Wages: The real competitiveness problem.

It's funny to see people winding themselves up over this.

1) Can we afford €50bn government expenditure? No

2) Is is possible to run the country for €30bn? No

3) Will we be able to borrow the €20bn difference beyond this year? No

Solution?

More tax and spending cuts.

Tax: A tax on the super rich just won't cut it. The vast proportion of people in this country consider themselves middle income and they will have to pay more. The rich will have to pay more tax and those outside the tax net will need to be brought into it.

Spending: The Croke park agreement can't cut it. We need involuntary efficiencies, redundancies and pay cuts.

Any point in arguing? no

Any point in saying you've already paid your share? no

An average individual will be hit in several ways: Higher tax, maybe pay cuts, child allowance cuts, removal of tax reliefs, property tax, water charges, etc.

We're all going to be squeezed and any argument, no matter how eloquent, will not change that

But nobody knows how much they are going to be squeezed!
The government are limping from budget to budget, bluffing their way through it, trying to make the easiest cuts politically speaking.
If at the start they had actually spelt out what specific actions it will take over the next 4 to 5 year, the majority of people might be able to knuckle down and get on with it.
There is so much uncertainty that even peolpe that have money are not spedning it, justifyibly in my opinion.

Good post, DerKaiser. It's how we go about this that will convince the markets whether we are worth putting money into or not.

Complainer said:

THis is nonsense. Perhaps you haven't heard of VAT - it brings in more revenue for the state than income tax, and everyone who lives here pays VAT. There are 0% of workers that 'pay no tax at all'.

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My mistake, I meant the 50% of workers who pay no income tax.

@ purple

I was simply wondering if you could live on the wage you are suggesting others should be able to live on. Cutting wages results in reduced spending power in this Country. That is important to those of us who rely on domestic spending, which I would imagine is most of us.

I'm delighted your export business is going so well. It's great to hear as we need so much more of it. I personally always try to buy as much Irish produce as possible, it's not easy even leaving the cost aside the availability, aside from food, simply isn't there.

lightswitch said:

@ purple

I was simply wondering if you could live on the wage you are suggesting others should be able to live on. Cutting wages results in reduced spending power in this Country. That is important to those of us who rely on domestic spending, which I would imagine is most of us.

I'm delighted your export business is going so well. It's great to hear as we need so much more of it. I personally always try to buy as much Irish produce as possible, it's not easy even leaving the cost aside the availability, aside from food, simply isn't there.

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I'm not disagreeing with you.
BTW, while we are busy we have had to cut prices so we have cut costs which included pay cuts (me included) and lay-offs. That's life; we can only spend what we get in from customers in payments. Everyone who got a pay cut accepted it without much complaint. If/when things improve we will increase pay to where it was but we cannot trade at a loss.

Complainer said:

It would really help turn this into a productive debate if you did some basic research. You have clearly no idea what actually goes on in local authorities and Revenue. Local authorities have taken on a whole raft of new functions over the period that motor tax payments have moved online, and staff have been reallocated into new services, without increasing staffing levels. Similarly for Revenue, they took on huge increases in activity levels/tax collected in the boom years with no increases in staff. The Govt have also been reallocating Revenue staff to other more critical areas - particularly Dept Social Protection - since the crunch began.

There is of course lots of scope for further improvements, and there always will be.

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There is still a motor tax office in every county and some have 2! This is hardly an example of making the most of improved efficiencies and making necessary resource cuts.
And it is precisely because government have constantly increased their activities rather than decrease them that the public sector became so bloated. The country is broke and it simply cannot afford lots of the unnecessary services being "provided".

Shawady said:

There is so much uncertainty that even peolpe that have money are not spedning it, justifyibly in my opinion.

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Saving doesn't mean that the saved money isn't spent. A saver allows someone else to do the spending. There would not be a net gain to the economy if people started spending their savings, as less people and organisations would be able to take out loans. This would actually cause bank's balance sheets to further deteriorate and lower credit availability (although the latter is actually positive).

Shawady said:

The government are limping from budget to budget, bluffing their way through it, trying to make the easiest cuts politically speaking.
If at the start they had actually spelt out what specific actions it will take over the next 4 to 5 year, the majority of people might be able to knuckle down and get on with it.

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The real budget deficit will be €18bn in 2010, same as 2009.

The plan as far as I understood it last year was something like knock €3bn off the annual deficit each year for 4/5 years.

Two things have changed since last year:

1) We have had to revise the annual cost of servicing our debt upwards because the bank bailout was costlier than expected and as a result, markets demand a higher premium from us to lend us money

2) The rate of expected recovery across the globe has slowed.

Both of these factors mean that the cuts will now be deeper than €3bn p.a. over the next few years.

Anyone who has listened to what's being said by government will know this.

So where specifically will the €12bn in cuts come from?

Well:

1) We don't really need to know this. The budget occurs in december each year at which point we'll know the measures for the coming year.

2) The government are due to submit a 4 year plan to the EU in next month, so we'll have a broad outline of what will happen.

The problem is that everybody wants to know everything yesterday. We need a little patience. In fact, what's the point in Brian Lenihan telling us what will happen in any year other than 2011? He'll be doing well to get the budget for 2011 through and hasn't a hope of being Finance Minister for the 2012 one.

Chris said:

There is still a motor tax office in every county and some have 2! This is hardly an example of making the most of improved efficiencies and making necessary resource cuts.
And it is precisely because government have constantly increased their activities rather than decrease them that the public sector became so bloated. The country is broke and it simply cannot afford lots of the unnecessary services being "provided".

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Again, it would help if you knew just a little bit about how Govt works. Local Authorities don't get to decide their own roles/scope/functions. These are set by legislation, so please don't beat up LAs for the expanding scope of their role.

It's easy to talk about 'bloated public sector' without being specific. You really need to start being specific about the services we can't afford. Do you want to halt the already limited inspections for building regulations? Or do want to cut back on the library service that provides a gateway to education for people with limited resources?

I personally do not want to see a reduction in public services or the staff that work in them.
However as the big cost here is the wages and salaries of these staff ,I think this is where cuts need to be made. I appreciate these staff have already seen a reduction in their take home pay, but what is the alternative?

Could motor tax be included in fuel? This would eliminate the administration in LAs, cost of the online service and payment processing would be gone, Gardai / court time saved prosecuting evaders and it would be difficult to evade as every car needs fuel The more you use a car the more you pay.

Reduce child benefit but as compensation introduce a free book / uniform for every child. Most parents find these costs expensive. The state could obtain the books at a much better rate than individuals can (although I'm sure they could find a way to screw it up). This would also mean child benefit is being used for the benefit of the child and not going to people who don't need it (http://www.askaboutmoney.com/showthread.php?t=145601) or being spent on other non-child related items.

The loss in benefit for parents with pre-school / babies could be offset by reducing VAT on essential necessities (bread / milk etc). This would be needed for families who are truly in need of this benefit. A reduction in VAT for some of the basics could also make a PAYE tax increase easier to swallow. If you spend all your income you're not effected, if you have excess income then you can affored the cut.