Car scrappage: Does the government favour the motor industry too much?

ROK ON

el tonto wrote: »

You do let them buy toy cars if it increases consumption taxes, encourages other people to spend and helps create or protect jobs. If the money is sitting in the piggybank, it does none of that.

The Paradox of Thrift.
Saving is good for the individual, but is viewed as bad for society if we all do it at the same time.

ROK ON

el tonto wrote: »

So if I don't buy a car, I've to pay off the national debt instead?

All I'm saying is that if you focus overly on austerity measures you're risking stagnation.

Society focuses on issues as if they are mutually exclusive.

We need austerity (let's call it cutting waste, becoming more productive). But we also need some stimulus. Consumer spending is fine but as a SOE we need to begin wealth creation.
So govt could look at offering tax free status to say folks that set up new enterprises. Won't cost a lot as many start ups are loss making anyway, but it helps sentiment.
We can't start a massive spending spree because mkts won't give us money for that.

A lot of our future depends on growth elsewhere helping to futher grow exports here so that the virtuous cycle begins again.

But the reality is that in the study of banking and property crises is that they take a lona time to recover from. Once we are seen to deal credibly with out cost base the mkts will reward us. There are things we can do that won't tke money off people now but will improve our finances. Such as begin extending the retiremnet age. Reduce the pension entitlements of future pensioners on a phased basis. These things have to be done eventually anyway, so no time like the present.

My issue is that I have so many ideas but no political party represwnts my way of thinking.

Idleater

ROK ON wrote: »

The Paradox of Thrift.
Saving is good for the individual, but is viewed as bad for society if we all do it at the same time.

Interesting. I've been saving for a while due to the "uncertainty" at work, and now am holding off spending it on a bike to upgrade the car on the scrapage scheme...

On a vaguely related note, I don't think I've bought as much in this country as I have this year, possibly partly down to said savings being there in the background.

That or I'm just a lazy indecisive sod.

Chips Lovell

Lumen wrote: »

You're going to have to pay off the national debt sooner or later. How does spunking money on a completely unnecessary car help that objective?

But that money was never going to be spunked on the national debt. If I have the money to buy a car and opt not to, I'm going to spunk it on holidays or bikes or what not. Or I'm going to leave it in the bank in which case the only person who gains is me.

Lumen wrote: »

"Stagnation" is not a risk, since it implies some kind of equilibrium state. We're currently heading towards complete economic meltdown in the form of a bankrupt state. Fussing around with a few jobs in the car sales industry is just rearranging the deckchairs on the titanic, and is the sort of policy adopted by a government that has absolutely no clue how to get us out of the economic hole it has dug us into.

The thing is that the scrappage incentive was a drop in the ocean of overall economic policy which is mostly at the moment about slashing spending and shoring up tax revenues.

If you don't encourage economic activity, then it's going to take a damn sight longer to repay that debt than if you do. Taxing the bejesus out of the country and doing nothing else has been tried before and didn't work.

CheGuedara

ROK ON wrote: »

My issue is that I have so many ideas but no political party represwnts my way of thinking.

When I'm benign dictator I may have a position for a minister for finance. We can definitely discuss it - I'll send a PM when the time comes (or a helicopter, which ever is easiest at the time*)

*I'll be in the middle of a cleansing of the 'class politica' so may be a little preoccupied. Also the position of minister for 'keepin it real' is already blagged

Macha

Stimulus is putting off til tomorrow the problems we face today. Encourage people to buy cars tomorrow and the majority are people who would have bought cars over the next few months anyway but jump sooner. And the majority of that money goes abroad to where the cars are manufactured. Total waste of taxpayers money.

Lumen

el tonto wrote: »

But that money was never going to be spunked on the national debt. If I have the money to buy a car and opt not to, I'm going to spunk it on holidays or bikes or what not. Or I'm going to leave it in the bank in which case the only person who gains is me.

It's not really your money. If you stay in the country the government will have to take it off you to repay the debt. Where do you think that €100bn is going to come from?

el tonto wrote: »

The thing is that the scrappage incentive was a drop in the ocean of overall economic policy which is mostly at the moment about slashing spending and shoring up tax revenues.

The scrappage scheme demonstrates that the government is more interested in wasteful unproductive subsidy schemes than real solutions.

el tonto wrote: »

If you don't encourage economic activity, then it's going to take a damn sight longer to repay that debt than if you do.

"Economic activity" sounds impressive, but if it doesn't generate wealth it's just spunking money away on shít we don't actually need.

If your salary has been slashed 20% and you're sitting in the pub

Selling cars barely registers as economic activity. Economic activity is

el tonto wrote: »

Taxing the bejesus out of the country and doing nothing else has been tried before and didn't work.

I haven't suggested "Taxing the bejesus out of the country and doing nothing else". I'm suggesting that the solution to our economic problems comes from productivity, efficiency, exports and investment.

Your support for this scheme comes from the taxation angle. So do you want taxation or not? If you want tax, raise it directly. If you want to create wealth, create conditions for wealth creation. Spending money on cars does not increase net wealth, nor does it create conditions for wealth creation.

SerialComplaint

The scrappage scheme has also reduced spend with local garages on maintenance and upkeep of cars.

what_traffic

el tonto wrote: »

The numbers that came out today. Scrappage generated a net benefit of €41 million to the exchequer through spending.

This €41 million is a number you have come up with??
Can you point to hard written facts from ESRI or Dept Of Finance that back up your statement?

Also you say:

el tonto wrote: »

Sure overall consumer spending is down, but what has that got to do with anything?

You stated the following yesterday:

el tonto wrote: »

The main purpose of the scrappage scheme from the government's point of view was not to protect the motor trade, but to boost consumer spending.

Thats the whole point of this thread. It was not intended to be a boost consumer spending, it was to protect the motor trade. There is nothing wrong with this per se- but lets call a spade a spade.

el tonto wrote: »

What makes you so sure it wouldn't have fallen further without this?

I am not saying it would not have fallen further. The point is that it was not intended to be a boost consumer spending, it was to protect the motor trade.


Also re sentiment - yes its rising in the ERSI figures you linked too; but its not actually happening on the ground looking at the Dept of Finance Figures released yesterday.
http://www.finance.gov.ie/documents/exchequerstatements/2010/endaugtaxanalysis.pdf

Haleakala

I think the original question was does the Government favour the motor industry too much?

While there are some ancillary manufacturers and service providers to that industry in Ireland (who can avail of state industrial incentives), the bulk of employment would be associated with the retailing and maintenance of vehicles. (Similar to bicycles).

The scrappage incentive being offered is significantly lower than the retail value of the product. It is unlikely that the incentive is encouraging the purchase of new cars that would not otherwise have been bought. It is however encouraging the purchase of new cars in a shorter time frame than would otherwise have happened. Why is this a good thing? It brings forward the revenue stream (which probably would have happened anyway, just later) and helps maintain employment in that particular sector. Why that would be any better than handbags (as the ESRI's J Fitzgerald notes) or mobile phones is anyone's guess.

(It should be noted that it is illegal to introduce incentives which favour domestic production above production from third countries - so a policy like that can not be implemented either. )

In truth, the advantage of it being new cars as opposed to anything else is that it is much more targeted, limited (including administrative scale) and at least the revenue from these expensive items is sizeable enough. Plus there is all the stuff/guff about the newer car being safer, greener, more fuel efficient etc. while the materials in the trade-in can be recycled etc. As these newer cars are also more difficult to service yourself, the garages might actually gain more service visits in the medium term.

From the point of the consumer, I would argue that the Cycle to Work is a much greater determinant in whether an individual would buy a new bike. Therefore the answer is no on the industry bit, yes on the retail bit, but not as much as some other areas (e.g. bike sales).

Chips Lovell

what_traffic wrote: »

Also re sentiment - yes its rising in the ERSI figures you linked too; but its not actually happening on the ground looking at the Dept of Finance Figures released yesterday.
http://www.finance.gov.ie/documents/exchequerstatements/2010/endaugtaxanalysis.pdf

The figures that show VAT receipts were ahead of projections?

what_traffic

el tonto wrote: »

The figures that show VAT receipts were ahead of projections?

Yes they do. But thats only a projection of what they thought they would take in till this point in 2010. Whats the point your making about this value? Look at VAT take up till August 2010 and compare against 2009.