Monday, 12 October 2009

Renewed Programme for Government: first few pages

Slí Eile: The Renewed Programme for Government is a mixed bag. It contains some very worthy aspirations not least those bearing the ecological imprint. It also affirms that there will be no deviation from the fundamental path set by the April Supplementary Budget. In the absence of any qualifying statement we have to assume that any changes or ring-fencing of public spending (such as in education – although the details remain to be seen) will be within the targets set to achieve a 3% public deficit by 2013.

In other words we are looking at comparatively minor adjustments within a fixed adjustment process - €4bn this year; €4bn next year and €4bn. If my sums are right that adds up to €12bn! Set that level of deflation against a total public spend of over €70bn (in 2008). That’s a lot of money to take out of circulation (and indirectly to start re-cycling it to guess where). In the 1980s adjustment it was claimed that a crowding in of private sector investment was brought about by a reduction in crowding-out public spending at the time. At this speed and scale, it would seem that a €16bn adjustment process will crowd a lot of things out including consumer and real (non-estate and non-financial) investor confidence. Lets hope not and lets hope that the Government will not go ahead with this scale of amputation of public services and transfers to poor households.

Tax Reform
Eliminate unnecessary tax reliefs and ensure that those relief schemes which are closed to new entrants will be eliminated during the lifetime of the government where possible’
Just how many of the 100 plus tax relief schemes will be delivered in 2010, 2011 and 2012? Why wait that long? What about uncollected taxes as of September 2009?
The references to more carbon taxes, changes to local government funding and raising of the PRSI ceiling are welcome in my view. However, how much of this will really be delivered and how will the promised adjustments for any negative impacts for poorer households be effected?

a single 30% rate for tax relief on private pension provision’ Still no sight of the White Paper on Pensions. And clearly, the coalition partners are signed up for a continuation of the present fragmented and inequitable system of provision for long-term income for our seniors to be. A standardisation of tax relief is welcome compared to what exists presently but we should be thinking much more creatively and boldly about a public social insurance approach to pensions funded on a continental basis.

‘There are strong indications that the tough decisions of the past year are starting to bear fruit.’ (p6)
For sure there are. You only have to look at the freefall in tax receipts as more businesses fold, people going on the dole and consumption is decreased by levies on low-income households.

Higher Education
‘We will take on 1,000 Third and Fourth level graduates to provide additional capacity and skills across the public service and in Government Departments and provide valuable work experience.’ (p6)

That’s a very good idea. How does this relate to Bord Snip proposals to cut 17,000 jobs in the wider public service?

‘We will implement incentives for employees to up-skill in preparation for the Smart Economy skills on a part time basis, as set out in the Comhar “Green New Deal’ (p7)

Good point. However, no detail accompanies this. What, concretely, has been achieved since the Smart Economy document of last December?

‘We will invest for the future by setting a target to achieve a national R&D investment of 3% of GDP, public and private combined
’ (p9)

When? How?

‘Develop Ireland as an international location for Energy Efficient Data Centres and cloud computing.’ (p9)

Pardon my ignorance of such matters but can anyone enlighten on this line?

ICT innovation
Some good ideas – but nothing new – are stated here. Given the failure of privitised eircom to deliver on broadband with the consequences all too clear coupled with the general failure of most state IT projects some new thinking and action is urgently needed here. This should be linked to the skills already there in third and fourth levels. For far too long state agencies have been captive to private sector consultancy with very poor results in terms of having joined up, accessible and cost-effective ‘e-government’ (Revenue Commissioners are, at least, one very obvious exception to this).

‘Subject to European Stimulus Funding, we will make broadband available to every house in the country by 2012.’ This reminds me of a promise made in the local elections in 1991 to literally ‘fill in every pot hole on every road in the country’. Somehow we recall seeing many potholes up to and including 2008.
This is amazing especially considering where we have come from in the last 10 years. Its like saying in 1973: subject to funding from the EEC, we (?) will provide colour TV to every house in the country providing they can pay for it. Food, Fuel and Furnishing for struggling families would be more helpful in the first place. Broadband is in serious need of upgrading and extending, though.

Its late. I have only got to page 9. More in a few days. At the beginning of the Document we find the following: ‘Unless we take radical and bold action to resolve the crisis that has staunched the flow of credit, the economy will not recover’ (p3)
Time will tell – but this document is unlikely to achieve this. Rather it will deepen the economic crisis. We need a genuine new deal.


Paul Hunt said...

This is a profoundly cynical exercise that, via horse-trading, allows the Green Party to advance its green agenda beyond what Irish voters were prepared to accept at the last election and allows FF to maintain its grip on power. It is, accordingly, profoundly anti-democratic.

If there is to be discussion, I believe the focus should be on those areas (broadly energy and environment) where the GP ministers have some sway; the other areas remain in FF control and it will have limited interest in delivering on any obligations that the document specifies.

This exercise shores up the Dail arithmetic for the foreseeable future and, short of extra-parliamentary action, continues to dienfranchise a clear majority of Irish citizens. At this stage debating the economics is a luxury; the urgent requirement is for political action.

Anonymous said...

‘Develop Ireland as an international location for Energy Efficient Data Centres and cloud computing.’ (p9)

Pardon my ignorance of such matters but can anyone enlighten on this line?

I think this translates as:

"We will do whatever it takes to keep Microsoft happy"

Mack said...

Ireland is an excellent location for Energy Efficient Data Centres - because of our climate there is not much need of air conditioning or heaters. Major selling point, we're being sold it politically here, but the flip side it's cheaper to run a data centre here than in Arizona..

Martin O'Dea said...

Nice, annonymous, and, agreed, Paul Hunt, the disenfranchisment is now becoming a concern. There is a degree of brinkmanship in the government track. You don't support us? - So - what are you going to do about. We can ride this out and we will imrpove our numbers in the next dail, by exhausting you into part-submission and spinning a global upturn. I would like to ask what is the role, constitution, function of ESRI and what authority has provided them with the status of economic say-so in Ireland - I know that it has some individual funding along with govt. funding but don't know who exactly is providing. I would dearly wish that someone from TASC was there to challenge assertions from Alan Barrett today on Radio. Even though the language is trying to include some 'human elements' e.g. 'fairness' the message is still book-keeping lives and resistant to any fundamental change. Its all about adjustment - akin to telling people aboard the proverbial titanic that its all about throwing buckets of water overboard and heading towards new york!

An Saoi said...

While it may be cheaper to run server farms in Ireland because of the cool damp air, server farms in Ireland still consume incredible amounts of electricity. There is little direct economic benefit derived from a server farm as they require few employees and the VAT paid on inputs is generally refundable as there is little or no taxable activity in Ireland. The location of these server farms here has more to do with the continued receipt of licensing income into Ireland, which is the backbone of the activities of Microsoft & others in Ireland.

Mack said...

An Saoi -

I'm not sure whether or not Microsoft are planning to offer services along the lines of Amazon's Elastic Compute Cloud - which offers metered access to processing units and storage space (with the value-add of professionally managed massive scaleability, data management, security etc) - but if not others might. The climate here was important to them in reaching that decision (to set up shop here). But presumably, many of these operations will offer commercial services to external businesses and will probably generate profits that will be taxed here. Which would be another good reason (in addition to that suggested by yourself above) as to why this might be beneficial.

Mack said...

Here's some links on the Microsoft Data Centre

Virtualisation / hosting offered by Microsoft Ireland

Some competition from Belgium -

An Saoi said...

Mack, Microsoft already provide such services in North America. The amount of electricity consumed by server farms in West Dublin is incredible and while Microsoft have long-term interests here, I wonder about the others.

There is a huge cost in providing infrastructure for these warehouses and unless they are just part of the business model, then the Irish state will be providing a very large subsidy to these firms.

While most of these companies sell through a commissionaire structures with the aim of running the profits through Ireland, the pay off for the infrastructure costs may be poor. The logical place for server farms if you believe the weather argument is Norway, which also has the advantage of cheap electricity generated by hydro power. However the tax position would be different!

Anonymous said...

There is also a disadvantage in locating electricity-intensive operations in Ireland...massive pressure to make electricity cheap for these businesses with the flip side of more expensive power for consumers, an indirect subsidy. I think we already saw this happening earlier on on the year.