There is cold comfort for Fianna Fáil in today’s exchequer returns, as yields on ten-year Irish Government Bonds have hit new highs. The international bond market is continuing to give its vote of no-confidence in this Government. Confidence among consumers also fell further in October – the 4th month in a row that the index has fallen.
The pace at which Ireland’s cost of borrowing continues to soar is deeply worrying. Although the yield is being driven by a number of factors, it is clear that the market is increasingly unconvinced by the story being told by the Irish Government about its strategy to deal with the public finances. Today’s exchequer figures show that the cost of paying interest on the national debt was up €651m, or 25%, on the bill for the same period in 2009.
The kind of misleading comment made by the Taoiseach in the Dáil today about the reduction in the headline deficit figure is typical. Claiming to have reduced the deficit by 8.3 billion in the first ten months of the year, ignores the fact that 85% of this reduction relates to once-off bank bailouts. It also ignores the fact that these figures do not count the near €22bn in promissory notes issued this year to Anglo Irish Bank, Irish Nationwide and EBS. The truth is that Ireland is now set to post a world-beating deficit this year equal to nearly a third the size of the entire economy.
The four-year plan now being prepared by Government must contain a real and convincing strategy for jobs and economic growth. Throughout this crisis, the Government has concentrated on bailing out banks, and cutting budgets, rather than on any coherent strategy for jobs. The bond market simply won’t buy that approach. We urgently need to convince both domestic consumers and international investors that there is a plan to get Ireland out of this mess.
The yawning deficit, even when the bank bailout costs are stripped out, underlines the need to make our tax system fairer and more effective. Upwards of €800m could be added to the income tax take next year without increasing any of the rates by capping or axing tax reliefs targeted at high earners.
- All of the property based tax reliefs that did so much to inflate the property bubble in the first place should be taken off the statute books immediately, bringing in over €300m.
- The size of pension pots which attract tax relief should be brought down from the current €5.4m level and brought into line with the level in the UK of around €2m. Such reforms could net €500m.