Notes on the Front

You'd think that some people would show a bit of humility.  But Sean Fitzpatrick over at Anglo Irish is not one of those people.  Okay, so during his tenure as chairperson his bank ran such a reckless, irresponsible and idiotic policy that it (and he, by extension) almost brought the country, never mind his own bank, to its knees, requiring a massive bail-out by ordinary taxpayers.  But Sean will not allow this to deter him:  he wants more pain for the country. 

Of course, Sean knows a lot about pain. He really has to scratch about for his bread: he's not only a bank chairperson, he's Chair of Smurfitt Kappa (€250,000 in fees) and a non-executive director of Aer Lingus (€45,000), Greencore (€48,000), Gartmore Irish Growth Fund (€15,000 Sterling) and Experiean Group (€107,000).  But for his pains at Anglo Irish, Sean get €431,000 in fees.  In addition, he holds 4.8 million shares in the bank. Last Friday, those shares would be worth over €24.4 million.

While I was looking all this up, I couldn't help thinking about WBS's post on the Irish Times story on how the middle classes got squeezed in the budget.  It's not that Sean is going to escape – the standard rating of the drug repayment scheme, the €10 air travel tax, the €200 for that little cottage in Connemara he may own; no, I kept thinking to myself – what is the middle class?  Now, given that I'm a great believer in the division of labour, I'll let the lads at Dublin Opinion continue burrowing into this topic of class.

I'll satisfy myself with examining the great middle group of income earners – a middle group that the vapid commentary of the Irish Times story confuses with middle classes.  The CSO's Employment Survey is a good place to go.  They tell us:

• 67.5 percent of all employees earned less than €20 per hour (on a full-time basis that's about €40,500).  Of course, there are some employees who earn more than €20 per hour but don't work a full working week so they'd make less that 40K.  So we can probably estimate 70 percent earn less than €40,000 a year.

But that's just employees.  What about those not in work?  In 2006 there was about 900,000 social welfare recipients with an additional 100,000 adult dependents.  Then there's about 325,000 non-working spouses of taxpayers – some of whom will earn more than €40,000.  Then there's students. 

There's also the self-employed.  The Revenue Commissioners data indicates that about 67 percent of self-employed earn less than €40,000.  That leaves about 64,000 earning above that threshold.

This is just a back-of-the-envelope job (there's a some double counting in the Revenue tables), but an approximation is that between 75 and 80 percent earn below €40,000 in 2006 terms.  So let's run through the Irish Times' charge sheet on the new tax items:

• The 1% Income Levy:  Yes, that hits everyone, but the middle classes needn't worry about the additional 1% on income over €100,000 – they are a long way from that.

• The €200 tax on second properties:  Not too many with incomes below €40,000 will have an investment property portfolio.

• The departure tax for foreign holidays:  Yes, everyone traveling abroad will pay €10.  But if you can afford the €29.99 latest offer by Aer Lingus to Lisbon (taxes and charges included), you can afford the extra €10.  Or you can buy your own 20-seat or less aircraft and use that for travel – the tax doesn't apply to those.

• Reduction in tax relief for pensions contributions:  Yes, now you won' get any tax relief for contributions of over €150,000 per year, which is nearly four times the amount the middle income groups actually earn a year.

• The €200 charge on parking spaces provided by employers:  I'd like to see the wage levels of those benefiting from that.  In any event, cycling is healthier and, now, tax-efficient.

• The increase in the standard rate of VAT by 0.5 percent:  Yes, that will hit low and middle income groups hard but not for the reason that the Irish Times states.  They say it 'will also hit their (middle class) pockets to a greater extent, given their higher spending power'. This is nonsense.  For the lowest income groups, VAT takes up 14 percent of income, for the higher income groups, it takes only about 7 percent.

• The withdrawal of automatic medical cards for over 70s:  Yes, that's one of the few Irish Times complaints that is valid.

• The standard-rating of the drug repayment scheme:  this won't affect most middle income folk, but it will hit hard that small group that is just above the standard rate tax band (€36,500 for a single person).

• Increase in DIRT Tax:  Yes, that will affect anyone with savings.

• Increase in Health Charges:  Yes, this will hit.  But it will hit the low-paid disproportionately more.  And given that you're more likely to need medical care the lower your income is, it's a particularly nasty bit of work.

• Mortgage Interest Relief:  this is contestable.  The likelihood is that middle income groups will benefit from the increase in the first-time buyers' relief.  Those on a second house are likely to be older (having owned property before) and, therefore, have a larger income.  I doubt that many middle income groups will suffer from this.

• The 50 cents hit on wine:  Oh, yes, this will definitely hit the middle classes and the aspiring middle income groups because as everyone knows, sophisticated house-trained people drink wine while beer is the poison of skinheads, workers and pit-bull owners.

All in all, the complaints made by the Irish Times are only valid for the middle income groups when they are equally if not more valid (e.g. VAT) for low income groups.  There's a valuable lesson here for the Left about how to read budgets, their affects on income groups and the wider issue of, dare I say, class alliances. 

So a little less vacuous commentary of the type the Irish Times is producing, and a little more acknowledgment of how so many make so little would really go a long ways.  And as for more sacrifices – bring on the pain sticks, Sean, I'm ready to do my patriotic bit.