Money Times- December 29, 2014

Posted by Jill Kerby on December 29 2014 @ 09:00




First, huge congratulations to everyone who was able to land a job in 2014, who got their mortgaged home out of negative equity or who was able to secure a better repayment schedule to pay that mortgage.

To all of you who bravely met with your creditors in 2014 (with or without the help of a debt adviser) and reached an insolvency or bankruptcy settlement that allows you to repay what you can but also start a new life free of debt, well done. 

Getting that millstone off your back will, literally, be a life-changer.

To the majority of Irish working people who have managed to keep their jobs on lower or frozen incomes while shelling out more tax – take a bow. You are the unsung heroes of Ireland, supporting not just yourself and your families but helping other families who still rely on state benefits.  

2014 was the year that we acknowledged the importance of supporting our local merchants and communities.

I don’t necessarily share the view that austerity is over, even if national gross domestic product (GDP) is soaring and unemployment is now under 11%. These GDP and unemployment figures are still skewed by the way the foreign export sector records its turnover and profits here, and by high immigration numbers.

But the biggest barrier we face to genuine recovery is the amount of debt the state and individuals are carrying, which is going to take decades to clear.

No country, company or individual can expect real prosperity so long as they borrow and spend more than they earn, and in Ireland’s case have to pay €8bn a year just to service the national debt.

We should thank the ECB’s for its, albeit, desperate attempts to refloat the recession-hit European economy. By reducing its own base interest rate to just 0.15% this year, many mortgage holders here are still in their homes, rather than facing outright insolvency.

Unfortunately low interest returns punish all savers as well as pensioners on fixed incomes. With little or no retail price inflation, these artificially low rates ironically provide little incentive to spend and discourage retail job creation. For 2015 to be a really good year, we have to have more domestic jobs, higher wages and net lower taxes.

The drop on January 1 in the top income rate of 41% to 40% is a good start, as is the raising of the 20% standard rate tax band by €1,000 to €33,800. The lower USC for incomes under €17,000 is also welcome though a new 8% rate for over €70,000 earnings is not.

For there to be meaningful extra disposable income in the domestic economy in 2015, and to incentivise employers to hire and ramp up production for consumers with more money in their pockets, the government should cut its own costs first.

The hundreds of quangos that still suck up billions of euro each year, should go. Reducing their own numbers, their salaries, allowances and expenses would be more millions saved. Sorting out the latest, great billion euro white elephant, Irish Water also needs doing.

The tax and PRSI cuts for lower earners and the €10 a month increase in child benefit by €10 in 2015 will help many families struggling with frozen incomes or benefits, as well as the tax burden and rising cost of education and public transport costs that directly affect their children. Means-testing of all state benefits would, however, target the people who genuinely need such benefits most, and pay them more too.

Meanwhile, we need to accept that there is only so much this State can do, no matter which political faction is in power.

It is upsetting – and unacceptable – that 90,000 people are on housing waiting lists and others can’t afford their rent anymore.  This crisis will take years to work through, but you can personally play your part, and increase your own income, by renting spare rooms in your home and earn up to €12,000 tax-free.

It’s also unacceptable that 27,000 people are waiting a year or more for a public service MRI scan and/or consultant’s visit when there are practically no waiting lists in the private sector and the cost is no more than a few hundred euro.  Personal savings need to be accessed to lower this queue sooner than later and a health contingency fund should be everyone’s saving priority.

We can only hope that practical, pragmatic political solutions are found to these problems in 2015.  That’s a tough ask given the political divisions.

In the meantime, we need to do everything possible to ensure that we our own financial well-being keeps improving and that we bring along the vulnerable members of our family, friends and community.  I’ll be writing again about my favourite topic - Build an Ark – again in the coming week.

Meanwhile, I wish all of you a Happy, Healthy and Prosperous New Year.  We certainly deserve it.


If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.




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