Did Tayto Ahern get his grasp of economics from Peter Ridsdale?
Read more about: Fianna Fail, Housing, Irish Election 
Did Tayto Ahern get his grasp of economics from Peter Ridsdale?
Currently lying bottom of the championship, heading for relegation to the third division (I just can’t get used to the new-fangled names), Leeds FC were once one of the top teams in the Premiership.
Under Dave O’Leary, Leeds FC never finished out of the top five, and made it to two European semi-finals. then, after the 2001 season the chairman Peter Ridsdale took a huge risk by borrowing on the back of future earning from European soccer. Once the team failed to qualify for European competition, however, the club found itself unable to repay the loans. It responded by selling players, leading to a very public spat between the manager and chairman and the eventual sacking of O’Leary. Not surprisingly, the selling of key players did not increase the team’s performances, and within two years the club dropped to the championship. Its financial difficulties saw the club sell most of its key players, its training ground, and, eventually, its stadium. It is now on the edge of dropping into the third division for the first time in its 88 year history.
The lesson here is that you risk all by gambling on future earnings. Quelle surprise.
With regard to Tayto Ahern, his case that his massive spending plans are financially viable is based on future non-direct tax earnings. According to the cross-party promises, direct taxation is to be cut regardless of who gets into government.
But Ireland’s non-direct tax income today is over-reliant on the housing market. A downturn in its fortunes will signal a downturn in the government’s fortunes. Added to this, of course, is the subsequent downturn in consumer spending.
It is interesting to note that consumer spending on hardware, paints and goods, dropped by 2.9% for the months October-December 2006, while consumer spending on furniture and soft furnishings in January 2007 is down 19.8% on January 2006.
Less people fixing up houses suggests a more settled housing market, which means that the current house market is over-priced, i.e. demand is not keeping those prices up.
In 2002, Ireland had 1,287,958 dwellings for a population of 3,917,203.
This works out at 3.0 per dwelling. The average house price was €200,000.
Since then 320,149 new dwellings have been built, giving a total of 1,608,107 dwellings for our 2006 census of 4,234,925.
This works out at 2.6 persons per dwelling. The average house price is €311,078 – an increase in price of €111,078 in four years, despite the significant increase in supply.
The figure includes immigrants, the catch-all excuse for the cause of, and solution to, all of Ireland’s problems. A bit like Homer’s beer.
What is keeping house prices up – and boosting the government’s coffers – when on paper demand should have fallen?
Our answer is here, but as regards Tayto and his Leeds FC economics, the central point is that over the next five years we are not going to have the income to spend while cutting tax.
As always, all Tayto has to pull out of the bag is cheese and onion.
A truly apt analogy. Combine Ben’s broader points with the continued sluggishness (to put it mildly) of indigenous enterprise along with the multi-nationals’ recent ultimatum to the Government to turn our education system and infrastructural development into an outsource function for their use – or else; and we can see that no political party is engaging the electorate in an open and honest dialogue about what is needed to create sustainable economic growth and social protection. Unfortunately, the Left is somewhat compromised in this debate, having launched its own ‘cut-tax-spend-more’ program though, in fairness, Fianna Fail has outdone everyone. It all adds up to such a depressing debate I can’t even think of a snappy concluding sentence that references Leeds FC.
Truly Excellent piece. Even though I am a right-winger even i can’t agree with these income tax cuts. As for Leeds references. Could say that Leeds went from playing with and beating the big boys to losing to minonws.. Like Ireland could be
Thanks lads. I didn’t really give that 19% downturn in furniture sales that much thought. now I’m thinking that it ties in with Primetime’s fairly recent programme on estate agents and how they are creating non-existent buyers in order to place real buyers in a phantom bidding war. If people aren’t buying furniture, it means people are not buying houses. Or, there is not the same amount of people buying houses as in, say, 2005. The estate agents can’t keep that con up forever, so I think we can rule out the soft landing delusion. Their con is widening the gap between the fantasy and reality. The furniture figures comes from the CSO’s retail sales index report for January 2007. http://www.cso.ie
I was trying to get figures for the mortgage interest supplement / mortgage protection payment, but can’t seem to find them anywhere. An increase in that health board-managed payment is a true sign of serious financial difficulty, and not the house repossessions so favoured by the Sindo and others. The payment is there to stop repossessions, so its fortunes reflect ours.
Ben – you can get the mortgage interest supplement figures from the annual Social Welfare Statistical Report. The lastest is 2005. However, this figure may not be a reliable index for people getting into mortgage payment problems since the scheme is severely means-tested to the point that only those on social welfare payments or Family Income Supplement would receive. Given that few people on social welfare or FIS have a bought a house in the last few years, and given that it only supports interest payments (which restricts the amount of relief of long-term homeowners who suddenly become ill or unemployed), the small numbers are misleading. Unfortunately, for many, if they can’t make their payments they’ll have to sell up.
Hi Michael, thanks for that. cheers.
Ben fantastic piece. I think that this is a step too far and listening to radio today and just chatting to normal folk, it seems that cynicism over these promises is *pretty* strong. I dont think these tax cuts will generate growth in the way that investment, incentives for indigenous business and development of creativity would have. Equally no one can afford a public service sector which we now expect by right on those tax cuts.
I suspect (I would though) that maybe people would have responded to solid service promises first and foremost (I know from SBP polls its 50/50 usually but perhaps for this election only)
thanks for that, Cian. I think you’re right. I have a belief – anecdotal I must admit – that people do not mind the 20% tax rate if they know what it is being spent on. This is a con job. you CAN have a decent public service system if it is managed with service in mind. In Ireland we have a clientocracy, and until that is tackled, then we will continue to see the wealth of the nation used to benefit the few. In the case of Fianna Fáil and the PDs that’s the wealth of the nation used to benefit the de facto unregulated construction industry, land speculators, and private pension speculators. the PDs talk about being a new force in public life, and free market and all that, but Parlon is just one example of where they are really coming from. Remember, Parlon was headhunted.
I also believe that is why Fine Gael is not going to benefit from the anti-government sentiment in the country. They also are seen as a client-based political party. Fine Gael continue to play to the line that ‘all politics is local.’In Ireland, I wish that all politics WAS local. It is not. In Ireland, all national party politics is client-based.
The Greens, Sinn Féin, socialist party in Swords maybe, and the independents (now on an incredible 8% of first-preference votes), are going to catch the anti-gov vote.
Labour could have latched onto that vote as well, but they have assured us all that come what may, they are going to put the headmaster in power as Taoiseach.
Why in god’s name aren’t labour thinking of themselves as the main party in any future coalition? fine Gael’s vote COLLAPSED in 2002 and yet they want to prop them up instead of marching in there and taking those vote. In politics, when your opponent is on the ground, you kick him. If you want to make friends, join BEBO.
when it comes to ambition, more Roy Keane, less John Delaney.
Ben, a short reply for now, I got this far;
you CAN have a decent public service system if it is managed with service in mind.
And instantly thought of this work by Geoff Mulgan. Great point by you and it is true that government has lost the ethos of service which is part of the reason for its existence.
The rest I shall respond to later on when i have a bit of time.
Thanks Cian, I don’t know the book at all so I must check it out. cheers.