Paul Sweeney of the Ictu, Ronnie O'Toole of National Irish Bank, Austin Hughes of KBC Bank and Danny McCoy of Ibec have their say on the Budget
Paul Sweeney, economic adviser to the Ictu
THIS HARSH Budget would not have been necessary if the Government had not
a) cut taxes so heavily during the boom years and
b) had not inflated the property bubble with large tax subsidies for investors.
These are tough times and while some harsh decisions have been made, the emphasis on social solidarity did not fully materialise.
The 1 per cent levy on all incomes, without a minimum threshold, is very regressive. If there was to be real social solidarity, the income levy should have been applied to incomes from all sources.
There were no obvious measures to tackle high income earners and tax exiles who earn millions but contribute little or nothing in taxation.
The increase in VAT, already one of the highest rates in Europe, combined with the other rises, like the 50 per cent increase in hospital charges and the increase in duty on petrol, will push up prices in the country with the second highest price levels in Europe.
The economic outlook of the Government may be optimistic bearing in mind the crisis in the private sector, brought in by wholesale, gross incompetence in the banking sector, which is having the biggest detrimental effect on the economy and on the taxpayer.
Ronnie O'Toole, chief economist, National Irish Bank
THE BUDGET places the burden of adjusting to the decline in Government revenue on taxation and borrowing, rather than more significant reductions in current expenditure.
Further, the Minister intimated that any shortfall in revenue over and above what is expected would be made up by further taxation measures.
The Minister is pushing the Government's tax take from 32 per cent this year to 33 per cent of gross domestic product next year, against the tide of a slowing economy.
There are some measures to rein in public-sector numbers. Ireland does not have a high number of public servants per capita, although pay rates in the sector are relatively generous.
While the staff reduction programme represents an effort at public-sector reform, the proof will be seen over the next three or four years.
What is unambiguously positive is that the Government remains committed to a high level of capital expenditure which, despite being reined in somewhat, is still running at about double Europe's level.
From a banking perspective, the most significant measure was the continued reform in terms of payments. Ireland uses a large volume of cash and cheques, which costs in excess of €1 billion a year.
The alternative is for the greater use of direct debits and debit and credit cards.
Austin Hughes, chief economist with KBC Bank
IN JUDGING Budget 2009, the key question to be asked is whether the package of measures announced by Mr Lenihan yesterday was more heavily influenced by purpose rather than panic.
It wouldn't be surprising if the combination of a nearbreakdown in the global financial system, coupled with a virtually frozen property market and a collapse in tax revenues at home, unnerved the Minister and his officials.
I didn't want to see a particularly steep cut in borrowing in 2009 but a government deficit of 6 per cent of GDP is worryingly high, given a painful rise in taxation. More ominously, the Minister left the door wide open to further increases in the tax burden in the year ahead.
Indeed, the range of options used to raise taxes harks back to the bad old days of the 1980s.
Such comparisons could weigh on consumer and business sentiment. I had hoped to see some clear signs of a fundamental reassessment of government spending. Instead, the Minister envisages current spending accounting for an increasing share of the Irish economy between now and 2011.
That doesn't speak of determined action. Instead, the projected reduction in borrowing relies heavily on the assumption of a strong economic rebound.
Danny McCoy,director of policy at Ibec
DIFFICULT circumstances require difficult measures. Budget 2009 was a mix of taxation rises, expenditure cuts and a substantial increase in borrowing. The balance towards current expenditure containment was not sufficient, given the structural shift that has been exposed in our taxation revenues.
The overall fiscal stance in cyclically adjusted terms is a modest contraction, making this an unavoidable pro-cyclical Budget. However, if the economic forecasts underpinning it prove to be robust, the Government has succeeded in its most important task of beginning the stabilisation of the public finances over a three-year window.
The overall package is aimed at those who can bear them most, making it a progressive Budget in redistribution terms.
The target 6.5 per cent of GDP could have been more ambitious by tackling the scale of the public sector. The structural problem with tax revenues has not been sufficiently addressed and resorting to expenditure tax increases is not conducive to restoring consumer confidence while simultaneously shrinking disposable income.
The move to accelerate corporation tax revenues by €350 million in 2009 is particularly challenging, given the turbulent trading and credit conditions that corporations are likely to face.