Thursday, 10 June 2010

Honohan and Regling-Watson banking reports. Fianna Fail's culpability.

You will probably have heard a little this morning about two reports on the Irish banking collapse commissioned by the Government - one compiled by the head of the Central bank Patrick Honohan, the other by international banking experts Klaus Regling and Max Watson.

Both  will form the basis for a Statutory Commission of Investigation to be carried out this year. The Government, however, has excluded its own role in the terms of reference of investigation. Some investigation, then. It sounds like holding the Nuremburg trials without the presence of war criminals.

Of course Fianna Fail wanted to portray the economic mess as something caused by outside factors, or the banks alone, but even the two reports it commissioned show the Government itself culpable.
The two reports are here: Honohan report      Regling-Watson report

Here are some snippets I found interesting. The range of property-based tax shelters and dodges is breathtaking, as is their duration (you can still see them on the property pages of the papers today):

Honohan Report, pages 31-32.

2.27 Throughout this period, the Government made extensive use of taxation incentives aimed at the construction sector.21 The rates of stamp duties, which were high, were lowered several times in recent years (in 2001, 2002, 2003, 2005, and 2007), sometimes with the aim of improving the affordability of housing to first time buyers (as was the case with the Bacon initiatives 1998-2000).

 In addition, different classes of construction investment have attracted sizeable income tax concessions extending over long periods. At the height of the boom, in 2004-06, schemes existed for urban renewal, multi-storey car parks, student accommodation, buildings used for third level educational purposes, hotels and holiday camps, holiday cottages, rural and urban renewal, park and ride facilities, ―living over the shop‖, nursing homes, private hospitals and convalescent facilities, sports injury clinics and childcare facilities.

 After some transitional arrangements, most of these incentives were abolished by 31 July 2008, after the expiration date of the schemes had earlier been extended on several occasions during 2000-08.

Regling-Watson report.

In relation to taxation policy and competitiveness.  Page 22.

Of course, some loss of competitiveness is the natural mechanism through which growth is slowed in a euro area economy that is overheating. In Ireland, however, an imprudent expansion of bank lending, accompanied by an unwise policy on tax exemptions, resulted in this natural economic cycle becoming much more extreme than should have ever have been the case.

In relation to tax policy and property.  Pages 27- 28

...Ireland is one of very few countries where interest payments on mortgages can be deducted from income tax yet there is no property tax (which would provide a stable source of revenue for the public sector). While this approach narrowed – again – the tax base, it also interacted in a negative way with the emerging real estate bubble by giving additional incentives to households to invest in real estate.

Third, the Irish tax system includes a large number of “tax expenditures” (tax allowances, reliefs and exemptions from income tax which – to some extent – reflect the income tax cuts mentioned above). According to the OECD, by 2005 the cost of “tax expenditures” had become larger than the remaining income tax receipts. As a percent of total tax revenue, tax expenditures in Ireland are more than three times larger than on average in the EU. Again, this excessive reliance on tax relief narrowed the tax base.

In addition, it contributed – again – to the property bubble, as some of the tax relief was directed to the property sector, often in particular regions of the country. And it contributed to a more general misallocation of resources as some of the tax concessions seem to have been granted on an ad-hoc basis in a not fully transparent way. After a review by the Department of Finance in 2006, a number of tax expenditures were eliminated and some restrictions on the use of certain tax reliefs were imposed.  Nevertheless, the system remained distorted.

And it still is. 

The opposition must not allow Fianna Fail to detract from its central role in creating the property bubble.  And they should also ask themselves what they were doing/saying at the time.

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Anonymous said...

Gday GM I SUSPECTED all along that the oirish were responsible for this global depression now it has been confirmed that BIFFO AND BERTY DA BOLLLIX were the evil genuises behind this iam dismayed ,this blasted depression has soooh cost me several ROLEX BENTLYS AND LAMBOS sold for groceries90%DISCOUNT ,the industry where iwas once a super star iam now just anX but thats how it is in the adult entertainment world you have to keep it up 24-7,ihope the oirish masters of the universe are now happy that there are millions and millions of X MILLIONAIRES all over da wurld being an X myself i know the feeling its not nice. BH

Anonymous said...

Hi GM,

Your last point is most telling. What we have here is a failure of both government and opposition. If we cast our minds back to the last election FG & Labour were if anything offering even more wild largess in the vain hope of unseating FF. None of the politicians had any real clue of what was wrong and what was to come.

The Gombeen Man said...

@ BH. " the adult entertainment world you have to keep it up 24-7.." Great!

@ Anon. True. The only one I remember consistently speaking out against the tax shelters was Joan Burton. And she's only one of the Labour Party.

anna said...

Let history ( and GN- the Blogspot of Record) mark on the date of publication, Eamon Gilmore tand the Labour party topped the popularity polls for the 1st time: For the First time a possibility of a Labour majority government - and he says he’d make Joan Burton Tanaiste.( Hooray!)
Opposition may have been timid- but at least I could always trust the Labour party to keep their fingers out of the till and do the job they are ( well) paid to do ( and also the Greens).
Not just economic recovery - there’s much to do:
The only job FF thought needed to be done were : cream off plenty of expenses for themselves , get plenty of illicit payoffs, see the rich class were well taken care of - throw a few jobs the way of the people- and that was it.
The country is Creaking in so many ways with decades of neglect:
Health boards that let children die in their care (!), and then don’t know How many(!!): water systems that pour out brown water in Longford and Galway : massive reform needed of electoral registration
( I was registered 3 times- despite telling Dun L council Many times to take my old addresses off) : Cuts in TD pay and reduction in no etc: A bad health system that let 2 people die in the last 2 years in casualty waiting departments in Dublin ….etc.
Regardless of what people say of the Greens they have been working behind the scenes on improving the water system, electoral registration reform, reform of the Dail, less dependence on fossil fuel, insulation grants , massive reform of the local council building planning system ( Badly needed) etc…and don’t forget these banking reports only came about because the Greens made FF do them ..if they had been in govt alone, they would have quietly buried this latest scandal.
There are only 6 green TD’s : We need more + Dozens more Labour TDs, Joe Higgins followers, People before profit alliance etc along as I know they will take no money from the public purse and will work hard for ordinary people, I’ll vote them for them ( but not SF- ineffectual nutters mostly- is united Ireland really top of most Irish peoples wish list for a better future??)
The CSO wesbsite has these stats: ½ million Irish ( over age 15) have only primary education + around 1 million have only 3 yrs Junior cert education= 1.5 million = 32% of the Irish population=
a lot of ordinary decent voters hoodwinked for Decades by sly better educated bastards.
People are better educated now- and the the Huge successes of the Labour party in the polls should mark a big turning point for us little green worms .

Anna said...

An election could be called this year. (Very Real Possibility- Make Sure you’re on the register- they stop registering people, as Soon as an election is called- phone your council to get registered.)
By Dec 2010 EAMON & JOAN could be in power- 2 honest hardworking people, who do Care about what ordinary people need.
We NOW have Brian & Mary: In Brian’s previous role as Minister of finance he carelessly let the banks control themselves (!!!)- he should have been Sacked from FF for that incompetence - instead he leads the country. As for Mary, I can’t think of any outstanding achievement of hers.
NEVER forget that FF did NOT become a Gombeen party over night;
Last week I read a Garret Fitzgerald article in IT. GF said at creation of the State in the 1920’s politicians strove for honourable standards. Then as the FF party took hold, Gombeenism and Cronyisn crept into Irish politics ( not just the FF party- they were just the worst). GF mentioned the policy of making political appointments to many state boards ( this wouldn’t go on to the same extent in other countries).
GF mentioned Irish Shipping ( evidently a state run carrier). In the 70’s IS had a man who somehow managed to hold 3 ( Three) key Salaried positions, including chief accountant- all given to him by TDs. He made some disastrous deal with a Japanese co- and IS somehow lost a Cool 10 Billion pounds ( in the 70‘s!!!)-and had to be wound up. No doubt this idiot walked away with a big pay off- well he already had 3 salaries- for incompetence.
Is it any wonder this country is poor- with scum politicians embezzling or wasting our money?? Incompetents appointed - just because they were a friend of a TD??
It did not end in the 70-’s I read a Kevin Myers article in 2008 asking just Who decided the rates of pay of Semi state boards?? He mentioned David Andrews ( FF TD and 1 time minister ) had a Part Time position on the Refugee Appeals Board- on pay of 250,000 a year. ( I am a full time executive officer- on 40,000 pa)
Don’t forget Bertie’s old girl friend Celia gets 15,00 a year from the board of the National Consumer Agency. Ok that was set up in 2007( when FF was beginning to be running scared of giving huge payouts to FF friends and ex Tds on these semi e boards)
Nonetheless Celia still managed to vote several 100,000 euro payment to a PR agency ( which was set up by ex FF personnel) whose services the National Consumer Agency Evidently Desperately needed.
For the last 90 yrs, the enemies of the Irish nation have been within our borders: Rotten greedy politicians.
And in the next year, We could have the Nation changing chance to consign these Gombeen Politicians esp FF to the dustbin of Irish history.

anna said...

small correction- Celia larkin gets 15,000 Pa on board of National Consumer Agency

The Gombeen Man said...

Thanks for that Anna. Well said, as usual.

annA said...
Lehihna is actually going to hear meetings as the goverment Themslelves discuss waht they did wrong!

also in todasy SBP ( 13 June ) a damning artcile by Vincent Browne maning Cowan as architexct od=of the banking disaster

Anonymous said...

Shark central. Its deeply corrupt. Who or what are politicians? They are nothing more than ordinary citizens in a politically charged environment. I know its not popular to say but people have no one to blame but themselves. Ireland is shark central.


The Gombeen Man said...

Hate to sound pessimistic Anna, but I will things ever change?

Dakota, I'm all for holding the bankers (esp Central), supposed regulators and politicians responsible, as they were charged with running things. But they didn't operate in a bubble either, as you rightly point out.

I'd like to know how many people who voted Bertie and FF back in on the basis of tax "giveaways" and "feel good", are the very ones now whingeing because their investment properties - which they were codded into borrowing heavily for - have now returned to their true values? The same lot calling for a "NAMA for the people", I'd say.

People my posterior. Maybe "the people" are the problem?...

Anonymous said...

Em correct I'd say but to be honest the individuals who voted FF in the last time should have been locked up for their own safety. How or why could they have believed that FF was going to give them what they wanted? Really in all honesty was it all the illegal drugs which were around at the time?

Ironically it was then that Labour should have been voted in to control the rampaging economy and share some of the wealth. But no its now that Labour are ahead in the polls. I dont know about you GM but I thought it was Irish timing which the problem, I think we can add to that stupidity as well. I think it is the people.


The Gombeen Man said...

Too many half-wits and simply dishonest people in the country, D. But at least doing the blog lets me know there are a few of us who see it, going by comments from the likes of BH, Ponyboy, Anna and yourself, and from some of the email I get.

We're not completely alone, mate. ;-)

Anonymous said...

Thank God!


Anna said...


Yes GM I DO live in hope: Everything Changes- here it’s Slow But Accelerating.
John MC Gahern said,’ Ireland was in the C19, Skipped the C20- and now is in the twenty first.”
Or as A German man once told my friend:’’ I know 2 things of Ireland: it rains a lot and there is 1 political party.”
We now have 10% foreign born population: something I regard as the yeast in the flat brew of life here: they won’t take the crap Irish people do- surely 10% new blood should be a Swing % in any country, that can accelerate change?
Meantime we all have work to do: Getting the bastards out:
* On above website check you’re registered-all councils are on it. Sometimes it is hard to navigate - my details only show if I type in capitals- so if in doubt phone your council.
*Not registered? the forms are on the site- print & send to your council
*Main register is printed in Feb ( and available at Councils/ libraries/ Garda stations)- but they carry on registering on the supplementary register ALL the time.
However ( irritatingly ) while you might not expect to be on a printed register till the following Feb- the website won’t show new voters until then Either.
* I am currently on under an old address- but I phoned the council today and they said, they do Have my new listing( I sent a form for new address 2 months ago) - it won’t be on website till Feb 2011 BUT I AM on the (Supplementary) register.
( OK- I ’m now listed twice- but I want to be SURE I have a vote before I ask them to take the old address off ( and believe me- it can take them a few years before they do that.)
* I’m not sure how it is here- but in NI/ UK as Soon as an election is Announced they Stop registering new voters. Dun L council told me that they will carry on registering a bit longer- a bit closer to the election date- BUT it is still is advisable to make Sure You are armed with a VOTE - the enemy may launch a sudden election strike at any time.
* If you move and did not get on the supplementary register, you still have a vote at your old address
( if you haven’t yet asked to be removed). Turn up at your old polling station and vote .
* People often make the BIG mistake of thinking you Have to have a polling card in order to vote - not true -it is really only to let you know your polling station. If the card did not come , Just turn up with ID: passport, full driver licence, birth cert etc.
* Once you’re on the register you stay on it. In my case at 3 addresses. No Matter how many times I told the council to take me off whenever I moved, they just kept going me more votes.
I asked them to Finally take them all off when I moved North for 3 yrs. They did - but kept me on at 1 address I left in 2001.Oh well. When I moved back in 2009 I did vote twice with that.
Check you‘re registered- if not get registered. I Always vote- It’s only fun when you have a horse in the race.
This year we will all become more broke. But can still have the great free pleasure of seeing sacked FF Gombeen TD’s looking like a wet weekend in Ballymagash.
‘This country isn’t big enough for us all.” said Brian Lenihan’s dad- also a FF Minister- during a previous Government Incompetence Induced Recession( not sure which 1 - there were many.)
Very True. Now on your bikes.