Lenihan: Budget cuts will impact on living standards

senordingdong

http://news.eircom.net/breakingnews/18824465/?view=Standard

Finance Minister Brian Lenihan tonight warned a sizeable chunk of €15bn in savings over the next four years will be in December's Budget.

The Government said the target for 2011 will be revealed next month and stated cuts and taxation measures will hit people's living standards.

The massive figure - twice the initial estimate - was blamed on higher debt costs and predictions that the domestic and international economy will grow at a slower pace than first thought.

Mr Lenihan said the bulk of the pain must be taken in the Budget.

"The Government accepts that there must be significant front loading in relation to this figure in the Budget this year," he said.

"Clearly for credibility purposes it has to be frontloaded."

The Cabinet met for around six hours today to discuss December's Budget and the four-year budgetary road map.

A statement issued after the meeting stated the Government decided on the €15bn figure to ensure the Budget deficit is slashed to the EU-agreed target of 3% of Gross Domestic Product, of the value of the economy, by 2014.

Mr Lenihan said the figure was based on an annual average growth rate of 2.75%.

The minister said EU economics commissioner Olli Rehn will travel to Dublin in the week beginning November 8 to brief opposition parties and the social partners.

It is expected the four-year plan will be published shortly after.

Speculation has been focused on the scale of the savings needed this year amid suggestions it could be as much as double the initial €3bn estimate.

The Government said the figure would not be revealed until the four-year plan is published next month and warned delaying the pain was not an option.

A statement said: "The Government realises that the expenditure adjustments and revenue-raising measures that must now be introduced will have an impact on the living standards of citizens.

"But it is neither credible nor realistic to delay these measures.

"To do so would further undermine confidence in our ability to meet our obligations and responsibilities and delay a return to sustainable growth and full employment in our economy."

Labour deputy leader and finance spokeswoman Joan Burton said the Government was refusing to reveal key information that explained how it came to the €15bn figure.

Ms Burton said other basic economic information was also being withheld from the public and Opposition parties.

"The Government has not yet produced their forecast for economic growth and employment for the next four years to explain the basis for their plan," she said.

"They have not yet set out what their growth forecast is for 2011, nor have they agreed that forecast with the European Commission."

Ms Burton said there was still no clarity on the savings needed in December's Budget, the impact of the bank bailout on the national deficit and savings expected from the Croke Park deal.

"Frankly, if this is the basis on which the Government is having its two-day meeting, then it's little wonder that the country is in the mess it is in," she added.

Business body Ibec claimed the €15bn adjustment was challenging but achievable.

Chief Economist Fergal O'Brien said: "It is essential that we don't stunt our fledgling economic recovery by overtaxing the country. The bulk of the adjustment must come in the form of current expenditure reductions.

"The Irish economy remains in the international spotlight and it is vital that we take the steps necessary to restore confidence. We must demonstrate our ability to solve our own problems and unfortunately this means tough decisions."

A two-day Dáil debate on the economy is due to take place tomorrow and Thursday.

I'm no economologist but does anybody else see a pattern here.

Taking their previous predictions at face value, DoF have fallen awfully short of the mark. After taxing the bejaysus out of everyone and everything.

With that in mind, I would wager that after hitting people hard, they curtailed their expenditure, tightened their belts, or...lowered their standard of living.

So surely, if they hit peoples standards of living again, people will start spending even less...resulting in the DoF falling short again.
Or is it just me?

gonedrinking

true but there is no other choice

orourkeda

State the obvious there Lenihan.

yoshytoshy

It's all or nothing at this stage.

Let the battle commence!

senordingdong

gonedrinking wrote: »

true but there is no other choice

I'm not sure that's the case, but if my point is correct, then these measure will infact, prolong the recovery.

Surely that's a bad idea.

yoshytoshy

We're living on promisery notes at the moment and if we don't ease off on the spending ,nobody will lend us anymore.

Better to have a pot to piss in ,than a pot of piss all over you.

jambofc

im no accountant but surely they should be encouraging us to spend what little we have rather than hitting everyone even more in the pocket?!?!?!

orourkeda

Perhaps the next minister will surround themselves will people who know what they're doing.

Herb Powell

what's this "we" bull****? TDs will be fine

senordingdong

yoshytoshy wrote: »

We're living on promisery notes at the moment and if we don't ease off on the spending ,nobody will lend us anymore.

Better to have a pot to piss in ,than a pot of piss all over you.

Yes, but based on the last budget, and previous predictions, this won't work.

Spending seems like the only sensible way out of this.

gonedrinking

senordingdong wrote: »

I'm not sure that's the case, but if my point is correct, then these measure will infact, prolong the recovery.

Surely that's a bad idea.

By not making cuts we would just be sinking deeper into debt which would mean it would take even longer to ever recover. Whatever happens the ecomony is going to get worse for the foreseeable future, but they will be less worse by making cuts and recovery will be quicker.

For those that say cuts aren't the way to go, what is your alternative?

average_runner

You cant spend something that you dont have.

Thats what got us into this mess with Banks spendinng money they didnt have and people buying houses they could never afford. These people lack common sense and should be the ones made paid.

Not the people that actually lived within their means during the boom.

yoshytoshy

senordingdong wrote: »

Yes, but based on the last budget, and previous predictions, this won't work.

Spending seems like the only sensible way out of this.

We should of started spending two years ago ,in hope of recovery. I think ,we have to take all this debt on the chin now and hope for the best.

Just remember who got us into this mess.

senordingdong

average_runner wrote: »

You cant spend something that you dont have.

Apparently you can. As so many in this country (govt. not withstanding) already proved.

And the governments ultimate plan through all of this, is to make the Irish economy look stable, so that they spend money they don't have by borrowing again.

gonedrinking wrote:

For those that say cuts aren't the way to go, what is your alternative?

Encouraging spending seems to be the sensible alternative beign thrown around here.

Mr Freeze

Don't Fret!!

We've turned the corner!

This is the Governments plan working, we will be fine!!!

NOT!

Seriously dreading this budget!!!

gonedrinking

senordingdong wrote: »

Encouraging spending seems to be the sensible alternative beign thrown around here.

And how do they do that? How can you encourage people to go out and spend money on stuff they don't need when we are in the middle of the worst recession we've had?

gonedrinking

I suppose the government could allow people access to a certain proportion of their pension, say 10% as a once off

Hyperbullet

Shouldn't the government be trying to entice people to actually spend money rather than beating money out of them and having no surplus income to spend at all. I'm sure they've got people far more versed in economic theory than me working on the budget, but I just feel they've chosen the wrong option.

gonedrinking

also why don't we tax lottery winnings? I'm just brainstorming here, its not really relevant to this thread

eeloe

gonedrinking wrote: »

also why don't we tax lottery winnings? I'm just brainstorming here, its not really relevant to this thread

People would stop playing the lottery if 42% of it is being deducted as tax, when the statebodys are already taking 100% of the income from the lottery.

deelite

gonedrinking wrote: »

And how do they do that? How can you encourage people to go out and spend money on stuff they don't need when we are in the middle of the worst recession we've had?

I heard David Williams on radio other morning and he suggested to freeze all mortgages for 2 years to encourage people to start spending, which I personally think is a great idea. He explained that for every one euro that you spend the government gets approximate 20 cent out of each euro.

gonedrinking

eeloe wrote: »

People would stop playing the lottery if 42% of it is being deducted as tax, when the statebodys are already taking 100% of the income from the lottery.

it doesn't have to be 42%, it could be a special lottery tax of 5%

yoshytoshy

Where do people think all this money comes from for spending ?
If the banks are all state owned ,that means the people of ireland are now the banks.
If the banks are broke here ,where do people think all the money is ?

They should start with cutting their own stupid "pensions". Oh no wait, they're special and exempt from everything :rolleyes:

deelite

gonedrinking wrote: »

But I suppose the danger with that is that people won't spend it and instead save it, still worth thinking about though. The government really need to start coming up with more ideas like this.

Personally I'd save half the mortgage (250) and would live a bit more comfortably - the bills would be paid on time (ESB, Gas etc.,) and I would probably put a bit more shopping in the trolley in the shops, maybe go out for a gin and tonic (I haven't been out in a pub since August and before that would have been January - I'm not joking).

senordingdong

gonedrinking wrote: »

And how do they do that? How can you encourage people to go out and spend money on stuff they don't need when we are in the middle of the worst recession we've had?

Lower VAT for one thing. The Brits did this on the run up to Christmas and it not only did them a world of good, it did shoppers from the Republic a world of good.
Lower income tax.
Lower the taxes things like alcohol and get people back out on Saturday nights.

Infact, lower taxes across the board, increased taxation is what is keeping people from spending.

gonedrinking

deelite wrote: »

I heard David Williams on radio other morning and he suggested to freeze all mortgages for 2 years to encourage people to start spending, which I personally think is a great idea. He explained that for every one euro that you spend the government gets approximate 20 cent out of each euro.

How would that work? Surely it would then mean that the banks would need more of our taxes pumped into them to keep them afloat.

deelite

gonedrinking wrote: »

How would that work? Surely it would then mean that the banks would need more of our taxes pumped into them to keep them afloat.

Didn't really listen carefully to that but his opinion was that as it stands the banks aren't lending so when the mortgages are being paid it's only going into them and as we now own them we can afford to it (or something like that - when he said freeze the mortgages I stopped listening....:D)

lucylu

deelite wrote: »

I heard David Williams on radio other morning and he suggested to freeze all mortgages for 2 years to encourage people to start spending, which I personally think is a great idea. He explained that for every one euro that you spend the government gets approximate 20 cent out of each euro.

I can't see this happening. Those on Tracker Mortgages are benefiting from the Low ECB interest rate should still pay their mortgages if they can, ECB rates will not get any lower. Freezing mortgages for 2 years will no doubt lead to an increase payments in the future.

gonedrinking

senordingdong wrote: »

Lower VAT for one thing. The Brits did this on the run up to Christmas and it not only did them a world of good, it did shoppers from the Republic a world of good.
Lower income tax.
Lower the taxes things like alcohol and get people back out on Saturday nights.

Infact, lower taxes across the board, increased taxation is what is keeping people from spending.

But lowering taxes could well mean that the overall tax take is lower even taking into consideration the additional spending.

yoshytoshy

senordingdong wrote: »

Infact, lower taxes across the board, increased taxation is what is keeping people from spending.

It has nothing to do with negative equity ? pension commitments ? job security ? dare I say the word again "recession" ?

Even if a new TV that should be €500 ,suddenly cost €470 ,would anyone expect a stampede to get them ?

senordingdong

senordingdong wrote: »

Lower VAT for one thing. The Brits did this on the run up to Christmas and it not only did them a world of good, it did shoppers from the Republic a world of good.
Lower income tax.
Lower the taxes things like alcohol and get people back out on Saturday nights.

Infact, lower taxes across the board, increased taxation is what is keeping people from spending.

I think comparatively speaking our taxes are already pretty low

dolphin city

gonedrinking wrote: »

I suppose the government could allow people access to a certain proportion of their pension, say 10% as a once off

what pension? some people can't afford pensions as they are.

dolphin city

deelite wrote: »

I heard David Williams on radio other morning and he suggested to freeze all mortgages for 2 years to encourage people to start spending, which I personally think is a great idea. He explained that for every one euro that you spend the government gets approximate 20 cent out of each euro.

and what happens after two years when all the mortgage payments have been spent on clothes, etc. Back to square one but probably worse off then ever. Thats prolonging the pain for a short term gain.

senordingdong

yoshytoshy wrote: »

It has nothing to do with negative equity ? pension commitments ? job security ? dare I say the word again "recession" ?

Even if a new TV that should be €500 ,suddenly cost €470 ,would anyone expect a stampede to get them ?

It had nothing to do with pension commitments and job security before the recession.

You make a good point with your tv analagy.
But if a workers wages have gone down, his income tax has gone up, and vat has gone up, you can damn welkk bet there won't be a stampede to get a new tv.

gonedrinking wrote:

But lowering taxes could well mean that the overall tax take is lower even taking into consideration the additional spending.

That's a possibility, but we already have fair grounds to expect that the govt. will fall short of its predictions again.
Atleast try something new.

Mr Freeze

dolphin city wrote: »

what pension? some people can't afford pensions as they are.

Exactly! I don't have one!

And my Dad who has been paying into a pension for decades now, are they going to give him 10% of nothing? Because thats what his pension is worth now.

gurramok

We have one of the highest private debt burdens in the EU, we also have half a million plus people looking for jobs (those on the dole and and those not entitled to any benefits). We have a population of 4.3m, you just cannot expect a receovery in spending when a huge portion of the population are suddenly broke.

Yes, jobs will solve alot of it but where will we find half a million jobs? Over to you Lenihan!

PeterIanStaker

Herb Powell wrote: »

what's this "we" bull****? TDs will be fine

Exactly. He should have said cuts will impact people who dont have three pensions and a few offshore accounts.:rolleyes:

pickarooney

I don't understand why they don't make completely outlandish projections of, say, a trillion euros. That way when the reality is slightly lower they can publicly pat themselves on the back and the idiots that vote for them will keep on voting for them. Instead, they make forecasts which everyone knows are hopelessly optimistic and end up looking even more incompetent than ever when the real figure is a large multiple of the predicted one.

gonedrinking

CKWPORT wrote: »

Exactly! I don't have one!

And my Dad who has been paying into a pension for decades now, are they going to give him 10% of nothing? Because thats what his pension is worth now.

how is that even possible, what sort of pension did he have? and by the way the majority of people in the country who work have a pension, thats a fact.

PeterIanStaker

gurramok wrote: »

Yes, jobs will solve alot of it but where will we find half a million jobs? Over to you Lenihan!

I guarantee you these gombeen traitors are delighted that thousands will emigrate.

pickarooney

deelite wrote: »

I heard David Williams on radio other morning and he suggested to freeze all mortgages for 2 years to encourage people to start spending, which I personally think is a great idea. He explained that for every one euro that you spend the government gets approximate 20 cent out of each euro.

Wow, he totally nailed that explanation of how VAT works.

newmug

senordingdong wrote: »

Yes, but based on the last budget, and previous predictions, this won't work.Spending seems like the only sensible way out of this.

What exactly do you expect people to spend? Do YOU have an extra 20grand to throw away on a new car or extension? Do you think guards and teachers, who are paid with borrowed money, should then go and spend that money willy nilly?

senordingdong wrote: »

Apparently you can. As so many in this country (govt. not withstanding) already proved.

And the governments ultimate plan through all of this, is to make the Irish economy look stable, so that they spend money they don't have by borrowing again.

Encouraging spending seems to be the sensible alternative beign thrown around here.

NO YOU CAN NOT! That is what got us into this mess in the first place! We're going back to a level of spending / standard of living we should have been at all along, only we're doing it all at once instead of over 20 years. The whole 90's and 2000's were a white elephant, everyone had the emperors new clothes syndrome:mad:

senordingdong wrote: »

Lower VAT for one thing. The Brits did this on the run up to Christmas and it not only did them a world of good, it did shoppers from the Republic a world of good.
Lower income tax.
Lower the taxes things like alcohol and get people back out on Saturday nights.

Infact, lower taxes across the board, increased taxation is what is keeping people from spending.

So, we owe 15bn. We are being forced to "repay" it through taxes and cuts. But you think that by LOWERING the repayments, that people will volunteer to make up the shortfall by buying even more crap than we did in the crazy tiger years? Did you finish school, serious question?

lucylu

Could we not mint a few bob in Sandyford on the QT?

gurramok

gonedrinking wrote: »

by the way the majority of people in the country who work have a pension, thats a fact.

About half the workers don't have a pension as they don't earn enough to afford one. Just like nearly half of all workers don't even pay income tax as they earn too little.

gonedrinking

balderdash

Minstrel27

Herb Powell wrote: »

what's this "we" bull****? TDs will be fine

It's funny really. All of this will have absolutely no impact on his life.

gurramok

gonedrinking wrote: »

balderdash

Its quite a common fact!

http://www.rte.ie/news/2010/0622/pensions.html
"Currently almost half of Ireland's workforce has no supplementary pension provision over and above the minimum State pension."

sh1tstirrer

Minstrel27 wrote: »

It's sickening really. All of this will have absolutely no impact on his life.

fixed

Quandary

If nothing else, the last couple of years have made people very cautious when it comes to spending. Tax increases will just make people tighten their belts even more. If the govt reduce tax will it be reduced in a way that will encourage the public to spend more? - i cant see them making a return out of this really.

The govt really need to clean and weed their own house first though. Do the fcuking decent thing and set an example by slashing their own wages and at least eliminating double fcuking pensions. I know its only a drop in the ocean, but they need to get down to the level of the public when it comes to personally feeling the pain if they want to have any credibility. Unfortunately though as we all know, the political system in Ireland is a closed system where the elite will make sure no.1 is well and truly looked after first.

I used to think a government was a body which had the best interests of the majority at heart - :pac:

thebigbiffo

they've already set up NAMA to manage loans that cant be serviced by individual developers thereby freeing them up to go about their business (sort of...)

where's my NAMA so somebody can take my negative equity and bad loans and so i can get back to the business of being a citizen and spending my income in the economy.

to be fair: it's not that outlandish. i read yesterday there's a 'NAMA like scheme' in place for local authorities as well - example being they paid 5 mill for a site for social housing they can no longer afford, give it to scheme which manages said loan until it's viable to pay it back.

why not free me of my underperforming loans (ie. the mortgage as one example) until the debt can be paid back when the economy recovers. anyone give me a good explaination why there's no NAMA for joe soaps when we're (the taxpayer) effectively the ones who pay for for all these other schemes AND pay into the exchequer aswell?