IRISH BUSINESS NEEDS a big lift, Irish consumers need to get their mojo back and start spending.
This is why Michael Noonan and Brendan Howlin have spent the last two weeks searching for coins down the back of the fiscal sofa to help pay for their “pro-jobs and pro-business” budget.
Hopefully Noonan’s 25-point plan to kickstart growth will deliver. But the arithmetic underpinning Budget 2014 is not just iffy in some places, it’s downright scary.
Somebody who’s never watched The Omen told Dr James Reilly to cough up cuts of €666m at Health. He just about got over the line on Budget Day, but the government still cannot say what the Health shortfall for 2013 (yes, this year) will be, never mind 2014. His department accepts that a supplementary budget cannot be ruled out.
Reilly is planning a “general review” of medical cardholders which will yield €113m in savings next year. Some of them apparently lack probity according to the same officials who gave them the cards.
Where did this extraordinarily precise number come from?
Was it from the same source who told the Minister he’d get an extra €50m from that hoary old chestnut of “generic medicines”? And has Reilly actually costed the free GP care for the under-sixes ahead of opening talks with the IMO?
Reilly must recall the time he and his fellow doctors at the IMO turned the screw when Fianna Fail jumped its fences too quickly by promising medical cards for the over-70s. It was a fiscal and PR debacle for the government of the day.
Elsewhere, the mathematics of imaginary numbers prevails. Howlin says he’ll get €500m next year from savings on public service pay. That’s another nice round number from a man who yet again claimed credit for “cutting the public pay bill by 17%”. Over half of these cuts were imposed by fiat under the late finance minister Brian Lenihan.
Noonan says the economy will grow in volume terms in 2014 by 2%. Maybe, maybe not. Presumably the Troika has approved this number. The actual outcome could be better…..but it could also be a whole lot worse.
We just don’t know.
The sale of the new Lotto licence is being tapped for €200m to pay for road building, for new local authority house construction and for insulation of the existing public housing stock.
Elsewhere, homeowners using registered builders to pay for home improvements costing €5k to €30k gross will get a 13.5% tax credit, the cost of which is conveniently spread over two years. This will combat the black economy in a labour intensive area, unlike the savage excise increases on drink and cigarettes which – when the VAT is added on – will make smuggling and cross border shopping even more logical pastimes.
Noonan is also applying the sledgehammer in the area of DIRT tax where the rate rises by 8%. The banks had refused earlier suggestions that they collect 4% PRSI on top of the old DIRT tax of 33%, insisting they weren’t a revenue collection agency for Joan Burton’s Social Protection department.
The banks got their way as usual, but in a fit of pique the Department of Finance has simply doubled the intended tax hike and charged it anyway. This will net an extra €150m per annum as a consequence. To add insult to injury, the issue of whether employees will be asked to pay PRSI on deposit interest will have to be clarified by January next.
Questions abound.
Noonan owns not a few of the banks and by damaging them may simply be damaging himself. He has been desperately forcing them to build their reliance on deposits as opposed to bond finance as a source of funding. But higher DIRT tax makes saving even less attractive for long term savers and ultimately will shrink deposits, especially when rates rise again.
Noonan has also upped the ante in his dealings with pension fund managers. His previous levy of 0.6% went down like a rat sandwich and is to be phased out in 2015. But needs must, and the cash strapped minister has raised the rate for 2014 to 0.75%. For good measure he’s also hammered top slice relief on lump sums disbursed by pension schemes on an ex gratia basis.
But nobody escapes the long arm of Merrion Street. It’s not just fat cat pensioners with gold-plated pensions who are going to suffer.
Consider the plight of an old-age pensioner living in the remote recesses of Enda Kenny’s County Mayo.
The local Fine Gael TD may have to inform the elderly OAP that their medical card has been revoked because they have displayed a lack of “probity”. But if he or she gets seriously sick then ringing for an ambulance may not be an option either. The telephone allowance for the elderly has been scrapped by Joan Burton to save €44m. This also knocks out the OAP’s personal alarm system.
Even death may not offer a way out.
The bereavement grant – up to now a miserable €850 – has been killed off to save a pitiful sum.
It seems a strange thing to do in an economy where the debt/GDP ratio has just hit 124% leaving us up there with the Greeks in the European debt league.
Noonan says that this will be the “peak” level. The ratio will fall to 120% in 2014 and will reach 114% by the year 2016. Which is good news for us and even better news for our “gallant allies in Europe” who apparently still view us as fiscal poster boys.
To embed this post, copy the code below on your site
have your say