herald

Wednesday 15 August 2018

While our political masters rearrange the deckchairs on the Titanic, the real economy continues to go to hell in a handbasket

This week's political controversies, the Fianna Fail leadership vote and then the Cabinet reshuffle that never was, show just how out of touch with reality the Government has now become -- dangerously out of touch.

While our political masters devote their attention to rearranging the deckchairs on Titanic, the real economy continues to go to hell in a handbasket.

This week, the ESRI published updated economic forecasts for 2011 and 2012.



BLINK

For the vast majority of us who aren't political obsessives, the ESRI forecasts made for grim reading.

The ESRI now reckons that, using the GDP measurement which includes repatriated multinational profits, the Irish economy will grow by 1.5pc in 2011.

This compares with the 2.25pc GDP growth that the ESRI was forecasting as recently as three months ago and the 1.75pc predicted by the Government in last November's four-year economic plan.

When it comes to the more important GNP measurement, which excludes repatriated multinational profits, the ESRI is forecasting 2011 growth of just 0.25pc. Blink and you'll miss it!

The ESRI believes that the economy will perform slightly better in 2011 with GDP growing by 2.25pc and GNP by 1.5pc.



HURDLE

So why should ordinary Joes who live and work in the real world bother themselves with the ESRI's alphabet soup?

What does this mean for you and me? Quite a lot, actually.

When it published its Four-Year Plan last November the Government was forecasting average GDP growth of 2.75pc for each of the four years out to the end of 2014.

It was this forecast economic growth that the Government was relying upon to deliver more than half of the projected €11bn increase in tax revenue to €42bn over the next four years.

Less than two months later, it is already clear that the Four-Year Plan has fallen at the first hurdle.

Those of us who warned at the time that the plan's growth forecasts were hopelessly optimistic are being proved correct even more quickly than we had feared. This slower-than-forecast growth means that, instead of raising taxes by €5bn over the next four years, the Government would have to raise them by up to twice as much if it was to reach its target of reducing the budget deficit to 3pc of GDP by 2014.

There isn't a snowball's chance in hell of that happening. Although it's still early days, it is already clear that the savage December Budget has decimated the domestic economy. Pre-Christmas retail sales were a disaster, unemployment is rising once again and tax increases have drastically reduced consumer spending power.

All of which means that, despite last December's tax increases, the Government is almost certain to miss the revenue targets contained in the Four-Year plan. If the Government hopes that it can make up the numbers by further increasing taxes it is utterly deluded, unfortunately a not unlikely possibility if this week's political shenanigans are any guide.

No country ever taxed its way to recovery. Already the ESRI is forecasting that 50,000 people will emigrate from Ireland this year and next. All further tax increases would do is depress the economy even further, cost even more people their jobs and homes, and lead to even more of our young people, on whom this country's future depends, emigrating.



LUNATIC

Based on this week's performance, most of our ministers, many of whom have been continually in office for more than a decade, are completely cut off from reality.

With chauffeurs and civil servants constantly at their beck and call and with outrageously generous salaries and allowances every month, they have become completely institutionalised. With, as the latest ESRI forecasts demonstrate, disastrous consequences for the rest of us.

The sooner the electorate discharge the inmates from the Leinster House lunatic asylum the better for all of us.

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