Business as Usual – Capital Programme to Proceed, No substantial changes to Tax Base

January 30, 2009


Taoiseach Brian Cowen has stated the introduction of a proposed property tax is “speculation” and a decision will be made by the Cabinet “in due course”.

Speaking at the Davos global economic summit in Switzerland, Mr Cowen said the issue would be considered by the Commission on Taxation which is due to report on taxation in September ahead of the December Budget.

Our discussions are ongoing on that but I think we have the Commission on Taxation report which is due mid-year – mid to autumn – to be ready for consideration in our Budget proposals from next year on,” Mr Cowen told reporters.

The Central Bank yesterday advised the Government to consider a tax on residential property.

The assistant director of the bank, Tom O’Connell, said yesterday at the launch of the bank’s first bulletin of the year that a residential property tax should be one of the options considered. Mr O’Connell said a €1,000 annual tax on the 1.7 million dwellings in the State would yield €1.7 billion per year.

However, the Irish Congress of Trade Unions (Ictu) made clear that it is not in favour of the introduction of a property tax on all homes, rather on investment properties and “trophy homes” only.

The Taoiseach went on to state that there were:  “various views about how soon this recession might end and how prolonged it would be depending on how optimistic or pessimistic people are about it.

“There is no doubt that 2009 is going to be a very difficult year and next year for some will see a return of some growth. For us we will have to face into 2010 with the same determination that we face into this year.”

It is clear from what we have seen in the last six months, from the downturn in economic activity, that we have to bridge the gap that has now arisen both in terms of expenditure cuts and taxation. It cannot be met by expenditure cuts alone, although they are an important factor in addressing the situation.

Broadening the (tax) base and seeing what way we can build up our taxation base and at the same time stay competitive, do all we can for creating and maintaining jobs – that is the trick, that is the balance and judgement that can only be made closer to budget time.”

Talks on an economic recovery plan involving the Government, unions and employers continued today. Ictu general secretary, David Begg, last night said unions would have to be able to show “some progress immediately” in relation to tax as part of the social partners’ talks with the Government.

Minister for Finance Brian Lenihan told the Dáil yesterday that a broadening of the tax base is on the agenda but he defended the current income tax system as fair and progressive. Mr. Lenihan reaffirmed the Government’s commitment to the 12.5 per cent rate of corporation tax.

In a speech at Davos yesterday, the Taoiseach stated that Ireland’s capital programme was the largest in Europe. The Taoiseach went on to state the following: 

“We consistently pursue a pro-business and pro-employment tax regime;
we maintain a fit-for-purpose business regulation environment that recognises the need for control and certainty whilst avoiding unnecessary bureaucracy;
We remain committed to very substantial investment in key areas such as infrastructure, education and, critically, R&D, innovation and commercialisation.”

Comment: More of the Same –

It is quite clear from these collective statements from the Taoiseach, the Minister for Finance and ICTU that there are to be no substantial changes in the tax system. I

It is also clear from the Taoiseach’s speech at Davos, that substantial cuts in expenditure, are to be expected, and that state services such as Health and Welfare, and not the capital programme will be axed.



Irish Army Military Equipment Sold for Next to Nothing

January 30, 2009


In the space of three years, from 2005 to 2008, the Department of Defence has auctioned off hundreds of unwanted vehicles for practically nothing.


The equipment included helicopters, navy boars, vans, trucks, minibuses and trailers. But despite there being more than 350 items on the lot, in total, these sales have brought in just €1.6 million.


This amount is hust a small fraction of the €100m brought in through the broader sale of army lands and properties throughout the last decade, according to figures obtained by the Sunday Tribune.


Over recent years the defence forces have held a number of auctions to offload equipment, but they have ceased since 2006. Now all vehicles are scrapped once taken out of service.


However, in 2004, a total of 194 vehicles were sold, amounting to some €79,100. 1992 and 1994 Ford Fiestas were sold for €4.70 and 48 Nissan Patrol jeeps ranging in age from the early to mid-nineties and in price from €545 to one cent.


In 2006, the auction included 17 Ford Transit vans, which were sold for between €33 and €1,033 each. A spokeswoman for the Defence Forces explained that all of the items were sold at auction and consequently, the price received was the highest on offer in each case.


“The condition of some of these vehicles that have been in use in the Defence Forces for about 10 years has to be taken into account,” she said.


Aside from ground vehicles, the list of sales also includes five helicopters sold for a total of €517,000, six Marchetti Aircraft €600,000 and a variety of naval vessels €344,226.


The most expensive items, apart from aircraft and boats, included a 93D ACMAT 4X4 Personnel Carrier for €5,474 and a Ford Backhoe Digger for €5,449.


A statement from the Defence Forces stated:

“It should be pointed out in the first instance that it is not generally the practice to sell defensive equipment or armaments of any nature. Such equipment is normally considered to be defunct and is scrapped. “Prior to 2004 and subsequent to mid 2006, vehicles have been taken out of service and scrapped.”




“Want a car for one cent? Try an Irish Army auction” Sunday Tribune, October 26th, 2008.

Four Military Barracks Closed: Longford, Lifford, Letterkenny, Monaghan

January 30, 2009


Longford military barracks closed today. The closure went ahead despite several protests by locals, who expressed concerns about the economic impact of the move. Over the last few days, barracks in Lifford and Letterkenny have been shut down and Monaghan Barracks has also closed.

The closures were announced on budget day,  The four barracks were to to close by 31 January 2009 and St. Bricin’s Military Hospital in Dublin 7 is to close at a later date. The personnel affected have  been re-deployed to other barracks. The total number of personnel is approx. 650 military plus 40 civilian personnel.

Gerry Rooney, PDFORRA General secretary said “The closures will cause disruption to the soldiers stationed at the barracks concerned and will see between €6 million and €12 million lost to the local economies in north Donegal, Longford and Monaghan. In PDFORRAs view the closures are not necessary and will not contribute any additional money to the Government. Indeed, in the short term it will most likely see an increase in spending to up-grade barracks to accommodate those who are moved as a result of the closures. “

Gerry Rooney also said “The closure of St Bricin’s Hospital and its relocation to the DFTC could see the Defence Forces Medical Corps lose the specialist’s medical services provided by St Bricin’s which would undermine support for Defence Forces operations and the personnel who provide them”.


€16.5bn cutbacks over five years planned for Ireland

January 28, 2009


The Taoiseach has told the Dáil that the Government plans to make an adjustment of €16.5bn over the next five years between taxation and expenditure cuts.

He said that this plan has been sent to the EU Commission. Step one was to finalise savings of €2 billion this year.

Mr Cowen said progress was being made in talks with the social partners and that they will know by the end of the week if they can reach agreement.


It is unclear at this point if these cuts will be made in the capital programme or in state spending on social services such as health provisions.


Anglo-Irish Nationalised: No decision about AIB & BOI

January 27, 2009


On January 15th, the Government took nationalised commercial lender Anglo Irish Bank. The move means the bank will now be fully owned by the taxpayer. The unprecedented decision was seen as a last-ditch attempt to rescue Anglo after a substantial number of depositors pulled their money out of it in the past number of months.

The Government will put an assessor into Anglo to establish what value, if any, can be put on the institution. There are no guarantees that existing shareholders in Anglo will receive anything following the assessment. The sudden move came after it emerged last month that the bank had concealed loans to its former chairman Sean FitzPatrick over a period of eight years. His loans stood at €87m last September.

The Government said the move, which marks the first time the Government has owned a bank since 2001, was taken to ensure the continued viability of Anglo-Irish Bank which has loans of about €100 billion on its balance sheet. It also added that a new board would be put in place apart from the newly appointed chairman Donal O’Connor.

“The funding position of the bank has weakened and unacceptable practices that took place within it have caused serious reputational damage to the bank at a time when overall market sentiment towards it was negative,” Mr Lenihan said.

He added that a planned €1.5bn recapitalisation of Anglo, which had been previously on the cards, was not now appropriate although he added that he remains fully committed to the funding proposals for Allied Irish Bank and Bank of Ireland.

Mr Lenihan would not be drawn on the cost of the move but he said it erased the need for the €440bn bank guarantee scheme to be utilised in the case of Anglo Irish Bank.

Anglo-Irish Bank, whose shares slumped to a year low of 12c just before Christmas from highs of €11, has been dogged by bad news for months and the institution, which is a commercial lender, has been long considered the most exposed to the troubled property sector.

Shares in other Irish financial institutions were hit hard amid worries the nationalization could indicate funding is becoming harder for the whole sector. The declines also came after ratings agency Fitch cut its ratings on the main Irish banks on the 15th January 2009.


On January 16th, shares in both Bank of Ireland were:


* UK:BKIR:  IRE:  3.38, +1.08,+47.0% dropped 11.1% and Allied Irish Banks (AIB):



* 2.65, +0.57, +27.4%)(UK:ALBK: slumped 22.7%.


It has been indicated since the bank guarantee that Bank of Ireland and Allied Irish Banks are also in line to receive capital injections of €2 billion




Mass Strikes in France

January 27, 2009

Nicolas Sarkozy now faces the first mass-protests over his handling of the financial crisis as unions prepare to paralyse France in a general strike uniting train-drivers, air traffic controllers, journalists, bank staff and even ski-lift operators.

Black Thursday” is the first general strike since the French president’s election in 2007. All the leading unions have joined forces to protest that the government’s stimulus plans should focus less on companies and more on workers’ job-protection and purchasing power.

The protests reflect a mood of social unrest that has been building for months. Unemployment had dropped in the first half of last year but it is now spiralling, particularly among the young, and is forecast to reach 10% in 2010. The recession is predicted to be worse than thought while flagging exports and consumer sales have greatly affected the manufacturing sector.

The strike will unite private and public sector workers from schools, hospitals national TV and radio to postal services, bank clerks and supermarket employees. High school pupils, university lecturers, lawyers and magistrates will also protest Sarkozy’s reforms and planned job cuts. Despite the predicted chaos, one poll found that 70% of French people either support or sympathise with the strikes.



Details of Dublin Bus Cost-Cutting Measures

January 27, 2009


Dublin Bus will cut 290 jobs, scrapping the weekday Nitelink service and removing 1,000 scheduled journeys from its timetable. Commuters face far more infrequent services after the company’s  proposals to take 120 buses from eight garages from March 1, as part of a radical cost-cutting plan approved by Transport Minister Noel Dempsey

It was reported in the Irish Independent that the main losses will be at:

* Harristown, where 30 buses are being dropped.

* 40 buses will be dropped in total between the two Donnybrook garages, with 23 buses cut at the Phibsboro garage.

* Twelve buses are being cut at Conyngham Road, eight at Ringsend, six at Clontarf and one at Summerhill garage.

* The Nitelink service will be cancelled from Monday to Thursday and final departures on Friday and Saturday nights will be at 3am instead of 4.30am. 

Changes to the late-night service will be implemented at an earlier date than the other cutbacks, from February 2. CIE has also indicated that there could be more cutbacks on the way.

CIE’s ‘Cost Effectiveness Plan‘, presented to staff revealed “additional corrective action” may be required. There were angry exchanges between Dublin Bus and its workers at a fraught meeting at the Gresham Hotel  last Friday 16th January with some workers walking out in protest as it ended. Management told staff that a €31 million reduction in costs was “urgently required” after it suffered €10m losses last year and projected €31m losses this year. There will be a reduction of 290 staff across all grades, including 160 temporary drivers, executive, clerical, operations and maintenance staff. 

Dublin Bus has estimated a potential loss of €31 million in 2009. Public transport subsidies for CIE companies remain some of the lowest in Europe. The government abolished the public transport fuel rebate late in 2008 even though CIE indicated the loss of this rebate would add millions in additional costs to CIE companies in 2009.

According to the Labour Party, the elimination of bus routes and services will be a “devastating blow for commuters and will particularly hit low income workers many of whom have no option but to use public transport to get to work.” Commuters had already been hit with fare increases of an average of 10 cent from the 1st of January last.

However, what is most astonishing is that the Green Party members of government are prepared to support the decimation of critical public transport services across Dublin.”

The Labour Party went on to comment that if the Government was really committed to persuading more people to use public transport, they should do what other transport operators do and provide for a drop in bus and rail fares, rather than an increase.