The first item below shows a country, not sliding inexorably into
recession as Britain is doing, but one hit by the euro and suffering
a sudden collapse.
If one remembers that Ireland's population is about 7% of that of the
UK these figures are shockers. The budget deficit on that basis is
the equivalent of £148bn in the UK having tripled in a year.
It highlights the ultimate flaw in the Euro, namely that it covers a
dozen or more countries (with more tied to it via the EMU rules] with
differing economies and needs but wikth no firm overall economic
centralised policy. No currency can exist in such a vacuum. Nor,
it seems, can Ireland exist inside the Euro-zone.
-------------------------------
Thereafter, I list first some comments from the 'popular' end of the
media spectrum on the Brown 'Relaunch'. (He keeps doing these
relaunches because they always sink! ) Then some comments from the
'heavies' !
All in all the Brown relaunch has - it appears - sunk again.
Christina
======================
FINANCIAL TIMES 3.9.08
Ireland budget deficit triples as slump bites
By John Murray Brown in Dublin
Ireland's public finance deficit tripled in the first eight months to
the end of August as the housing and construction slowdown hit tax
receipts, posing an increasing threat to Ireland's European Union
commitments on fiscal discipline.
The budget deficit was ?8.4bn, compared with a ?2.8bn deficit in the
same period last year.
Tax revenue was 9.4 per cent behind the figure achieved in the same
period last year.
Alan McQuaid, economist with Bloxham stockbrokers, said: "The overall
underlying picture continues to worsen."
In June, the government revised its budget forecasts and now
officially expects the fiscal deficit to come in at 2.75 per cent of
gross domestic product. This compares with a forecast of 0.9 per cent
at the time of the budget in December
The European Union's stability and growth pact rules, established to
support the euro, stipulate that deficits should be below 3 per cent
of GDP over the economic cycle. Rossa White, at Davy stockbrokers,
said: "It is almost certain we will breach the 3 per cent limit in
2008."
Richard Bruton, deputy leader of Fine Gael, the conservative
opposition party, said: "They are heading for 4 per cent borrowing in
2008 as a percentage of GDP. It will be close to 5 per cent in 2009,
even if their spending plans only meet existing commitments
"This alarming swing from surplus to deficit is not due to bad luck,
it is down to prime minister [and former finance minister] Brian
Cowen's reckless management of the public finances over the last four
years."
The housing slump has hit VAT receipts, which were down ?1.17bn in
the eight months to August while stamp duties fell ?480m and capital
gains taxes were down ?436m.
Bloxham estimates the economy will contract by 2.5 per cent this
year, the first recession since the early 1980s.
But both Davy and Bloxham are urging a stimulus package of tax cuts.
Property prices were by general consent badly in need of a
correction, after a 10-year boom, driven by low borrowing costs,
strong underlying demographics and favourable tax treatment. But what
has taken all commentators by surprise is the speed of the
deterioration in the public finances that the housing slowdown has
triggered. The budget has moved from healthy surplus in 2006 to a
deficit close to 3 per cent, the equivalent of 6 percentage points of
GDP or ?10.5bn.
The worsening public finances come as the government prepares this
week to seek to restart key negotiations with trade unions and
industry representatives on a new three-year wage deal. But with the
public finances under strain, and other costs increasing, observers
believe it will be hard to do a deal.
========================
THE SUN - Leader 3.9.08
Home Truths
THE government has a worrying habit of inventing economic policy as
it goes along.
Twice this year it has torn up the Budget timetable to announce
crisis measures which smack of panic.
First, it borrowed £3billion to repair the damage from its self-
inflicted 10p tax fiasco.
Now it is borrowing £1billion more to ease the constipated housing
market.
This will pay to lift the starting rate for stamp duty - a tax on
moving home - from £125,000 to £175,000.
Every little helps and this is a welcome leg-up for first-time buyers.
But stamp duty is an iniquitous tax which acts as a brake on job
mobility.
It has been ratcheted in recent years to the point where it has
helped bring the market to a halt.
The government was happy to take its slice when house prices were
soaring beyond the reach of struggling families.
If it really wants to help first-time buyers, it should let the
market settle back to a realistic level - and not encourage them to
risk their money until it does.
========================
DAILY MAIL 3.9.08 - MAIL COMMENT:
Too little, too late to halt the slide towards recession
New life may have been breathed into the housing market - but is it
too little too late?
Any help for those hardest hit by the credit crunch must be welcome.
So let's at least raise one cheer for the Government's long-delayed
attempt to breathe life into the housing market.
Yes, some first-time buyers (and buy-to-let speculators) may get a
leg-up from the measures announced yesterday.
Yes, the package will rescue some struggling families - though no
more than 6,000 - from the misery of repossession. And, yes, it will
save a few builders' jobs. All of which is better than nothing.
But let's be realistic. After months of damaging dithering (and
unhelpful interviews in the Guardian), none of this will have the
slightest impact on our slide towards the recession which, says the
OECD, will be upon Britain by Christmas.
The £1.6billion involved may sound vast (and we haven't a clue where
it will come from). Certainly, it's enough to place a heavy burden on
taxpayers, present or future.
But it's a drop in the ocean of what would be needed to make a
noticeable difference - billions the Government can't begin to
afford, after the fortune it squandered during the boom years.
Meanwhile, these measures will do nothing to tackle the homebuyer's
main problem - the catastrophic shortage of affordable mortgages.
Indeed, doesn't this package look less like effective action than a
desperate attempt to be seen to be doing something, for the sake of
an easier ride at this month's Labour Conference?
One cheer for the Government? On second thoughts, make that a half.
========================
FINANCIAL TIMES 3.9.08
Not safe as houses
When ministers announce a package of measures on an issue, this is
often a euphemism for a motley bunch of policies that are only
loosely related. So it was on Tuesday with the launch of plans on the
housing market. Their only common purpose seems to be to enable the
government to regain political momentum. In this, as in their
economic effects, they look unlikely to make a significant impact.
The most eye-catching element is the temporary abolition of stamp
duty from Wednesday for a year on property transactions between
£125,000 and £175,000 at an estimated cost of £615m, This was bundled
with measures to help first-time home buyers, to assist families
struggling with mortgage interest payments and to bring forward
planned increases in the supply of social housing. Focusing on areas
of potential hardship is welcome, since it is where government can
make a real difference.
Transaction taxes such as stamp duty are undesirable because they gum
up markets. But the temporary change introduced by the government is
itself unwelcome. There is a problem in principle in changing the tax
system to encourage people into a market where the value of their new
homes may well continue to drop. That problem remains even if - as
seems likely - the scheme is too limited to be effective in kick-
starting the housing market. The level of mortgage approvals depends
far less on a relatively small cut in the cost of home-buying than it
does on potential buyers' ability to borrow now that lenders have
become so much more cautious.
The underlying truth is that house prices need to fall back to a
sustainable equilibrium. They are currently dropping at a rate of
more than 1 per cent a month, but are still too high. Prospective
buyers benefit most from a market in which homes are more affordable.
Having raised expectations that it would produce plans to help people
with housing, the government had to be be seen to be doing something
once the political season began. But the exercise raises two points.
The first is that the government is on a hiding to nothing if it
encourages voters to believe it can control house prices and the home
loans market. When prices continue to fall and the level of mortgage
approvals still sags, ministers will shoulder some of the blame.
The second is the risk that to recoup the cost of these and previous
tax concessions, ministers look to populist moves such as a windfall
tax on utilities or introducing a higher top rate of income tax. This
would indeed differentiate the government from its Tory opponents.
And it would be a serious mistake.
======================
TELEGRAPH - Leader 3.9.08
Where's Prudence when you need her most?
The package of measures to revive the housing market, cobbled
together over the summer, is an ill-equipped vessel on which to
relaunch a foundering government.
Coming hard on the heels of the Chancellor's gloomy weekend prognosis
and yesterday's forecast from the OECD that the UK economy will slide
into recession in the second half of this year (the only major
economy to do so), it needed to be both bold and convincing if it was
to restore public confidence. It proved to be neither.
The haggling between Downing Street and the Treasury over what is
possible when the public finances are in their most parlous state in
living memory has produced not a big bang, but a damp squib.
The stamp duty holiday for properties valued at under £175,000 will
help about half of all homebuyers over the next year, saving each of
them up to £1,750.
Will that breathe new life into a moribund market? Unlikely. House
values are falling so rapidly that a buyer has only to sit tight for
a few weeks to make that kind of saving on the purchase price.
A similar move by the Conservative chancellor Norman Lamont during
the last big crash in 1991/92 did nothing to arrest the decline in
prices or transactions. Analysts were agreed yesterday that the
giveaway would not move the market because the real problem remains
the availability of mortgage finance.
The Government has, since the Northern Rock crisis exploded a year
ago, shown itself impotent on that front. As for the new shared
equity provisions to help people onto the housing ladder, the
precedents are not promising.
These ferociously complex schemes have a low take-up. An earlier
effort in this direction, the Social Homebuy scheme, saw just 88
homes purchased in 18 months.
Astonishingly, the stamp duty holiday appears to be unfunded, with
the Treasury unable to say how the £600 million cost will be met.
Whatever happened to prudence?
Gordon Brown made his name with his limpet-like adherence to
watertight costings. No longer, it seems. Yet never has prudence been
more necessary.
Public borrowing in the first quarter of this year was almost £25
billion, the highest since records began in 1946. Polls suggest that
voters do not believe these tinkering measures will do anything to
turn round the economy, and they are right.
That will only come when the Government shows the courage to take the
big and painful decision to cut public spending and start living
within its means. Such is the drift and division at the heart of
Labour that no one can have a shred of confidence such leadership
will be forthcoming.
One property that will not be secured by yesterday's piecemeal
measures is 10 Downing Street.
