€2bn a year saving to be made on ‘IOUs’: think tank

By Evelyn Ring

Wednesday, November 02, 2011

A GROUP working to address the country’s economic inequalities says the Government could save €2 billion a year by restructuring its "IOUs" for Anglo Irish Bank.

Launching its pre-budget submission yesterday, independent think tank TASC said the savings could be realised by turning the Government’s promissory notes into low-interest, long-term bonds.

TASC economist Tom McDonnell said the money could be saved every year from 2012 to 2023 by restructuring the promissory notes — a promise to inject real cash into Anglo at some point in the future.

"By turning the notes into a long-term bullet bond owed to the European bail-out fund, we can reduce our repayments, before interest, from about €3bn a year to about €1bn," said Mr McDonnell.

TASC is also proposing that any public spending savings should be spent on frontline services and welfare, with no overall cuts.

TASC director Dr Nat O’Connor said their pre- budget proposals were designed to reduce deficit, support jobs and protect low income groups.

"The narrow focus in previous budget on Government finances, rather than the health of the whole economy, has been economically and socially damaging," said Dr O’Connor.

He said austerity measures to date had been counter- productive and resulted in excessive economic contraction.

"We should remember that the €6bn adjustment in the last Budget only reduced our structural deficit by €2.2bn, according to the International Monetary Fund," he said.

Pointing out that their budget proposals also protected low income groups, Dr O’Connor said there was a lot of evidence showing that inequality played a central role in causing the global crisis.

TASC looked at Budget 2011 and found that people on lower income levels lost significantly more proportionally of their incomes compared to people on higher incomes.

In particular, single people with children lost around 5% of their income from changes to tax and benefits, whereas other households lost less than 3%.

TASC head of policy, Sinéad Pentony, said the think tank hoped the Government would consider introducing an "equality audit" as part of the annual budgetary process.

"Protecting low incomes is not just an equality issue: it is also crucial to our economic recovery, since only by maintaining and boosting demand in the economy can we grow jobs, increase tax revenues and reduce welfare spending," she said.

This appeared in the printed version of the Irish Examiner Wednesday, November 02, 2011