Sunday, November 22, 2009

Unions Give Up Trump Card

If reports are true that the unions have agreed not to strike in some parts of the country on Tuesday because of the weather conditions, they have just made a major blunder. After months and months of politically motivated and generated attacks on public servants and the valuable work they do for society, the unions, when they have an opportunity to give the greatest ever demonstration of the value they provide - which goes largely unnoticed - appear to be about to play right into the hands of their opponents.

Every day of the week all over this country, public servants provide essential services to society. Nurses, doctors, firefighters, Gardai, soldiers, etc. The usual suspects, if you like. But all of these are supported - and cannot work without - the services provided by computer analysts; payroll staff; recruiters in HR; finance people who pay bills; cleaners who keep offices fit to work in, etc. I could go on. I never agreed with the idea of the Frontline Alliance because the front line, whether we like it or not, cannot operate without the back office. That is the nature of organisations.

If the unions call off Tuesday's action, they will have done a severe disservice to all public servants.

Update: 11 a.m. 22 November 2009

I have just heard this confirmed by a SIPTU representative on radio news. Unbelievable stupidity.

Sunday, October 11, 2009

Gormley Adds To The Manure Heap

I could barely contain my anger listening to the absolute shite John Gormley spoke on the right-wing programme, the Wide Angle, with Karen Coleman this morning. Asked would there be social welfare cuts in the budget later this year, Gormley said that he could not comment on that as it is a budgetary matter. Later, however, he had no problem in telling us that there would be a carbon tax in the budget. What a load of absolute shite.

Let's face it, the ordinary taxpayer will be screwed in the budget while the fat cats will continue to get off scott free.

As if it was not bad enough listening to Gormley's gormless ramblings, Eamonn Ryan is now adding further to the manure heap on the grossly over-paid Marion Finucane's programme on RTE.

The Green Party did a disservice to the Irish people yesterday in voting for the so-called programme for Government and NAMA, the Dick Turpin arrangements for bailing out developers and bankers.

I just can't wait to get a go at these guys when the election finally comes.

Wednesday, June 10, 2009

Fianna Fail Just Don't Get It

There is an air of Alice in Wonderland about the reaction of Fianna Fail to the rejection, by the majority of the people, of the party, their policies and their handling of the economy.

Spokesperson after spokesperson trots out the line, obviously prompted by spin doctors, that they were faced with a massive economic problem caused by the global recession and banking crisis. A Fianna Fail apologist on RTE this week even went so far as to say that they “inherited” the crisis? From whom? They have been in power for years, so this disaster happened on their watch.

Fianna Fail fuelled the bubble; encouraged crazy development and speculation; splurged out on wasteful projects; presided over massive waste of money for e-voting; watched while FAS burned cash; got us into a disgraceful bargain with the criminal rapists and brutalisers in the church and allowed the banks to behave worse than gamblers running amok in a casino. They have mortgaged our futures and those of our children by putting billions into the banks. At the same time, they make the people – not the banks and developers – pay for the criminal or negligent activities of banks and builders.

We all appreciate that we have to bear some burden to get things back on track, but a bit of humility, rather than superior arrogance demonstrated by Lenihan and Ahern, for example, would be welcome, as would a genuine acknowledgement and apology for getting us into this mess. How they have the nerve to even appear on the media without admitting these failings is beyond me.

They also suggest that their problems were caused by poor communications, (another one from the spin doctors), while continuing to communicate poorly. The underlying suggestion is that the people don’t understand. Do they think we are all fools? If there is a communications problem, it is Fianna Fail that is suffering from it. They have not listened to the people for quite a long time; that’s the problem. It is very clear to me, from being on online forums all weekend following the election and from listening to radio and TV that the people understand very well what is going on in Ireland. They very clearly understand that Fianna Fail and the Green Party destroyed the country and blighted the future for so many people, while letting their banking and developer friends off the hook.

Then Dermot Ahern argues that the government has not lost the confidence of the people. Is he joking? Read the results and the RTE/Sindo exit poll, Dermot. You were roundly rejected by the people. You now have no mandate to govern and the sooner you are gone the better.

And then the best of all came from that fount of wisdom, Mary Coughlan, the incompetent, useless minister for enterprise and deputy prime minister. She tells us that Fine Gael’s call for an election was a populist move and that the Government had to focus on sustaining and creating employment. It’s a pity that they did not focus on sustaining and creating employment a bit sooner, rather than presiding over the loss of thousands of jobs and the ruin of so many lives. Their response to the recession will add to even more job losses and to our economic problems.

In Fianna Fail’s defence, however, I suppose that if they did not anticipate the deep recession we are in, despite being warned by many commentators (not least George Lee and David McWilliams), they could hardly have been expected to anticipate the electoral disaster that was about to befall them last weekend.

So what do you think? Did Fianna Fail and the Green Party get what they deserved? Should there now be a general election, as opposition parties want? Leave a comment and let me know.

Sunday, May 24, 2009

Well Done Leinster

What a day for the boys in blue. I'm delighted with the Leinster win and very thankful for the support from Munster.

There is a big welcome home party at the Royal Dublin Society (RDS) today from 2.30 p.m. in Dublin. Unfortunately, I won't be there as I will be watching the end of the FBD Insurance Ras 2009, which finishes in Skerries.

So, what do you think of Leinster's win? Leave a comment and let me know.

Saturday, May 23, 2009

FBD Insurance Ras 2009

The FBD Insurance RAS 2009 ends in Skerries tomorrow. I'll be there at the finish! For non-Irish speaking readers, ras is the Irish for race!

Heineken Cup Final 2009

I'm delighted to hear reports on the Irish radio station, RTE, that there are lots of Munster supporters in Edingurgh wearing the red of Munster and there to support Leinster against Leicester (confusing, I know) in the Heineken Cup Final 2009. A marvellous day for Irish sport and Irish rugby. Let's hope Leinster do it and win!

Saturday, May 16, 2009

Great Win for Manchester United

OK, it wasn't exactly pretty, but Manchester United deserve all credit for winning the Premier League again for another three-in-a-row. That's 18 wins in all, equalling Liverpool's record.

After the match, it was a little difficult to know exactly what Tevez was talking about when he mentioned "difficulty" in staying at Old Trafford. I think it might have been a problem of his understanding the English language. I'd love to see him staying and hope he does. Ronaldo might be on the move too, but the squad seems strong enough to succeed again next year.

Here's looking forward to a great 2009/2010 season and the 19th title !

Sunday, May 03, 2009

Great Win For Leinster

It was marvellous to be in Croke Park yesterday to see Leinster annihilating Munster. What a performance! Well done to all on the Leinster side - players and supporters. It was great to see so many "true blues" there but it is always a pity to see so many Leinster people wearing red.

Nevertheless, it was a great day and a wonderful occasion at our national stadium. Croke Park was a credit to those responsible for its preparation and maintenance. The
GAA should be proud.

Tuesday, April 28, 2009

For Culture Vultures in Fingal

The Skerries Traditional Music Weekend will take place from 15 to 17 May 2009. This is a very good weekend in Skerries with lots of musical events in pubs, clubs, and other venues.The weekend will include music sessions, workshops, dancing and general craic. So come along for a really good time in this lovely Fingal seaside town.

Also ramping up its summer programme is the Seamus Ennis Cultural Centre in Naul. This renowned venue has an excellent programme of events, including the Bluegrass Patriots, Mick Hanly, Kieran Gos and many more.

Away From It All In Virginia

Virginia Park Hotel
Virginia Park Hotel

My wife and I spent a lovely relaxing weekend staying at the Virginia Park Hotel in Co. Cavan. The hotel is in the small town of Virginia and is less than 90 minutes from our home in north Dublin.

We arrived early on Friday evening and were immediately impressed by the beautiful grounds, which are situated on the shores of Lough Ramor. The hotel is a restored 18th century manor house, originally owned by the Marquis of Headfort, a member of the Taylor family. This family also owned Ardgillan Castle, overlooking Skerries Bay in Fingal, north Dublin.

The hotel itself is pleasingly “old world” and I loved the creaky floors; magnificent high-ceilinged rooms; interesting paintings, sculpture and furniture; narrow warren-like corridors, and quaint bedrooms. Our room had a beautiful view overlooking the lawn, Virginia Golf Club and Lough Ramor. The bedroom, although small, was very comfortable and really warm. The bathroom was very well appointed and had a fantastic shower.

Bective Court
Bective Court

We ate in the Marquis dining room on Friday night and our meal was delicious. The wife had pork fillet while I went for the lamb shank. Both were very well prepared, although I probably would not have chosen the tomato dressing with the lamb in hindsight. On Saturday, we just ate in the bar and that was very nice too. Breakfast was as expected – we both went for the “full Irish.”

The staff were very friendly and efficient and we enjoyed talking to the barman, Terry, each evening. He had a very quick, dry wit and entertained us greatly.

Although the weather was not great, we had a lovely relaxing time and managed to avoid most of the rain. We enjoyed pleasant walks along the shore of the lake and in the beautiful wood, which was carpeted with masses of bluebells. It was a delight.

Carpet of bluebells in Ramor Forest
Carpet of bluebells in Ramor Forest

We were interested to learn that the hotel is owned by Baltimore International College and is the Irish Campus for their School of Culinary Arts. They send students over to Virginia to learn the culinary arts and we had the pleasure of meeting some of them during our stay.

Although not far from Dublin, this is a lovely place to escape to and we will definitely return.

Thursday, April 23, 2009

Revenue Commissioners Say Tax Evasion Becoming An Issue

As I predicted in my post on 4 February 2009, the Irish Revenue Commissioners have declared that tax evasion is becoming an issue during the current recession. According to the 9 p.m. news on RTE Television on 23 April 2009, the Revenue Commissioners are increasingly concerned at the increasing level of tax evasion and have started targeting cash businesses; this will include shops, pubs and solicitors' offices. They will also visit construction sites to examine books and records.

Despite their efforts, I still predict that there will continue to be an increase in tax evasion and black economy working.

Wednesday, April 22, 2009

Ahern Dropped

Having written so recently about Noel Ahern's amazingly inept interview on Today FM radio, I can't say that I am either surprised or disappointed that he has been dropped from the ranks of Ministers of State in the Irish Government, as I predicted in my previous post.

Tuesday, April 21, 2009

Is The Any Bandwagon That Fine Gael Will Not Jump On?

I listened to Leo Varadkar, Fine Gael’s Enterprise Trade and Employment spokesman, speaking on RTE’s Drivetime radio programme this evening (21 April 2009) and was hardly surprised that he and his party have jumped on a new bandwagon: bailing out people who chose to fix their mortgage rates to protect themselves against rising interest rates. There seems to be no bandwagon, whether it is Eircom shareholders, taxi drivers or people who gambled on interest rates, that Fine Gael will not clamber on as soon as it appears.

People who took out fixed rate mortgages took a gamble that interest rates would rise and they didn’t; they fell. That’s the risk they took when they made their decision and it should not be up to the Government, through the taxpayers, to now support them because their gamble did not come in. This sort of Fine Gael nonsense demonstrates clearly why they are not fit for office, which is a great pity as we really need a credible alternative to Fianna Fail. Sadly, Fine Gael does not offer that alternative.

On the programme, Varadkar was asked if he knew the numbers of people involved but, of course, he didn’t. Nevertheless he said it was higher than he thought (how did he know?) and maybe about a third of people were on fixed rate mortgages (how does he know?). This lack of analysis is so typical of Fine Gael’s and Varadkar’s blathering.

Varadkar wants the Minister to legislate for a capping of exit fees but at this stage, Minister for Finance, Brian Lenihan, has declined to act in such a foolhardy way. “It’s about time taxpayers got something back and let’s start with this”, said Varadkar. Sorry Leo, let’s get this straight: what you are really saying is that it’s about time a third of mortgage holders (based on your estimate) get a special break, but not the other two thirds and not those taxpayers who do not have a mortgage but who may have paid massive interest rates in the past. Everyone is suffering pay cuts, new taxes and levies too, you know. Financial decisions entail risk and, in their cases, people who opted for fixed rate mortgages must have realised that there was a risk that interest rates would fall. And, of course, they will go up again in the not too distant future.

So here’s a question for you, Leo: how high would interest rates have to go before you would then be calling for those on variable rate mortgages to be bailed out? Your proposition is preposterous but it is in keeping with a long succession of Fine Gael nonsense and special pleading.

Saturday, April 18, 2009

Penalty Point Madness and an Equally Looney Minister of State

Listening to the Last Word on Today FM last Wednesday I thought it was either April Fool’s Day or that I was listening to an excerpt from a re-make of Alice In Wonderland. I was reminded of what Humpty Dumpty said to Alice when listening to that buffoon of a Minister of State, Noel Ahern, talking to Anton Savage: 'When I use a word,' Humpty Dumpty said, in a rather scornful tone,' it means just what I choose it to mean, neither more nor less.'

Savage was trying to get the MoS to explain why not having a current NCT certificate (similar to the British MoT) attracted five penalty points - the highest that can be given - when, for example, not wearing a seat belt attracts two points; dangerous overtaking attracts two and driving through a red light attracts two. Rather than even try to explain, Ahern simply said, ‘Well, that's the law and that's what was approved in the law back some years ago …’ Savage interrupted to enquire WHY this was the case and Ahern responded, ‘Well, why, why? You can sometimes bother yourself too much asking why. Just accept there are certain facts, and that's one of them.’

I really thought this was a wind-up, but sadly it was all too true.

Next, Ahern started quoting statistics, the source of which he could not identify. He said, ‘…statistics show that if you ..... I don't have the figures in front of me here but ..... if you analyse the different vehicles that are in accidents, a very large proportion of them are cars that are 6, 7, 8, 9 years old ....’

Once again, Savage (who knows a lot about motoring, as it happens) challenged the MoS, ‘Hang on for a minute Minister. The statistics actually show that improperly maintained vehicles contribute to .7 of 1% of the fatal road crashes in the country.’

Here is what the Road Safety Authority's Road Safety Strategy 2007-2012 (pdf) actually says (page 12, figure 5) about Contributory Factors for Fatal Collisions 200-2005:

  • Drivers 81%
  • Pedestrials 12%
  • Road 4.2%
  • Environment 2.1%
  • Vehicle 0.7%

So Savage is spot on in his analysis and the MoS was talking pure rubbish.

It got worse as the interview went on, with Ahern quoting statistics that did not exist and spouting even more balderdash than you could imagine. It was so bad that I made a transcript of the interview and it is well worth reading.

It is simply ludicrous that there should be five penalty points for not having an NCT when other, far more serious offences, carry much less points. For example, driving on the wrong side of the road only carries one penalty point!

Like so many things in Ireland, there is absolutely no logic to this discredited system of penalty points. But, what can we expect with clowns like Ahern in charge of the place. Maybe (and here's hoping) he will lose his job, for which he is clearly not qualified, in Brian Cowen's purge shortly.

You can download a copy of the interview from my Skydrive.

Monday, March 09, 2009

Sad News From Northern Ireland

The news tonight of the murder of a PSNI officer, following so closely on the murder of two young soldiers and wounding of innocent bystanders, is appalling. Those murdering bastards who claim to have perpetrated these deeds in the name of Ireland are a disgrace to this country and I hope they are apprehended soon and receive suitable punishment.

The people of Ireland, North and South, in free elections, voted for the system of government we have now on this Island. It is from that vote that the arrangements in the North and in the South gain their authority. These murdering thugs have no mandate.

I'd like to see the ordinary people of the North, joined by their neighbours in the Republic, take to the streets with a clear message: you have no right to do this in our name. You are
murderers and represent nobody but yourselves. The people are supreme. You will not win. Your cause is lost.

Taxi Drivers Need To Cop On

Why should there be barriers to entry to the job of taxi driver? What is so different between taxi drivers and any other unskilled worker? Should we limit the number of labourers, sanitation workers, delivery men, van drivers? I never heard such a ridiculous proposition in my life as that argued by these brass-necked guys. If you can't make money at a business - get out of it! Don't look for sympathy from a public that was abused by your highly restrictive practices for decades. We have had enough of protectionism of vested interests; indeed, there are still too many vested interests in this country. So I am glad we have a sensible report about taxis and hope the Minister rejects their self-serving call for limits on numbers. They have a neck to even suggest it.

Thursday, February 26, 2009

Tanaiste Coughlan Has Something Important To Say

I listened in gobsmacked amazement to Mary Coughlan's interview with Cathal MacCoille on the Morning Ireland radio show on 25 February. In an interview lasting 16 and a half minutes, Coughlan told MacCoille, on sixteen occasions, that 'it is very important to say' something and then went on to utter some utterly inarticulate, facile piece of nonsense. She also told him, on two occasions, that she was working 'stridently' on some issue or other. She sure makes a lot of meaningless noise alright.

If it were not so serious it would be funny. But this woman, who can hardly string two meaningful sentences together, is our Deputy Prime Minister and the Minister for Enterprise, Trade and Employment. No wonder we are in the state we are in.

Wednesday, February 04, 2009

Economic Consequences of Pension Tax

This is a tax, not a levy

I am disappointed, but not surprised, at the uncritical acceptance by almost all media and most commentators of the Government "spin" in relation to the so-called pension levy, which is, in fact, an additional tax on public sector workers. This failure of analysis has led to widespread serious misinterpretation of the benefits - and underestimation of the damage - that the tax will impose on the economy.
This is a tax increasing measure dressed up as an expenditure reduction measure and, while it will have the effect of reducing the net cost of the public sector payroll to the government, it will not have the same effect on the wider economy for several reasons.

Payroll costs not reduced

Payroll costs, and therefore government expenditure on payroll, have not been reduced, so let us dispense with that pretence. After March, the salary of a public servant will be the same as it was before March. That is an objective fact. There are only three ways to cut payroll costs: cut numbers, cut pay rates or cut allowances and overtime; none has been done to any effect.

No real government savings

Private individuals (forget that they are public sector workers for the moment) will pay the tax, so the government, as such, has not created a new source of income from, say, innovation, efficiency improvements, creation of intellectual capital, development of new services, etc. So, overall, the government has not generated any savings or income that it can pass on to the consumer or to industry

Transfer pricing

Many (if not all) public sector organisations engage in some form of transfer pricing, whereby they provide services to other public and private sector organisations. These transfer pricing mechanisms usually consist of charges for direct payroll and non-payroll costs; employers' PRSI and pension costs, and administrative overheads. Since payroll, PRSI or pension costs have not reduced, there will be no savings between institutions.

This is fine when transfer pricing stays within the public sector, where it is just churn, however inefficient. However, utilities and local authorities, in particular, pass on significant costs to the
private sector. Examples of these services include the provision of ESB supply and services; connection of sewerage, water and other services for developers; public transportation costs; inspection and certification services, and commercial rates. Since the costs of these services include payroll-related costs, which have not reduced, and there are no balancing savings to put directly against them, the costs of the services to the private sector will not decrease because of this tax.

Reduction in personal spending will seriously affect economy

This is a very significant new tax imposition on one section of the community. Therefore, public servants will, naturally, have to look at their own spending and reduce it drastically. Add in new education fees; pay freezes; property taxes; health insurance costs, and the ill-considered VAT increase, and it is not inconceivable that public sector workers will suffer a reduction of some 20% to 30%, or more, in disposable (cash) income over the next two to three years. This will have a catastrophic effect on economic activity in the state and will lead to a deflationary nosedive, perhaps one of the worst ever seen in the history of the state.

No provision for future pension liabilities

The tax, ostensibly related to future pension entitlements, will not be put to that purpose, but will be used instead to relieve the current economic and fiscal situation. The lie and devious sleight-of-hand is clearly laid bare; despite this, it appears to be too obscure for many commentators to see.

Predictions for the future

The consequences of the Government's actions are startling and demonstrate an ineptitude and lack of foresight that is hard to fathom. Because of their actions, I predict that some or all of the
following will occur:

In the Public Sector

  1. Collapse of morale leading to reduced productivity; stifling of innovation and increased absences.
  2. Collapse of partnership leading to overall loss of goodwill; far more workplace disputes; local industrial unrest; resistance to change; lack of flexibility; withdrawal from all non-negotiated local arrangements; legalistic interpretation of existing agreements, and lack of cooperation with management.
  3. Disruption to services caused by direct action and industrial unrest; works to rule or contract; refusals to fill in or substitute for absent front-line workers; creation of backlogs that will not be dealt with except by prescribed procedures; overtime bans and refusals to work, even when overtime is available and clearly necessary.
While the above consequences might seem to be discreditable, it is simply not realistic to cut someone's pay so deeply - and so ostensibly inequitably - and expect them to perform to the same standard as they did before. This is simply human nature in evidence.

In the Personal Private Sector

As the public sector represents a sizeable portion of the workforce and, therefore, of personal spenders, the increased taxes will have several consequences that can be directly attributed to their reining in of their spending. These will include:

  1. A massive further collapse in consumer confidence that will now spread like a virus to those in so-called secure public sector employment (although many were already feeling the pinch anyway, especially the large number on short-term contracts, renewable from year to year).
  2. Huge reduction in car sales, with a knock-on effect on jobs in the motor industry, and leading to continuing catastrophic declines (already seen) in VAT and VRT.
  3. Immediate deferral or cancellation of home improvement and maintenance works (e.g. home insulation, energy saving, environmental initiatives – all pet projects of the Green Party), which will affect the smallest builder in the country, with consequent impacts on jobs. There will not be a trowel scraped, a brush dipped, a nail hammered or a brick laid by the autumn.
  4. Virtual standstill in domestic property transactions, leading to an almost complete collapse in stamp duty, and knock-on effects on the legal profession; auctioneers and estate agents; building contractors; architects; surveyors, etc.
  5. Huge defaults on mortgage repayments for rental properties, as owners fail to let them and cannot afford to keep and maintain them, leading to a further worsening of bank positions and the destruction of the housing market for the next five to seven years.
  6. Dramatic reduction in discretionary spending on meals, holidays, alcohol and entertainment, leading to widespread closures and job losses in the hotel, tourism and entertainment sectors.
  7. For the first time, perhaps, in the history of the state, the emergence of large numbers of personal bankruptcies, as people fail to meet their debts and liabilities.
  8. Continuing queues heading north to shop in the cheaper Sterling area, leading to further closures and job losses in the retail sector in the Republic. The border towns of the Republic will return to being the "ghost towns" they were in the last recession.
In the Wider Economy

  1. A multiplier effect as cash and confidence evaporate from the economy, spreading from private sector worker to public sector worker, and from there back to those few workers left in the private sector, creating a massive spiral of deflation and mass unemployment.
  2. A massive reduction in PAYE and PRSI paid into the exchequer as unemployment grows because of lack of demand and consumer spending.
  3. A consequent increase in social welfare payments to the unemployed.
  4. A return to mass emigration, even to economies with similar problems, due to the plunge in confidence created by this government.
  5. A huge increase in the black economy as people return to cash dealing, with even further losses of VAT, PAYE and PRSI remissions to the exchequer.
  6. On top of losses already made on personal pensions, which will not be recovered, there will be a reduction in personal pension contributions for the next decade. This will create an even greater ticking demographic time bomb, for which there is no Pension Reserve Fund available (having already been given to the profligate banks that got us into this mess in the first place) to defuse it.
  7. A complete collapse of inward investment, and further expatriation and closures of what are left of existing multi-national corporations, as the international community loses confidence in the Irish economy and in the government.
  8. Continuing reductions in Ireland's international credit rating until we become, after years of so-called prosperity, an economic basket case once again.
  9. External intervention in Ireland's economy by the World Bank or the International Monetary Fund and the removal from us of all control over our economic affairs.
In Politics

With the breaking of the Social Contract by the government between it and the citizens, and of the employment contract between employer and employees, anger will rise swiftly in the public sector. Public sector anger will mix with further anger, despair and despondency in the private sector, creating a dangerous cocktail of social and industrial unrest; loss of confidence; inter-class and intra-class tensions; public versus private sector antagonism, and consequent searching for blame and scapegoats. The consequences will include:

  1. The current government will not return after the summer recess, at the latest, and an election will be called, leading to further instability.
  2. Cowen, already a dead man walking, will be removed as Taoiseach and leader of Fianna Fail.
  3. Lenihan will have a very short tenure as Minister for Finance.
  4. Coughlan, ineffectual in the extreme, and clearly out of her depth in any role she holds, will disappear in ignominy from government.
  5. Harney, if she does not go voluntarily, will not be returned to the Dail.
  6. The Greens and Fianna Fail will be decimated in the national, local and European elections.
  7. There will be a return to short-term governments and unstable coalitions, with further destabilising effects on the Irish economy.
  8. The Lisbon treaty referendum will be defeated for a second time, creating more trouble for us in Europe.
Ship of state is foundering

These are black days for Ireland, brought about by a government that rode the waves of prosperity without chart or compass, ignorant of, or unwilling to prepare for, the dangers of the rocky waters ahead. Sadly, when we need real leadership, we have an inept, inexperienced,narrow-visioned and ideologically misguided crew manning the ship of state, and a weak and unconvincing captain at the helm.

While the private sector is often called the "engine of the economy", the public sector is the auxiliary power, on which we hope to be able to rely in times of crisis (for example, in dealing with the collapse, nationalisation and re-capitalisation of the banks; for being a steady hand, conservative, middle class and reliable; for responding to diseases such as foot and mouth, and CJD; for putting out fires and treating the sick; for creating a sense of continuity and social stability in uncertain times).

Having lost his main engines in stormy waters, Captain Cowen, exhausted, panicked, overwhelmed, and indecisive, has just cut off the auxiliary power in a vain attempt to save fuel. A massive, catastrophic and devastating crash upon the rocks of economic ruin is the inevitable consequence of this foolhardy action.

Will it be long before the first cries of "abandon ship" echo through the vessel and the frightened crew, finally coming face to face with their own shortcomings, don their lifejackets and race for the lifeboats?

Monday, February 02, 2009

Ill-considered Pension Levy Will Be Highly Iniquitous And Divisive

The proposed "pension levy" on public sector workers will be highly iniquitous and divisive; will visit inequality amongst them, and will impose different levels of effective taxation on workers on the same salaries in the same employment. These will arise from several aspects.

1. Years of service

It appears that the pension levy will be based on current salary and that it will be based on an assumption of a full public sector career and consequent pension entitlement. However, many staff, especially professional staff and those who have entered the public service after some years in the private sector, will not actually serve the full pensionable service of about 40 years and, therefore, will not be entitled to a full pension. The inequality of taxation in such cases is easily demonstrated.

Let's assume that two employees each earn 50,000 and will retire on the same date. Assume that one, at retirement, will have full pensionable service of 40 years and the other will have 20 years service. For simplicity, let's assume a pension levy of 5% of pensionable salary, amounting to 2,500 per year for each employee. The pension payable is normally based on 1/80 of salary per year of service, subject to a maximum of 50% of salary. In this example, therefore, the employee with 40 years' service will receive a pension of 25,000, while the employee with 20 years' service will receive a pension of 12,500 per annum. However, from the date of its introduction, they will both have paid exactly the same levy amount for their pensions but the employee with the lesser service will receive only half the pension. This is clearly iniquitous and will lead to severe inequality in the treatment of similar employees.

Effectively, this creates, for every single public sector employee, an individualised taxation regime which will be highly divisive, with workers with longer service benefitting significantly over workers with less service in the same scheme. It also effectively represents a change to a scheme without consultation with the members involved and may be open to challenge in the courts.

It also demonstrates that this so-called levy is, in fact, a tax and not a levy, and so should be called such. If it is a pension levy, it should be based on pension income, not on current salary.

2. Coordinated and uncoordinated pensions

Some public sector staff have uncoordinated pensions, which means that their pension is based entirely on their salary at retirement. Other staff, including all staff who joined the public service after 1995, have coordinated pensions, which means, in simple terms, that their pension is based on their salary at retirement, but reduced to take account of the old age pension, which they also receive. Because of this, they pay a higher rate of PRSI (A1) than pre-1995 staff, who pay a lower rate (D1). Therefore, post-1995 workers will pay the same pension levy, plus a higher rate of PRSI, for the same or a lower pension than their pre-1995 colleagues.

However, this iniquity does not end there. Post-1995 salaries were adjusted in some cases to take account of the differential in A1 and D1 PRSI contributions. Therefore, post-1995 workers will pay the pension levy on a higher gross salary (usually about 5% higher, though netting to the same value after PRSI) than their pre-1995 colleagues. So if the levy lasted for seven years, say, an employee who joined after 1995, based on the above example, would pay approximately 875 Euros more than his colleague for the pension.

3. Taxation based on future projected earnings

As the pension levy is not a contribution from which an employee will derive any additional pensionable benefit, it can only be considered as a tax on future potential earnings, based on current salary. For a variety of reasons, an employee's salary might be less at retirement than it was previously; say, perhaps because of a reduction in overtime or allowances that might have been reckonable for pension purposes. So, therefore, the levy will have been paid at a salary level on which the projected pension will never be earned. This is surely unjust.

4. Preserved pensions

Many employees who left the public service may have decided to preserve their benefits when they left. This means that their pension will be paid when they reach retirement age based on their service when they left and on the current equivalent salary level. If an employee returns later on a higher salary than they had previously left on, the preserved part of their pension will be paid at the old salary and the later pension will be based on their current salary at retirement. The levy, however, does not take account of the value of the preserved pension, which is, once again, highly iniquitous.

5. A divisive individualised tax

This pension levy flies in the face of the very concept of personal pension provision as it offers no pensionable benefit for the “contribution”. It will create severe inequality for many employees. Employees with longer service will benefit far more, based on the same contribution levels, than those with shorter service; the levy pits public sector worker against private sector worker; it imposes current taxes on future potential earnings, and it individualises the taxation system for every single public sector worker, breaching the principle of equality in taxation. Could anything be more ill-conceived and more likely to increase division in society than this blunt taxation instrument?

So let’s dispense with the populist charade of calling this a "pension levy" to appease private sector workers; right wing economists; media commentators and employer representatives and call it what it is: a special taxation levy on one group of workers - those in the public sector.