Sinéad Pentony: The Finance Bill will bring the measures announced as part of Budget 2011 into law in the coming days. As the effects of these measures begin to be felt by families, business and the wider economy, it is worth restating the impact they will have, and comparing the Irish solutions to the crisis, to what is happening over at the World Economic Forum in Davos.
Budget 2011 measures represent a €6 billion adjustment that will reduce incomes at all levels through changes in taxation (€2.1 billion), with a disproportionate impact on low paid workers. Spending cuts on public services and social transfers (€2.2 billion) will see a further erosion of public services and push more people into poverty, while the capital spending budget cut ( €1.75 billion) will have a direct impact on our competitiveness and economic growth.
Cumulatively, the extreme austerity measures will result in:
• even more demand being taken out of a weak and fragile economy;
• businesses being put under increasing pressure as they struggle to remain viable;
• the jobs crisis continuing and the rate of emigration gathering pace;
• growing inequality - as more families and vulnerable groups are pushed into poverty because they no longer have an adequate income to meet their basic needs.
The absence of an investment strategy to stimulate growth and demand will make it increasingly difficult to address the deficit. The passing of the Finance Bill into law represents more of the same failed policy choices, and they will not address the fiscal and economic crises.
Meanwhile, over in Davos, the World Economic Forum is having its annual gathering of international business leaders, politicians, intellectuals and journalists to discuss the most pressing issues facing the world. The Forum is not normally associated with ‘progressive’ ideas but over the last number of days they have been talking about inequality, jobless growth and youth unemployment, amongst other things, as they grapple with finding solutions to the global financial, economic and fiscal crises.
Fears over jobless recovery and youth unemployment have prompted joint actions between the trade unions and Davos leaders to develop a coherent plan for G20 nations. Job creation coupled with the need to address the issue of growing income and wealth inequalities have been put forward as key parts of the solution. Some of the suggestions include the need to increase the wage share of national income; the creation of a universal safety net to protect workers who lose their jobs; and active labour market policies to create work, amongst others. Action is also needed to ensure the proceeds of growth are distributed more equally and concentrations of wealth are eliminated.
The passing of the Finance Bill into law will copperfasten measures that will do the exact opposite of the solutions being discussed in Davos. Ireland seems to be determined to cut its own idiosyncratic path.
The reduction in social transfer levels and the minimum wage will create a more unequal distribution of wealth, while the absence of any major job initiatives means the most promising job path for Ireland’s unemployed will continue to be the airline ticket out of the country.
Showing posts with label Finance Bill. Show all posts
Showing posts with label Finance Bill. Show all posts
Friday, 28 January 2011
Wednesday, 26 January 2011
Not just for Section 23: Economic analysis and the Budget
Tom McDonnell: There has been much commentary in the last week about the Government’s decision to roll back on its commitment to end the Section 23 property tax breaks. The Government has instead committed to an economic analysis of the impact of ending the tax breaks. Although TASC called for the abolition of these reliefs in its pre- Budget submission, economic analysis of budgetary measures is in many ways a welcome development.
The larger issue here is the continuing failure to undertake economic analyses of all budgetary measures. For example, an announcement pointing to a forthcoming econometric analysis of the impact of €6 billion in austerity measures is glaringly conspicuous by its absence. The absence of serious analysis was a causal factor in the economic crash, and it would be criminally negligent not to learn from past mistakes.
At least six months before each annual budget, the Government of the day should produce a long list of the measures it is considering for the forthcoming budget. Each of these measures should then be subjected to a full cost-benefit analysis by independent economists. Opposition parties should have their own opportunity to submit proposals for analysis. The cost-benefit analysis should seek to quantify the impact of the proposal across a variety of indicators. Sample indicators include (but are not limited to) the impact on:
• Economic growth (short and long-term)
• Employment
• The exchequer borrowing requirement
• Economic equality, for example which groups will gain and which groups will lose
• The at risk of poverty rate and other poverty related indicators
• Quality of life indicators, for example health outcomes
• Aggregate stock and composition of productive physical capacity
• Aggregate stock and composition of human capital
• The national innovative capacity
• The environment
The results of each of the cost-benefit analyses should then be independently peer-reviewed and submitted to the Government two months in advance of the budget. Existing policies, for example tax expenditures, should be subjected to regular ex post analysis. All policy measures should be reviewed twelve months after implementation, and then again every two or three years.
In the run-up to the budget the Government’s chosen set of budget proposals should be submitted to an independent Fiscal Council, set up for the express purpose of ensuring the parameters of the budget are counter-cyclical and consistent with the principle of macroeconomic sustainability.
The Government of the day should also seek to ensure that the principle of multi-annual budgeting becomes standard practice. The publication of multi-annual budgetary frameworks, of the type outlined in the National Recovery Plan, need to become semi-annual events.
None of this in any way precludes or infringes on political or economic debate. Political parties will have different positions on the relative importance of the various indicators and these differences will lead to divergent policy choices.
Impact analysis will improve accountability and transparency in budgetary decisions and will make it more difficult for interest groups to lobby Governments to sneak through legislation that benefits their narrow sectional interest at the expense of the wider society.
An indicative timetable might look like this:
January to March: Passing of Finance Bill through the Dáil
April: Publication of ‘Four Year Budgetary Framework’
June: Publication of Long list of budget proposals
June-October: Cost benefit analyses of the long list
October: Publication of ‘Updated Four year Budgetary Framework’
November: Parameters of the current year’s proposed budget audited by independent fiscal council and findings published
December: Budget
The fiscal council should be a purely advisory body, entirely independent from political parties and from powerful vested interests. For example, this would automatically exclude all economists working in the financial sector (or, indeed, for other sectional interests). Lobbying a member of the fiscal council should be made illegal. Ideally, the head of the fiscal council should be an economist of international renown.
The larger issue here is the continuing failure to undertake economic analyses of all budgetary measures. For example, an announcement pointing to a forthcoming econometric analysis of the impact of €6 billion in austerity measures is glaringly conspicuous by its absence. The absence of serious analysis was a causal factor in the economic crash, and it would be criminally negligent not to learn from past mistakes.
At least six months before each annual budget, the Government of the day should produce a long list of the measures it is considering for the forthcoming budget. Each of these measures should then be subjected to a full cost-benefit analysis by independent economists. Opposition parties should have their own opportunity to submit proposals for analysis. The cost-benefit analysis should seek to quantify the impact of the proposal across a variety of indicators. Sample indicators include (but are not limited to) the impact on:
• Economic growth (short and long-term)
• Employment
• The exchequer borrowing requirement
• Economic equality, for example which groups will gain and which groups will lose
• The at risk of poverty rate and other poverty related indicators
• Quality of life indicators, for example health outcomes
• Aggregate stock and composition of productive physical capacity
• Aggregate stock and composition of human capital
• The national innovative capacity
• The environment
The results of each of the cost-benefit analyses should then be independently peer-reviewed and submitted to the Government two months in advance of the budget. Existing policies, for example tax expenditures, should be subjected to regular ex post analysis. All policy measures should be reviewed twelve months after implementation, and then again every two or three years.
In the run-up to the budget the Government’s chosen set of budget proposals should be submitted to an independent Fiscal Council, set up for the express purpose of ensuring the parameters of the budget are counter-cyclical and consistent with the principle of macroeconomic sustainability.
The Government of the day should also seek to ensure that the principle of multi-annual budgeting becomes standard practice. The publication of multi-annual budgetary frameworks, of the type outlined in the National Recovery Plan, need to become semi-annual events.
None of this in any way precludes or infringes on political or economic debate. Political parties will have different positions on the relative importance of the various indicators and these differences will lead to divergent policy choices.
Impact analysis will improve accountability and transparency in budgetary decisions and will make it more difficult for interest groups to lobby Governments to sneak through legislation that benefits their narrow sectional interest at the expense of the wider society.
An indicative timetable might look like this:
January to March: Passing of Finance Bill through the Dáil
April: Publication of ‘Four Year Budgetary Framework’
June: Publication of Long list of budget proposals
June-October: Cost benefit analyses of the long list
October: Publication of ‘Updated Four year Budgetary Framework’
November: Parameters of the current year’s proposed budget audited by independent fiscal council and findings published
December: Budget
The fiscal council should be a purely advisory body, entirely independent from political parties and from powerful vested interests. For example, this would automatically exclude all economists working in the financial sector (or, indeed, for other sectional interests). Lobbying a member of the fiscal council should be made illegal. Ideally, the head of the fiscal council should be an economist of international renown.
Monday, 19 April 2010
Irish versus Transparency?
Nat O'Connor: Am I the only one who was wondering why it was taking so long for the Finance Act 2010 to be publicly available? (It was signed into law by the President on 3 April).
It appears to be due to Section 10 of the Official Languages Act 2003, which requires major documents to be published simultaneously in both Irish and English. The work of translating the Act will take several weeks. Hence, it could be well into May before it is available in either hard copy or online.
Meanwhile, the Act is law. On 9 April, the Minister for Finance signed Statutory Instrument (SI) 147 of 2010 bring the VAT changes into force. This SI refers to the original Act, yet interested parties cannot look up the sections mentioned because the Act is not available yet.
This all creates a transparency gap, which could last anything up to two months, given that this Finance Act is particularly long.
Now, it is not as bad as all that, because the Oireachtas website publishes each stage of the Finance Bill as it went through both houses. The final version ("as deemed to be have been passed by both Houses of the Oireachtas") is the same text as the Finance Act. (This document is also available in print from the Government Publications Office).
So the practical part of the transparency gap is resolved because the provisions of the Official Languages Act are neatly side-stepped. Although Irish speakers are currently denied the ability to discuss the technical detail of the final version of the Bill as Gaelige, as it is in English.
But does all this really create a major lack of transparency? Not in practical terms, once I learned that the final Bill on the Oireachtas website text won't be further amended. Maybe this was obvious from the 'deemed passed' label, but as someone looking at the later amendments of the legislation, I want to see the definitive text of the Act, so I can be absolutely certain there will be no more last minute changes.
I have a lot of sympathy for frustrated Irish speakers, who for decades were denied the ability to interact with public bodies in their native language. But there is a basic 'rule of law' requirement that if a new law is brought into force, then on principle the text should immediately be available, without delay.
The Official Languages Act doesn't state that legislation must be published simultaneously, only the more general heading of documents of "major public importance". Yes, I think the Finance Act 2010 is of major public importance. But I think the principle of transparency of the law, that laws must be published when they come into force, must take precedence.
In which case, one option is that the translation must take place before the Act becomes law; which means that this too must be completed within the strict time limits established by the Constituion for money bills.
It appears to be due to Section 10 of the Official Languages Act 2003, which requires major documents to be published simultaneously in both Irish and English. The work of translating the Act will take several weeks. Hence, it could be well into May before it is available in either hard copy or online.
Meanwhile, the Act is law. On 9 April, the Minister for Finance signed Statutory Instrument (SI) 147 of 2010 bring the VAT changes into force. This SI refers to the original Act, yet interested parties cannot look up the sections mentioned because the Act is not available yet.
This all creates a transparency gap, which could last anything up to two months, given that this Finance Act is particularly long.
Now, it is not as bad as all that, because the Oireachtas website publishes each stage of the Finance Bill as it went through both houses. The final version ("as deemed to be have been passed by both Houses of the Oireachtas") is the same text as the Finance Act. (This document is also available in print from the Government Publications Office).
So the practical part of the transparency gap is resolved because the provisions of the Official Languages Act are neatly side-stepped. Although Irish speakers are currently denied the ability to discuss the technical detail of the final version of the Bill as Gaelige, as it is in English.
But does all this really create a major lack of transparency? Not in practical terms, once I learned that the final Bill on the Oireachtas website text won't be further amended. Maybe this was obvious from the 'deemed passed' label, but as someone looking at the later amendments of the legislation, I want to see the definitive text of the Act, so I can be absolutely certain there will be no more last minute changes.
I have a lot of sympathy for frustrated Irish speakers, who for decades were denied the ability to interact with public bodies in their native language. But there is a basic 'rule of law' requirement that if a new law is brought into force, then on principle the text should immediately be available, without delay.
The Official Languages Act doesn't state that legislation must be published simultaneously, only the more general heading of documents of "major public importance". Yes, I think the Finance Act 2010 is of major public importance. But I think the principle of transparency of the law, that laws must be published when they come into force, must take precedence.
In which case, one option is that the translation must take place before the Act becomes law; which means that this too must be completed within the strict time limits established by the Constituion for money bills.
Monday, 8 February 2010
Usury
Nat O'Connor: One of the interesting minor features of the Finance Bill 2010 is that certain changes were made to Irish law to make it easier for banks following versions of Shari'a/Islamic law to operate here. The need for change is that Shari'a regards charging interest on loans to be a sin: usury.
One commentator in the Irish Independent (Friday 5 Feb 2010, p.11) made a mistake in claiming that: "The Finance Bill contains measures to tax Islamic financial transactions in a similar way to Christian finance."
The mistake is that, clearly, there is no such thing as "Christian finance". The law that governs finance in Ireland is secular, and passed by the Oireachtas. In recent years, the Finance Bill has become a highly complex document filled with references to the annually modified original law. It weighs in at 230 pages this year and makes the Lisbon Treaty look like bedtime reading. These are the rules that hide numerous tax loopholes and special arrangments that successful lobbyists have persuaded successive governments to include. These are also the rules that continue to permit extortionate, exploitative borrowing. For example, legal moneylenders here can charge over 100 per cent on loans.
Theological scholars will also be quick to point out that Christians, including several popes, also outlawed usury over the ages. Plato and Aristotle condemned usury, and Ancient Rome capped interest at 8.33 per cent (see Jonathan Freedland's interesting article on usury in the Guardian).
In Ireland, Section 35 of the Finance Bill 2010 allows certain payments by Islamic banks to be treated as interest for tax purposes. (The explanatory memo gives quite clear details about this). This is welcome, in so far as it allows more international commerce and it is of benefit for Muslims living in Ireland (and others) who would like to avail of alternatives to interest. However, tinkering with the small print of the labyrinthine finance legislation will simply allow these banks to operate in parallel to our existing norms.
We are long way away from reigniting the argument here on how much is reasonable profit from a loan, and at what point does exploitation (usury) begin.
One commentator in the Irish Independent (Friday 5 Feb 2010, p.11) made a mistake in claiming that: "The Finance Bill contains measures to tax Islamic financial transactions in a similar way to Christian finance."
The mistake is that, clearly, there is no such thing as "Christian finance". The law that governs finance in Ireland is secular, and passed by the Oireachtas. In recent years, the Finance Bill has become a highly complex document filled with references to the annually modified original law. It weighs in at 230 pages this year and makes the Lisbon Treaty look like bedtime reading. These are the rules that hide numerous tax loopholes and special arrangments that successful lobbyists have persuaded successive governments to include. These are also the rules that continue to permit extortionate, exploitative borrowing. For example, legal moneylenders here can charge over 100 per cent on loans.
Theological scholars will also be quick to point out that Christians, including several popes, also outlawed usury over the ages. Plato and Aristotle condemned usury, and Ancient Rome capped interest at 8.33 per cent (see Jonathan Freedland's interesting article on usury in the Guardian).
In Ireland, Section 35 of the Finance Bill 2010 allows certain payments by Islamic banks to be treated as interest for tax purposes. (The explanatory memo gives quite clear details about this). This is welcome, in so far as it allows more international commerce and it is of benefit for Muslims living in Ireland (and others) who would like to avail of alternatives to interest. However, tinkering with the small print of the labyrinthine finance legislation will simply allow these banks to operate in parallel to our existing norms.
We are long way away from reigniting the argument here on how much is reasonable profit from a loan, and at what point does exploitation (usury) begin.
Friday, 5 February 2010
Any initial thoughts on the Finance Bill 2010?
Nat O'Connor: I'm still reading through the Finance Bill, but I want to put up this post to give readers a space to post any comments over the weekend about their own impressions so far of the Bill, any interesting coverage, any likely implications, etc.
Thursday, 4 February 2010
Finance Bill 2010
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