Tag Archives | budget 2009

Government cuts – the government still don’t get how to go about it

This goings on in this article from the Irish Independent last week really frustrates me – TDs snub bid to cut minister pensions.

HALF of sitting TDs getting ministerial pensions have snubbed government attempts to get them to agree the amount their payments should be cut by.
….
The Department of Finance received replies from only 16 of 31 sitting Oireachtas members who still enjoy ministerial pensions after it wrote to them more than a month ago to seek agreement on a reduction. The others appear to have ignored the letter.

To be fair to anyone who’s been approached and asked to accept these cuts voluntarily, I’d have a little sympathy. At a certain point in time, it was deemed right and acceptable for the current situation to exist. An entitlement was created (as childrens allowance and over 70’s medical cards, and the old age pensions are entitlements) so to ask someone to give up their entitlement isn’t the way to get what you want.

As the government are trying to do with many other entitlements, they do have an option to remove them, as pointed out in the article:

In another embarrassing blow to his authority, Taoiseach Brian Cowen will now have to force through the pension cuts after failing to get the co-operation of some recipients.

But, as I pointed out before, these kinds of cuts are short term in nature and so small that they won’t have any major impact on our budget deficit this year, or any other year.

Such cuts are for show, and there’ll be a bigger show if the government did actually bring in legislation to make the cuts obligatory. But it’s all still show.

As I suggested here previously – why not do something constructive about this, and for the longer term:

Instead of cutting benefits for everyone in one go, why not cut the benefits for anyone who doesn’t have them at the moment? Remove the entitlements to benefits for anyone may in the future who expects to get something rather than taking it from someone who has it already.

….

To my mind, this is a simple way to get something accepted by the government without so much opposition, but I obviously accept that it’s a longer term thing. However, with less opposition at the time of making decisions in this way, it’s alternatively possible that they could make cuts across a wider range of areas in one go – without the piece meal tinkering about the edges they’ve been involved in for the past 6 months.

I see that since I originally composed this post, Brian Cowen has made his move on this and is proposing a 25% cut in pensions entitlement. Which just goes to show how pointless the cuts are in the first place. All for show!

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Mortgage interest relief removed after 7 years

Talking to my dad over the weekend gone by, we were discussing the impact of the most recent budget on ourselves personally. There wasn’t anything good we could say between us unfortunately.

One item that did come up however, that doesn’t have an impact on either of us, was the removal of mortgage interest relief from those with mortgages for more than 7 years.

He felt that this was an extremely unfair measure and was surprised that it hadn’t received very much coverage in the budget aftermath – unlike the budget unrelated coverage of the fixed rate mortgage bail-out campaign.

On the other hand, I didn’t feel that it should be that much of an issue. My view would be that after 7 years, most mortgage holders will have been working long enough to be able to withstand such an increase in their expenses.

If mortgage interest relief was a means to aid first time buyers to afford their homes, then there is no need for the government to be involved in part-paying the mortgage repayments of the whole country – particularly those that are no longer first time buyers.

Combining the two current mortgage issues (fixed rate mortgages and mortgage relief after 7 years), there could be cause to review the potential difficulties of mortgage holders who, 7 years ago, took out a fixed rate mortgage. These people would now be hit with huge charges if they were to attempt to move to a cheaper variable mortgage as a means to reduce their costs now that the mortgage interest relief has been taken from them.

But even then, I don’t believe there are too many people that would be in this situation. As of today, there are over 10 mortgage providers in the country at the moment, and that I can find, only 3 of them provide fixed rate mortgages of more than 5 years – 10 years at EBS, AIB and permanentTSB.

I’m waiting for information from the Financial Regulator, the CSO and the IBF to see how many people did take out 10 year fixed rate mortgages in 2002, 2003 and 2004. I’m willing to hazard a guess that there aren’t that many people in that category.

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Still have some money left after the budget?

Irish News of the World

Sunday, April 12th, 2009

Diarmuid MacShane

Still have money left after the budget?

The Budget

Winning the Lotto is about the only way left to make money in Ireland without the Government taking a huge chunk out of it. That and being lucky enough to have picked Mon Mome to win the Grand National at 100/1 last Saturday.

For many of us it’s going to be very worrying when we sit down to check out the full impact of this weeks disastrous budget on our personal finances. Depending on our circumstances, we’ll be worse off by between €600 and €6000 per year.

Silver Lining

Was there anything in the budget documents that that could give us even a glimmer of hope for the coming years?

The shocking answer is that there is nothing, nada, zilch. The best that can be said about Tuesdays budget is that it could have been worse, for now. But it will be getting worse in 2010 and 2011 based on what the Minister had to say.

Can we do anything?

There are still ways where we can keep our tax payments down, or where we can get money back from the government. Depending on the money you spend during a normal year, you could potentially get back much of the extra tax charges – if you’re not claiming tax refunds already. Many of these should be familiar to you, but if not, these are definitely worth checking out.

Medical Expenses
You can claim tax relief on certain medical and dental expenses at the standard rate of tax of 20%. You can claim relief on expenses you pay for yourself and for others. If you were to pay €1000 in medical expenses during 2009, you can reclaim €200 of that in early 2010. Check the Revenue.ie website to see what medical and dental procedures are included an allowable for tax relief.

Mortgage Interest Relief

Minister Lenihan removed all mortgage interest relief for anyone who’s owned their home for 7 years or more. But, if you’re a new first time buyer, or bought your house in the last 4 years, you can claim back 25% of the mortgage interest you pay up to a maximum of €10000 per year for 4 years. The tax relief rates decline then in years 4 to 7. If you’re a non-first time buyer, you can still claim relief of 15% until year 7 of your mortgage.

For first time buyers, for a single person, this tax relief is still worth €208 per month, or €416 for a couple. Remember, you get this relief directly through your mortgage provider when you submit a TR1 form.

Service Charges

If you’re paying service charges, primarily bin charges, or water or sewage charges, you’re entitled to get tax relief on those payments also. It normally doesn’t amount to that much, but still, it’s your money. The tax relief is provided at the standard 20% rate. For example, if you pay €240 per year in bin charges, you will get tax relief of €48. There is a limit of €400 of expenditure per year for which you can reclaim tax – so up to €80 in a year.

If you live in an apartment, you can still reclaim tax on the portion of your management charge that relates to bin charges. If you don’t know how much that is, you’re management company will be able to tell you.

Rent Relief

If you’re living in rented accommodation, you can claim tax relief on your rent paid. You must be paying rent for private rented accommodation (not local authority or state housing) which is used as your sole or main residence.

Tax relief is available at the standard rate of 20% so the maximum relief you can get for 2009 as a single person is €400 back on your total rent paid – or €800 for a couple.

Other Reliefs

You can also claim tax relief for third level fees paid if you’re doing certain courses in a third level institution.

If you’re a union member, you can also claim tax relief on your annual membership fees.

DIRT Tax

DIRT is a tax on the interest you earn on your savings. And Minister Lenihan has even come after us to take a share of that money, increasing the tax from 23% to 25%.

If you’re a pensioner that isn’t liable for income tax, you should check to make sure that you’re not paying any DIRT tax your savings interest up to the thresholds of €20,000 for a single person and €40,000 for married couples.

If you have paid DIRT tax that you shouldn’t have, it’s easy to claim it back. Forms are available at any financial institution or tax office, but you’ll also need proof from your account to show that you did pay the tax in the first place.

There are some interest free savings from An Post such as savings certificates, savings bonds and prize bonds where you don’t pay any DIRT at all. The only problem with these is that they are longer term savings where your money will be locked away.

Money in your pocket

Despite all the bad news this week, there are ways I’ve shared with you here where you could get back a significant amount of money back from the Government. This could amount to up to €3000 for a single person or     €6000 for a couple.

Getting all the tax relief you’re entitled to could mean that the harsh budget from last week won’t have much of an impact on you at all.

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Anyone conned by the sacking of 5 junior ministers?

You may have seen the front page headline in the Irish Independent yesterday morning telling us that the 5 junior ministers who are losing their jobs will get a severance package of €53,000 each.

Apparently that’s the compensation they’ll receive over two years for losing their position.

You got that?

So, in order to cut costs, we’re cutting 5 ministries, but still paying all the associated costs for the next 2 years.

I’ve written about this political chicanery and smoke and mirrors tactics regarding junior ministers before – here and here.

There’s no coincidence that the Taoiseach announced the sacking of the junior ministers on the night before the budget – trying to make us think that the politicians were going to feel the pain as well.

Apart from the fact that the govermnet have already back down on pretty every other cost saving measure announced in the budget related to politicians.

And as I said in the original post, it’s not like there are any other savings whatsoever from removing these 5 junior ministers.

The offices that they used will still be a government expense – they couldn’t get rid of them now anyway if they tried.

And the junior ministerial staff will still be kept on and reallocated (or to sit around and do nothing) since the civil servants won’t be losing their positions.

And all to save how much money? €250,000 over 2 years? The same amount spent on government jets?

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Budget 2009 – my thoughts!

The Department of Finance release 150 pages of disastrous news for the country last Tuesday evening. The country is going to be crushed with extra taxes and reduced benefits for the next couple of years. The only light that seems to be at the end of the tunnel could be seen in the long lines for Lotto tickets the next day for Wednesday nights €10m Lotto jackpot draw.

Winning the Lotto is about the only way left to make money in Ireland without the Government taking a huge chunk out of it. That and being lucky enough to have picked Mon Mome to win the Grand National at 100/1 last Saturday.

In a budget where the man on the street was hammered by a reduction in take home pay of up to 9%, Minister Brian Lenihan gave a complete lie to his pre-budget promise of providing a fair budget that would take equally from everyone. For many of us who are already either losing our jobs or having to take even bigger pay cuts to stay working, the Minister really showed that he’s still really only out to look after his parties political friends.

Blame

And worse, in a radio interview on Wednesday morning, the Minister then rubbed our noses in it even further when telling us that it’s all our fault.

Nothing then to do with Government mismanagement of the economy for the past 7 years, or the fact that the banks and developers were allowed create debts so large and unmanageable that no one now except the Government can sort things out – with our cash.

It’s our fault, according to the Minister, that he had to raise taxes because we were all doing our shopping up north. He seems to be forgetting that he almost forced us to do that by raising VAT at a time when it was being decreased by the British government.

Silver Lining

So was there anything in the budget documents that that could give us even a glimmer of hope for the coming years?

The shocking answer is that there is nothing, nada, zilch. The best that can be said about Tuesdays budget is that it could have been worse, for now. But it will be getting worse in 2010 and 2011 based on what the Minister had to say.

Impact

No one has escaped this budget – from the low paid who are now having to pay tax where they didn’t before, to those on social welfare where even the simple act of cancelling the Christmas bonus is the equivalent of a 2% cut in payments.

The common consensus before this budget was that the Government needed to do whatever possible to get people spending money again to give the economy a boost. Yet all that the Minister has done is remove even more money from our pockets which will probably even further reduce demand for goods and will probably mean prices will fall even further.

Ah, a positive eventually – cheaper good, if we do decide we want to spent what little money we have left.

But falling prices are bad for business and ultimately bad for employment so it’s a never ending spiral of bad news we’re facing.

Even if we decided, which would be to the dismay of the Government, we can’t afford to spend as much as before, they’ve managed to screw us on our savings as well. The DIRT tax, a tax on the interest you make on your savings, was increased from 23% to 25%. But that stingy measure will only bring in a measly €70m in a full year.

What can be done?

Unfortunately, with a couple of exceptions that I’ll come back to later, we’ve just got to suck it up and move on. We can, and should, let our politicians know what they’re doing to us – write them a letter or send them an e-mail. We’ll have an opportunity with the local and European elections coming up to give them a strong message about how we think they’re treating us.

To find out more about the impact the budget will have on you and your family, you can call the Revenue or any of the particular Government departments you deal with such as the Department of Social and Family Affairs.

Don’t forget though, that there are still ways to get some of your tax back from the government. You can claim tax relief on certain expenses you have during the year such as medical and dental costs, rent and refuse charges.

If you have a budget for how you spend your money, you should review this to take into account your drop in income. If you don’t have a budget, you can very quickly set one up by simply writing down all your monthly expenses set against your income. It’s quite likely that you’ll need to cut your spending across different areas – many of the areas I’ve covered here recently such as mobile phone and tv costs, electricity, gas and grocery shopping.

For many of us it’s going to be very worrying when we sit down to check out the full impact of the budget on our finances. Depending on our circumstances, we’ll be worse off by between €600 and €6000 per year. You shouldn’t avoid or delay checking your finances following the budget – some of the changes were implemented immediately (diesel and cigarette increases) on Tuesday night and you could be paying out extra already.

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Ideas – Here’s one for the Government and their mini-budget

I’ve written a bit about my scepticism regarding the recently announced IdeasCampaign here, and posted some extra speculation in the comments of that post.

I have an idea here for the Government when it comes to their mini-budget at the end of March or early April.

We all saw the ructions over the over-70s medical cards in the October Budget, and the subsequent embarassing climb down by the government.

This idea will mean that the government might get their wishes (though over a longer period of time), but they could make more cuts in one fell swoop in this way if they wanted, with not even close to the amount of opposition you’d think.

Instead of cutting benefits for everyone in one go, why not cut the benefits for anyone who doesn’t have them at the moment? Remove the entitlements to benefits for anyone may in the future who expects to get something rather than taking it from someone who has it already.

So, cut child benefit, or means test it, or whatever is being talked about, for anyone who has a child after April 2nd plus 9 months. After that, you chose to have a child in the full knowledge that you’re not automatically getting childrens allowance.

If the over-70’s medical card controversy was handled in this way, I don’t believe the uproar would have been as big. If you’re over 70, carry on. If you’re under 70, you know you’re not getting the card automatically so you make alternative plans.

Note: I’m not advocating any cuts in either of these areas – I don’t know enough about them. What I am advocating is a way for our government to think about how they go about making any decisions that they tell us they need to make.

To my mind, this is a simple way to get something accepted by the government without so much opposition, but I obviously accept that it’s a longer term thing. However, with less opposition at the time of making decisions in this way, it’s alternatively possible that they could make cuts across a wider range of areas in one go – without the piecenmeal tinkering about the edges they’ve been involved in for the past 6 months.

It would also show that they’re actually thinking properly about what their doing, and planning, rather than just reacting.

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When the going gets tough, the junior ministers start walking

I don’t often get into the nitty gritty of political commentary, but given much that’s going on at the moment, I feel bound to write this rant. Apologies for the length, but I’d appreciate if you read it and shared your comments.

A junior ministry is for life, not just for the good times!

Our politicians will tell us that they’re elected to lead the country, to make the country a better place for all of us, and to institute change based on their, and their political parties, beliefs.

Wouldn’t it be nice, then, to see our political leaders showing the courage of their convictions and actually leading the country now, in a time when we’re told we’re facing serious difficulties.

Instead, our politicians are going missing, or are trying to go missing.

Last week we had Brian Cowen go AWOL during the Dell and Waterford Crystal announcements. Mary Coughlan only surfaced this week – even though she’s the minister responsible for (un)employment as well as being Biffos deputy.

And this week, we’re seeing 3 (so far) junior ministers saying that in the interests of the country, they’re willing to give up their positions.

I call BULLSHIT!

We’re starting to see the Irish political equivalent of rats fleeing from a sinking ship. If these clowns believed, as they surely would have told us when appointed, that they had an important role to play – why can we suddenly do without them now that times are getting tough?

Surely a junior minister in the Department of Finance (Martin Manseragh) would have an even more important role to play these days than when originally appointed. As for Sean Power, I suppose given recent budget cut backs, being a junior minister at the Department of Justice, Equality and Law Reform with special responsibility for Equality probably means he actually doesn’t have anything to do anyway. As for Conor Lenihan, I’m not really sure what he does anyway, but I’m sure he told us sometime or other that his job was important – why change now?

Leaders who don’t actually lead

I’m actually going to include in this listing of wishy washy flip floppy politicians another two who are useless to the country at the moment – Brian Cowen himself for trying to give up the use of his brand new Merc because it might look bad, and Beverly Flynn for not keeping her Dail expenses allowance.

Lest anyone think any different, all of the actions by these politicians above are for show – more style than substance – and actions trying to fool the public into thinking that the govenrment are actually doing something. They’re not. They’re spectators on the sideline watching a game where they’re actually supposed to be playing.

The power to change but not the will

If Brian Cowen is really worried about the perceptions of him being driven around in a brand new Mercedes, it’s within his remit to change the rules so that new Mercedes aren’t bought or that less ostentatious cars are bought for ministers at all ranks.

If government ministers are concerned about the payment of a perfectly legitimate expenses payment to Beverly Flynn, then less of the moral pressure and running to the media to complain – use the powers they actually have to change the rules.

These clowns actually came up with the rules in the first place – if you don’t like them, change them. We the public, and the media, might like the rules to be changed, but we can’t do anything about it. Do these same rules mean that Seamus Brennans (RIP) expenses allowance are still being paid to the Fianna Fail party, despite his death for example?

To silence envious tongues. Be just, and fear not: Let all the ends thou aim’st at be thy country’s

If Martin Manseragh, Sean Power and Conor Lenihan really had the courage of their convictions and truely had the interests of the country at heart (rather than their personal political futures), they’d give up the extra money they receive as junior ministers, and any perks that go with it, but they’d still get on with the jobs that they need to be doing to sort this country out.

It’s not like removing the junior ministry positions is going to reduce staff headcount or costs that much – any staff employed there will only be redeployed rather than being made redundant.

Don’t sweat the small stuff

Would anyone like to illuminate our leaders of this concept? Like I said about the budget previously, all our govenrment are doing is tinkering about the edges of the massive problems they’re telling us that we’re facing.

Fair enough, you shower of useless politicians. You’ve told us there’s a problem. We’re saving our money and cutting back on our expenses. We’re focusing on our work, trying to be more productive, and thrashing out new ideas that might being some light to the end of our personal and collective tunnels.

What are you folks doing?

Apart from actually making our lives harder through your myriad of cutbacks across all aspects of Irish life, and starting to borrow against not only ours, our childrens and our childrens childrens futures, what actually are you doing?

Well, last week we were subjected to a week of gnashing of teeth about a minor TDs €41,000 expenses that is within their own power to cut off with one simple decision and signature.  And this week we’re now being distracted further with this pointless smoke screen of removing junior ministries.

Is that it?

How the hell are these people going to be able to come up with the drastic solutions necessary to address the issues the country as a whole is facing?

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Getting rid of the National Consumer Agency?

Regular readers are probably aware that I’m not a big fan of the actions of the National Consumer Agency. And though it might have been expected, you haven’t seem me dancing in the streets with the news that the NCA would be no more following the 2009 budget announcement that the NCA would be merged with the Competition Authority.

Apart from a comment about the proposal on my original budget post, I haven’t really approached this subject.

There’s not a whole lot for me to say really, having thought about it since the original announcement. I absolutely believe that we need an organisation such as the National Consumer Agency to protect the interests of Irish consumers, but not operated in the way this organisation is.

The NCA has at least 60 different pieces of consumer legislation at their disposal under which they can protect consumers, yet during 2007 when they received at least 2,250 complaints regarding suspected legislation breaches, there were only the following prosecutions:

  • Failure to display price of grocery product – 3
  • Failure to display prices in a public house – 3
  • Failure to display price of petrol – 6
  • Other fines imposed – 4
  • Prohibition Orders – 3
  • Oh, and don’t forget the classic “undertakings” – there was 1 of those.

That’s less than a 1% prosecution rate – hardly “putting the consumer first”.

And what does it take to achieve this 1% prosecution rate – according to the NCA 2007 Annual Report:

The Agency employed 59 staff, of which 55 were civil servants on secondment from the Department of Enterprise, Trade & Employment, 3 were on secondment from Forfás and 1 is a member of staff of the Agency.

And at a cost to the tax payer of:

State funding was provided through the Office of the Minister for Enterprise, Trade and Employment, and amounted to €5,369,331 for the period ended 31December 2007.

We do need a National Consumer Agency – and possibly we need it to be independent and for it to not be merged with the Competition Authority – but for an organisation that claims to be “putting consumers first” it needs to do a whole lot more and to be a whole lot more effective before we can feel in any way protected.

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What are you doing with your ECB interest rate windfall?

Okay, so it’s only €30 for every €100,000 borrowed on your mortgage. The average mortgage, according to RTE news this evening is €250,000 so that’s a saving of €75 based on todays reduction.

But, added to the recent previous further ECB rate reduction, you’re now €150 per month better off. And potentially you’re even better off following the changes to the mortgage interest rate relief in the Budget.

Lots of numbers, but the question is – what are you going to do with that extra money?

How’s your “rainy day” savings looking? Or are you planning a big Christmas and going to need a bit extra? Do you need to pay down other debts – credit cards, car loans, etc? Or could you overpay on your mortgage to reduce the term?

Whatever you do, don’t let this welcome extra money to be assimilated into your day to day spending. This money should be seen as a bonus, and should be treated differently to your “normal money” – make sure you get a decent longer term benefit from it.

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