The ESRI estimates that every 10,000 reduction in new housing units is equivalent to 1.2% in growth. The Government collects at least 28% of the cost of a new house via VAT@13.5% (it may be a surprise that such a tax is applied, given all the blather about stamp duty), charges, levies, income tax/PRSI from the labour input.

The Central Bank forecasts GNP growth of 3.25% in 2008 (3.5% GDP), mainly reflecting slower domestic demand growth. This is likely to be accompanied by an easing in inflationary pressures and some limited rise in unemployment.

The Bank says that it would be desirable to aim for a surplus in the General Government Balance once again next year. This would ensure that, in the event that adverse developments result in lower than expected growth, the fiscal position could accommodate this, without the need for immediate corrective action.

Spending growth will have to be cut from a 14% rate to a mid single digit rate in 2008.

The Health Service Executive has been unable to live within a budget that was increased by 16% this year.

Reducing public expectations will be a big task for the Tánaiste and Minister for Finance Brian Cowen TD.

However, politicians have been the biggest gainers in the public pay stakes since 1997, getting increases of 120% in basic pay compared with a rise of 60% in the average industrial wage. 

We have 35 ministers in a country of 4 million, complete with retinues of advisers/press release writers and constituency messenger gofors.

In addition a week hardly passes by without the launch of another public quango to commission reports from the consulting industry, which has made over  €400 million in public sector revenues since 1997. The litany could go on a lot longer than a litany and one of the latest in actionless actions, is a planned climate change awareness publicity campaign that has been ordered by Environment Minister John Gormley.

There has been minimal public service reform during a decade when staff levels have increased by almost 100,000. After the Budget, the Government will receive a review of the public service from the OECD government think-tank. A fool could only expect a radical response.

Finfacts wrote before the General Election last May:

Beyond the spin and tax cuts, there are real issues that matter in preparing for the challenges that will follow from a temporary period of prosperity, built on a housing boom.

In the absence of reform and when clueless what to do when there will be a financial crunch resulting from a downturn in the economy, there will be little surprise when the old blunt measure, the public sector jobs embargo, will be wheeled out. The merry-go-round will start again with essential posts left unfilled while useless paper-pushing roles remain overstaffed.

We already have a staff embargo in the health sector and expect more - but do not expect what could be termed reform. For example, the Faustian bargain of the Green Party includes more stellar objectives than measurable reform at home, where real change moves at a slower pace than the glacial speed in the Arctic. 

Minister Cowen said on October 4th that average increases of 8.9% agreed in the first miss-named Benchmarking process cannot be repeated in the Benchmarking Body's recommendations due towards the end of this year.

Cowen said that the Benchmarking Body in making comparisons is likely to give greater weight to the value of the public service pension package "in view of developments in relation to pensions across the economy in recent years."

The previous sham benchmarking was shown to have been a fraud and at the outset, the public service pension terms that gives any retiree alive the same increase as those of the grade last worked, were not taken account of in comparisons with the private sector.

Cowen says Benchmarking Body "likely" to give weight to the value of public service pension package; Public sector reform not part of agenda

ESRI: Irish economic growth forecast for 2008 cut again; Impact of 40% vacancy rate of new houses built in 2002/06 could worsen outcome

Central Bank says Irish Gross National Product (GNP) will grow by 3.25% in 2008; Recommends Budget 2008 surplus target to prepare for adverse developments

Irish Exchequer deficit in first nine months of 2007 at €3.1 billion; Shortfall on tax for the year to be between €1 and €1.5 billion

Dept of Finance's Ready Reckoner Pre-Budget 2008

The Tánaiste and Minister for Finance announced in September that “all new spending measures, as well as tax changes, will be brought together and announced as one in a unified way on Budget Day, instead of on a piecemeal basis, as at present”.

 In outlining the new changes, the Tánaiste said that: 

“These new arrangements represent a major change and a major step forward in my ongoing reforms of the budgetary process. Up to now it has been the practice to announce new public expenditure initiatives on three separate occasions – the publication of the Abridged Estimates Volume in November, Budget Day itself and the publication of the Revised Estimates Volume in the following February. This will now be streamlined into one single announcement of all expenditure policy measures alongside tax changes on Budget Day”.

In order to make the system more transparent the Government will publish detailed pre-budget estimates in October of the resources required to maintain the existing level of public services in 2008. These pre-budget estimates will form part of the new Pre-Budget Outlook (PBO) which sets out the economic and fiscal outlook for the next three years. 

Cowen said that this initiative will make it clear to Dáil Éireann and to the public at large what is the pre-Budget position and what is the additional spending being proposed. It will also help the Dáil focus more clearly on the existing overall level of spending and what we are getting for this spending.

All policy initiatives involving an increase in public expenditure, above and beyond the “existing level of service” figures, will now be dealt with in Budget 2008, along with the Social Welfare increases and tax measures. In this way, the Tánaiste said, he is responding to a call from the Dáil’s Public Accounts Committee, which in its October 2005 Report on Estimates Reform asked for a clear distinction between the pre-Budget and post-Budget allocations.