funding to date – 14% over the past four years has gone too far and must be reversed.*

I don't have a problem as such with any of this but don't see this as anything near approaching a solution to our crisis.


*9. There must be no privatisation of major indigenous enterprises to*
*repay the debts of failed Irish banks. Indigenous enterprise should be*
*developed under NewEra and become an engine of the recovery, not*
*eviscerated.*

Re: privatisation: If there was any privatisation, why does the ICTU assume it would be done to repay the debts of the banks? Why would the money not be used to fund the "teachers salaries"? 

Re: Indigenous enterprise: this should be developed by the government getting out of the way and doing its utmost to reduce the cost of business in this country

*10. The focus on public sector reform has detracted from the necessity to*
*radically reform corporate governance in the private sector, where obsessive secrecy and perverse incentives abounded and the emphasis was on deal making rather than creating value. This must become a priority to stop the mistakes of the past being repeated.*


Given that we are borrowing 15bn+ a year to pay for public sector salaries, pensions and dole payments, I would have expected something concerning this to be in the top 10 proposals. Howoever, not only is it at number 10, it is deflected entirely by drawing criticism to "secrecy and perverse incentives" in the private sector.

Even if everything above was fully implemented, it would, at most not even make a dent into our borrowing requirements. 

Anyone else what a go?

Firefly.


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## Purple (27 Nov 2012)

Great post Firefly. I can't disagree wih anything you have said.


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## Chris (6 Dec 2012)

Great post indeed. Here are some things I would add:
1) €3bn per year plus interest would be about €9.5bn as you mention. Now let's say that 100,000 jobs are created, then that comes at a cost of €95,000 per job. How is that going to be recouped? And what about all the jobs that are not created because €3bn is taken out of the economy every year? This focus on creating jobs for the sake of jobs is nonsense. If there were things for 100,000 to do at current wage levels then they would be doing it right now. But this comes down to the Keynsian idea that you can pay one group of people to dig ditches and another group to fill them is and create prosperity by doing so.

2) At this stage I know 5 people that have done the exact same thing as your colleague. When you tax something more you get less of it in the long run. That is the whole idea behind high taxes on cigarettes, why would it be any different for income?

6) There has been no cut in spending, only increases!

But I wouldn't expect any less convoluted no sense from a union, so this doesn't surprise me.


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