Thursday, September 30, 2010

George Osborne and the Irish Economy

Four years ago, in The Times, George Osborne sung the praises of the Irish Economy, indeed he was keen for us to copy them, stating that:

What has caused this Irish miracle, and how can we in Britain emulate it? Three lessons stand out. First, Ireland’s education system is world-class. On various different rankings it is placed either third or fourth in the world. By contrast, Britain is ranked 33rd and our poor education performance is repeatedly identified by organisations such as the OECD as our greatest weakness. It is not difficult to see why. Staying ahead in a global economy will mean staying at the cutting edge of technological innovation, and using that to boost our productivity. To do that you need the best-educated workforce possible. It is telling that even limited education reform is proving such a struggle for the Prime Minister.
Secondly, the Irish understand that staying ahead in innovation requires world class research and development. Using the best R&D, businesses can grow and make the most of the huge opportunities that exist in the world. That is why it is shocking that the level of R&D spending actually fell in Britain last year. Ireland’s intellectual property laws give incentives for companies to innovate, and the tax system gives huge incentives to turn R&D into the finished article. No tax is paid on revenue from intellectual property where the underlying R&D work was carried out in Ireland. While the Treasury here fiddles with its complex R&D tax credit system, I want to examine whether we could not adopt elements of Ireland's simple and effective approach.Thirdly, in a world where cheap, rapid communication means that investment decisions are made on a global basis, capital will go wherever investment is most attractive. Ireland’s business tax rates are only 12.5 per cent, while Britain's are becoming among the highest in the developed world.

Today's news from Ireland looks bleak, with a deficit equivalent to 32% of GDP . What is says about Ireland's prospects is not good. What it says about Osborne's judgement, not for the first time called into question, is that he is someone who does not look at details too much, is easily impressed, and is more concerned with doing down the opposition rather than being original himself. But then the Pope is Catholic and bears do their business in the woods.

1 comment:

Man in a Shed said...

What's really scary about Ireland is they haven't even stopped the rate of debt increasing !

This article in the Telegraph makes sobering reading.

The more economic news I see, the more I get worried. We have been living way beyond our means for over a decade and defied economic gravity. But its not lasting.

Our politics has failed us ( nobody was fully honest enough before the general election - though oddly Nick Clegg perhaps used the right words at his last but one party conference with his "Savage cuts" but didn't back it up with the truly horrifying figures. )

My guess is that many countries will be unable to save themselves with austerity and will have to revert to inflation and hyper inflation to default on their debts.

That will lead to mass misery and perhaps not a few political revolutions.

Iceland has its former prime minister on criminal charges - perhaps we should do the same.

Let me ask you the question I ask myself - do you really understand what's going on ? If we are honest very few of us do, and many of those who do are lying to us for their own reasons. Perhaps George should have seen more of it - but the economic establishment missed it all with a few notable exceptions.