As I write this piece, the granular details of the Anglo / IBRC debt ‘deal’ continue to trickle out.
What we do know is that the Irish Bank Resolution Corporation Limited, formally Anglo Irish Bank is gone, its board of directors dismissed and its staff made redundant.
But what about the debt?
Based on limited details made available so far this morning, it appears that there will be no reduction in the principle amount owed and that the debt will be with us for a very long time to come.
In other words, our civil servants and Government appear to be on their way to agreeing a refinance of the Anglo debt. Like an unsustainable short-term mortgage, the Anglo debt will be paid off over a much longer period of time, resulting in lower short-term payments but higher long term cost.
A question that surfaces time and time again is what impact a deal on the Anglo debt would have on the ongoing austerity programme. The simple answer is minimal.
Austerity is not going away. Ireland remains one of the most indebted countries in the Euro area and as a result, financial belt-tightening will be with us for some time to come.
There will be no reversal of the property tax and its rollout.
There will be no reversal in the rollout of water charges. No reversal in the college fees and little chance that Garda stations will be reopened…although one couldn’t rule out the possibility of a reopening of a few in the lead-up to the next general election as a political gesture.
For families across Ireland, austerity will continue at a pace as if the Anglo deal never happened. Now that Government has swallowed the biter pill of delivering property taxes, water charges, higher college fees, reductions in social services and so on, it and its civil servants will be loath to give them up.
At one level, what Government is building is a tax system that will provide it with a more reliable source of income. Let’s face it; the old stamp duty regime was madness, where up to 9% stamp duty was levied against the sale of a property. During the boom, government became addicted to stamp duty revenue and dependant on the property bubble to sustain it…only condemning it when the property crash was well under way.
For taxpayers, what is important now, and into the future is that we match the official zeal for control of our incomes and household purse-strings by taking a far greater interest in how our taxes are actually put to use, and vigorously question were warranted. Not doing so would be a tragedy and a waste of years of austerity and a waste of billions of Euro of OUR hard-earned income.