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In 1997, the former Progressive Democrats leader Mary Harney said that if it isn't possible to distil a position on an issue into a soundbite, it isn't worth saying. The soundbite has the virtue of a simple message sterilised of complexity, nuance and the risk of alienating sections of the electorate. By repeating it often enough, a multiplicity of parrots can become a formidable force. The news in recent weeks has been dominated by soundbites on tax, jobs and pensions, as the majority of journalists have played the tunes called by the politicians. Taxes Irish income tax is low as are payroll taxes but the overall Irish tax take is largely unchanged since 1995 according to the 30-country member government think-tank, the OECD. No party is promising to reduce taxes overall but why allow them brag about low taxes while indirect taxes/public sector charges will remain an open season? The development of stealth taxes has been underway for many decades. If for example, we had to still affix a 2 penny stamp bought at the Post Office, to each cheque we issue, we would be surely more conscious of the tax. Anyone who is an aspiring first time house buyer who is waylaid by politicians bragging about reducing taxes - ask them the average price of a new Irish house/apartment and how much does the Exchequer collect from the cost --- the answer is a cool 28% in taxes starting with VAT @ 13.5%, plus levies, PAYE, PRSI, site stamp duty etc - according to Minister for Finance Brian Cowen TD, in answer to a Dáil question in 2004. Up to €4.6bn of the €18.5bn of taxpayers' money that will be spent on new main roads over the next decade, will go into the pockets of landowners. Fred Barry, chief executive of the National Roads Authority is reported as saying that the increases in the cost of land for major roads projects as "disturbing". For a second successive week, the Sunday Independent has marshalled its principal columnists to write about the iniquities of the stamp duty system. However, while reform is merited, it is just one issue fuelling the price of property. Bizarrely of all, the impact of a corrupt land rezoning system that creates an artificial scarcity of land and makes a small number of people immensely wealthy, at the expense of property purchasers, is a non-issue. To add surrealism to the bizarre, a public tribunal is in its tenth year, investigating planning corruption and the system that spawned it, remains unreformed. The corruption hasn't stopped. It has only got a little more subtle than the use of brown envelopes. Tom Parlon, the President of the PDs has said that any changes in the current system that makes some Irish farmers very wealthy, would be to "the left of Stalin," even though Parlon and his fellow farmers are beneficiaries of European socialism via the Common Agricultural Policy. Economist Jerome Casey, who is editor of the Building Industry Bulletin, in a report in 2003, said that site costs account for 42.5% of the cost of a house nationwide. Casey said that typically in the mid 1990s, Durkan Brothers sold apartments off O'Connell Street for £35,000 to £40,000 (€44,440 to €50,790) for which the site cost was £5,000. Currently, both the Irish Council for Social Housing and private house builders are reporting city house site costs at up to 50% of the house price. Outside the cities, site costs can represent up to 40% of the house price. For the country as a whole, site costs may now constitute 42.5% of the house price, an increase of almost 30 percentage points on the pre-boom position. In Dublin that increases to 50%. Overall the Irish figures are grossly out of line with the rest of the developed world. In the US land accounts for 20% of the total cost of a house. In Denmark the figure is similar while in Portugal the land factor drops to 15%. The low standard of the Irish public health service despite the investment of billions of euros spent on it in recent years, means that a family of two adults and two children have to spend at least €2,000 on private health insurance and at least another €1,000 on other health costs. Is that a stealth tax? No doubt that Michael McDowell would still brag about "cutting taxes" and as a soundbite will hope that the voters are plonkers. If he is back in government, will he support tax rises?? Of course he will and he could have Charlie Haughey's first Finance Minister Gene Fitzgerald as his patron. Jean Baptiste Colbert (1619–83), Minister for Finance to French King Louis XIV reputedly said: The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing. Jobs and Churn When clichés such as "the thin end of the wedge" and of "paramount importance" were popular with politicians who had little to say, the word churn referred to a container used by a farmer to deliver milk to the creamery or a vessel used to make butter. Then it gained currency in financial services. Now it has become a handy word for describing an inevitable job shakeout when there's no need to deal with the actual facts. The closure by US mobile phone company Motorola of its software centre in Cork, with the loss of 330 jobs in the political constituency of the Minister for Enterprise, Trade and Employment Micheál Martin, was one of the main items on RTÉ Radio 1's Morning Ireland programme, last Friday, March 09. The loss of what Martin often terms "high calibre jobs," required some soothing words and the Minister referred to many IDA projects in the pipeline and the strong economy that produced "86,000" additional jobs last year. It was a good point to make and just over two hours later on the same channel, a journalist on the Today with Pat Kenny programme, spoke of "churn" in the economy and the magic 86,000 figure was again produced, without any breakdown. An IDA Ireland spokesperson, presumably press-ganged by his political masters, also resorted to the mot du jour "churn," saying that job gains and losses is normally around 6% of the total at any time. UCD economist Moore McDowell was also in a "what crisis, there is no crisis" mode, when he told the Sunday Independent: "In a very cold, dispassionate manner, the loss of these low-skilled jobs is in one way a good sign that Ireland is moving up the development spectrum, into truly high skilled jobs. "This is a natural progression for the economy. It's when the likes of Intel and Google decide to pull out that we should worry about the state of the economy." Quite so. Natural progression it may well be but when the fastest growing Irish-owned tech company of this decade is considering moving overseas, should we be concerned? Neither does the natural progression suggest that we will replace all jobs lost as Developing Countries are increasingly the location of choice for R&D centres established by multinational companies. The Minister, Micheál Martin spoke on Friday on The Right Hook programme on Newstalk 106 of upskilling and multiskilling. The number working in Irish construction has grown from 126,100 in early 1998 to 281,000 in late 2006. So there is quite a task and it's not that we can wave a wand and have most of the workforce employed as research scientists. According to the State-funded Rural Development Report 2025, which was published in 2005, Growth in exports from the dominant indigenous enterprises will remain relatively low. Moreover, it is likely that a large part of manufacturing output from foreign owned enterprises will move to lower cost economies. In these circumstances, employment in building and construction will not continue at current high levels. This argument knocks the wheels off the spin applecart but during partytime, spin will always win out. Now for the facts: The policy advisory agency Forfás, which reports to Micheál Martin's Department, said in January that employment growth in the Irish economy continued to increase in 2006, with construction, public administration, education and health accounting for 53,000 of the additional 83,000 jobs in the economy. During 2006, employment levels supported by the development agencies (Enterprise Ireland, IDA Ireland, Shannon Development, and Údarás na Gaeltachta) increased by 5,927 to 305,062 – 2,913 permanent full-time jobs in foreign-owned companies, and 3,014 in Irish-owned companies. Against a backdrop of a strong local economy and a global economy that has been experiencing the best period of sustained economic growth in forty years, the 7% slice for jobs in the foreign-owned sector and Irish firms in manufacturing and internationally traded services, is hardly impressive.
Nevertheless, expect to hear more about "churn" and when the business sector itself, conflates the performance of the foreign-owned sector, which was responsible for 92% of Irish exports in 2006 with that of Irish-owned firms, separating myth from reality becomes even a more difficult task. * The "86,000" figure used by Martin, comes from the CSO's Household Survey that was published on Feb. 22, 2007. Pensions The issue of pensions was another one that was distilled into a soundbite in February when PD leader said he supported an increase in the State pension by nearly €100 per week if elected into Government. Dispensing lollipops is easier than providing a credible response to a situation where 900,000 Irish private sector workers have no occupational pensions, while those in the rest of the private sector who do could never match public sector pension that would require funding of 28% of annual salary for forty years. The Challenge for the Media It's easy for the media to join in the soundbites' debate dictated by the politicians. However, will any politician be pushed into answering credibly what would the response be to a fall in tax income from property that amounted to 17% (direct only) in 2006? Besides, there are many further issues that would move beyond lollipop lists and soundbites. How about probing the issue of accountability or more likely the lack of it in Irish public governance? - See - Ireland 2006 - A Banjaxed System of Public Governance where the Buck Stops Nowhere. Fionnán Sheahan, who is now a political correspondent with the Irish Independent, wrote the following in the Irish Examiner, one month after the last General Election in 2002: Health Minister Micheál Martin’s jargon-filled €13 billion prescription to cure the ills of the health service was launched with great aplomb at the end of last year. It was people-centred, multi-disciplinary and would be monitored and evaluated in a designated, cohesive, integrated, focused, coordinated framework and approached with capacity, efficiency and equity. RELATED Irish General Election 2007: Some questions that voters should ask the politicians Comment: The job description of the Irish TD in the Twenty-first Century Comment: The Irish Economy and the Inconvenient Truth © Copyright 2007 by Finfacts.com |
