Much will be written over the next few days on the details of the budget. However it is sometimes useful to stand back and take a wider view of matters. What will the long lasting impact of this budget be?
The first impression that comes to mind for me is – an opportunity lost.
Everyone accepts that we needed to alter our finances to put things on a more stable footing.
However the opportunity to make some long-lasting changes appears to have been missed. The measures on pensions, property and employment smack of short term raids and incentives rather than a longer term realignment of priorities, broadening of the tax base and control of expenditures.
The second thought that strikes me is – can you ever trust the government again? Those that invested in a vast array of tax incentives are seeing those tax breaks ended prematurely with the promised relief curtailed. What impact will that have on future tax breaks e.g. the new improved BES scheme?
A final thought relates to the public sector – particularly the golden generation that joined the service before 1995. These individuals will continue to enjoy pension benefits far beyond those enjoyed in the private sector. The capitalised value of these mushroomed from €75bn in 2007 to €129bn in 2009 – an increase of approximately €145,000 per person. The 4% reduction now proposed is only a drop in the ocean compared to liabilities that grew by €54bn in the last two years alone. If we genuinely are all returning to 2007 living standards surely we should have “gained” another €50bn?
The lasting impression therefore is one of sadness – Animal Farm is alive and well in Ireland
Regarding trusting the government - can they just end these tax breaks prematurely and shift the goalposts like that?
ReplyDeleteSeems very unfair but maybe I am being naive!
I would agree that it is extremely unfair – it undermines confidence in government and makes it extremely difficult to use the tax system to achieve other objectives.
ReplyDeleteHowever it is not to my knowledge illegal.
It raises a whole range of concerns in relation to other “promises” by government:
1.The 12.5% corporation tax rate
2. Public Sector and Social Welfare Pensions
3. Bank guarantees
All are subject to some element of promise but can be varied in appropriate circumstances.