As called for a month ago on Irish Election the government has announced the creation of a 10 billion euro fund to recapitalize credit institutions with capital from the National Pension Reserve Fund.  Since the NPRF was originally designed to make overseas investments only, its governing legislation will have to be amended.  In effect therefore, the Dail will get a vote on the recapitalization scheme, even though the ability to recapitalize was already evident in the legislation rushed through to support the guarantee scheme.   The government is probably still secure enough that getting the votes won’t be an issue, but how much more will increasingly nervous independents and backbenchers be willing to take?

Accounts of last year’s election highlight the period when Brian Cowen took the FF campaign by the scruff of the neck after initial drift and swept the SoD to victory.  Is he now taking the same approach to the economy [Irish Times]? –

The Government is to present a revised economic plan early in the New Year to tackle a deteriorating situation in the public finances.

The Department of the Taoiseach has taken charge of the “economic and fiscal assessment”, a Department of Finance spokeswoman said. Taoiseach Brian Cowen, who is in Brussels this week for the crucial European summit meeting, is expected to outline further details of the plan early next week.

Er … isn’t an “economic and financial assessment” Brian Lenihan’s job?

Dow Jones newswires has an interesting story (subs. req’d) about the negotiations for a capital infusion for Irish banks.  There’s a quote from a government spokesman complaining about all the people who are complaining about the private equity interest in the banks –

There has been a rush to criticise private investors as vulture funds. But Ireland has always been open to private investment which has significantly benefitted the public in the past

That’s a mixing of past direct investments in Ireland (e.g. to build and operate a factory) with the type of investment being considered here, where Eircom provides an unhappy precedent.  The article also says that another private equity group has entered negotiations — London-based Apax partners.  They thus join the faux-Irish named Mallabraca (as if Eircom was helped by the name of one round of owners being Valentia), and the more curious interest from the institutional fund managers group (curious because their bid sounds like it would be done with other people’s money).  Finally, the article says that one major hurdle is lining up the financing needed to buy the banks, because the size of a deal means that any loan would have to come from a foreign bank — whose host government might wonder why one of their banks is taking on a risky Irish loan.  Finally, one potential investor is not mentioned: the National Pension Reserve Fund.  Based on today’s share price, it would buy all of Anglo-Irish with less than half the money it gets from the budget just this year.

Anglo Irish Bank will announce their preliminary full year 2008 results tomorrow (3 December).  Two things to look for.  Will they signal an even worse property market than their forecasts for earlier in the year had indicated (and the exchequer returns today indirectly confirm)?  And will the results be sufficiently bad that the bank will announce a capital-raising measure?  This is the first of a series of events in which the government may have to show its hand.

They are €1billion lower than projected by Lenihan on October 14th in his budget. Already down on last years projections. The latest exchequer figures show a current deficit of 7.8 billion euro.

The Taoiseach told the Dail that the figures mean that even more spending cuts will have to be made.

The fact that these are the november figures is vital, it is a measure of the health of business and in self-assessed employees. For the celtic tiger years these sources of income kept the government afloat paying corporate profits and CGT on both our foreign and indigenous business.

The November period is a black-spot which could bring some businesses to their knees, cheques and cashflow are vital at this point in the year to cover tax, invoices and wages over and above the usual run of the mill costs - the fact is that the taxman gets paid first. The time for people to get action going on small business cashflow has approached and may soon leave - opposition have tried, banks are doing ad-hoc initiatives like RBS and Bank of Ireland but we have no coherent plan that boosts confidence as well as business ability to pay. That is what is needed. Unfortunately, we don’t seem to have the money to do it either.

Crisis? It’s baby-crunching time. We no longer have the luxury of attacking others’ prescriptions – those issued by the Government, employers’ spokespersons and stockbroker economists. The proverbial punter at the bar is impatient: ‘So what’s your big idea?’ It’s a fair question.

Let’s be under no illusion. The right is driving this debate. And the main ‘opposition’ in all this has been Fine Gael who wants more of the same. A debate? You need two sides to have a debate. All we have is the sound of one hand slapping us about.

So far, the Left, with some exceptions, has staked out a small ground. It opposes cutbacks, proposes infrastructural projects and more training places, and suggests alternative revenue streams such as cutting tax reliefs. Some good ideas but, to date, they do not cohere into a programme of expansion and renewal. They do not, as yet, constitute a new narrative.

And neither will this. It is, instead, an invitation to progressives to draft up their own programmes and proposals, to put forward their own contributions; to do better than what’s contained here. But the foundational principles must be to:

* Expand fiscally – junk the cutback vs. tax increase trap. We need money, lots of it, to put back into the economy.
* Expand demand – more spending, not less, is what the economy needs to maintain and expand business activity
* Expand indigenous enterprise: Lay the structural foundations for a new enterprise base – public and private; this will take time, so we have to start soon, tomorrow, this evening

That’s the ticket – expand, expand, expand. For illustrative purposes I have come up with a 10-point programme but no single programme can address all issues. For instance, I have not addressed recapitalising our banking system, educational investment, reducing poverty and labour market issues. In a fully-blown progressive project, these will take centre-stage.

But paramount in all this: the Left must become audacious. It must put forward its vision with courage and confidence. For the Left is right and the Right is wrong. We must defend our programme against all nay-sayers, pessimists, neo-liberals and shills for vested interests: on the doorstep, at community meetings, on RTE panels, in the Dail. No fear, no capitulation.

In short, we have to go on the offensive, all economic guns blazing. So let’s start.

You can continue reading this essay at Irish Left Review.

Our economic woes may be at an end - Suzy has the scoop.

The package will be all about the three T’s - ‘Timely, Targeted and Temporary’. It will include proposals for tax cuts, fast tracking of Structural Funds to stimulate growth, and a percentage of GDP (maybe 1% or maybe not) from member states. There will also be consideration of the budget deficit problems that Member states find themselves (a bit of slippage, sliding, etc. but not much more tolerance for that on the Irish side of the house and that’s where the T in Temporary might come in.) Whether cuts, savings or spending already proposed by governments (I’m thinking the ’subprime’ lending scheme in the budget last month) will be seen to contribute to the member state’s contributions remains to be seen.

But Brian Lenihan is ranked 18th out of 19 European finance ministers covered in the Financial Times’ latest ranking of their job performance.  Of course Lenihan is mainly being penalised by things that happened before him, but the “political ranking” will tend to reflect the recent impressions of the economists who voted on that component and clearly he didn’t make much of an impression over the last few months.  Note the counterexample of Alistair Darling who although faced with bleak economic statistics, has managed to seem like a man of action on the political side.

Were things good, Joan Burton would be roundly accused of talking down the economy. However, things aren’t good and so the answer to her Parliamentary Question on tax reliefs for construction holds some pretty grim reading. In the financial year 2006, the government waved of €464.4m in 19 property based tax exemption schemes. This included €64m for student accomodation and €140m in urban renewal.

The government over the same period the tax foregone on the Business Expansion Scheme and the Seed Capital Scheme was just €21.4m and €1.2m respectively. Granted this is not all the money available to business and via a variety of bodies like the IDA, FAS and others subsidies are given to development and skills. However the stark contrast in figures chimes with the sense that we all have now of a party in government which prioritised those who lobbied hardest - our friendly developers - over the much vaunted knowledge economy.

As others have written on this topic, the support for tech startups and small business is negligible and something that other opposition parties can make hay out of. Indigenous enterprise will be required to dig us out of this hole, if we are to use tax breaks to incentivise economic benefit it should go to those business who can provide sustainable long term jobs.

The PQ is below the fold.

DÁIL QUESTION

NO  232

To ask the Minister for Finance the amount of tax that was foregone under each of every property tax based scheme in 2006 and 2007; and if he will make a statement on the matter.

*    For WRITTEN answer on Tuesday, 11th November, 2008.
Ref No: 39627/08

Minister for Finance ( Mr Lenihan) :

I am informed by the Revenue Commissioners that the amount of tax foregone under each property-based scheme in 2006 is as follows:-

I am advised by the Revenue Commissioners that data for the tax year 2007 is not yet available as the appropriate income tax and corporation tax returns for that year are either not yet due for filing (by 17th November 2008 in the case of returns filed via ROS) or have only recently been filed but have not yet been processed.

DÁIL QUESTION

NO   233

To ask the Minister for Finance the amount of tax that was foregone under the business expansion scheme and the seed capital scheme respectively in 2006 and 2007; and if he will make a statement on the matter.

*    For WRITTEN answer on Tuesday, 11th November, 2008.
Ref No: 39628/08

Minister for Finance (Mr Lenihan):

I am informed by the Revenue Commissioners that the estimated tax foregone in respect of the Business Expansion Scheme and the Seed Capital Scheme for the years 2006 and 2007 is as set out in the following table:

Ireland now sticks out like a sore thumb among countries whose banks are heavily exposed to property.  While the guarantee scheme made a huge splash when it was announced, other countries have since moved onto banking system capital as a major focus of their efforts — providing banks with enough of an additional buffer to withstand serious losses on their loan books.  The guarantee scheme only helps indirectly with this, since it helps with the raising of new debt (or deposits) but not equity — and does so by transferring risk to the government.   But here’s an interesting idea from Korea: a special fund set up with resources from domestic public and private institutions to invest in banks.  Ireland has one obvious candidate to back such an entity: the National Pension Reserve Fund.  It’s currently getting over a billion euro from the exchequer each year while the value of its overseas portfolio tumbles with the global market crash.  So how could it do any worse as a shareholder in Irish banks — if the government truly has confidence in them?