Month: April 2009

Another crisis conference — mark your diaries

Since the very timely and successful event organized by Colm McCarthy on January 12, the economic crisis in Ireland have evolved significantly. We’ve had the nationalization of Anglo Irish Bank, the break-down (and relaunch) of the partnership talks, the pension levy, the announcement of next week’s supplementary budget and a steady stream of deteriorating macroeconomic statistics.

No wonder Philip Lane and I feel a follow-up conference coming on.

We’re planning to cover not only the evolving medium term fiscal and growth prospects, but also the impact of the recession on inequality. We’ll also catch up on banking developments since January.

In addition to the organizers, confirmed speakers include John FitzGerald, Brian Nolan and Karl Whelan.

In order to give the budget time to be digested, we’re scheduling the event for the afternoon of Wednesday, May 20th. TCD will host. So mark your diaries now.

As with Colm’s event, it will be under the auspices of the Dublin Economics Workshop, free and open to all, but registration will be required. Send an email to tcdconference@irisheconomy.ie to book your place.

The evanescent taxes still the main source of revenue collapse

Another picture, using the latest Exchequer returns, to illustrate the extent to which the tax collapse is disproportionately concentrated in just three taxes: Corporation Tax, Capital Gains Tax and Stamps. These fell by 56.5% in the first quarter of 2009 relative to the same quarter of 2008. The percentage fall in the remaining taxes was “only” 16.6%. This figure is in nominal terms–no deflation.

For a longer perspective, scaled by GDP, and showing just how systematically reliance switched to these boomtime taxes over the years — and away from the baseload taxes, take a look at the following:

(NB: recall that, because based on Exchequer returns, these do not include PRSI, etc).

Public Sector Pay Cuts

Speaking on today’s News at One, George Lee pointed to informal evidence from the Central Bank of average wage cuts in the private sector of 8%.  He then immediately noted that this raised the question of why there had been no wage cuts in the public sector.  (About 3.20 minutes in.)  George has a well-deserved reputation as an excellent economics reporter, perhaps the best of his kind on these islands, but this statement was unfair and unhelpful.   The pension levy is a wage cut.  It reduced the taxable income of public servants by an average of 7.5%, thus putting public sector workers exactly in line with the private sector figures that George is quoting.

As a public servant myself, I am conscious of the need to be careful when making statements about public sector pay.  However, the bottom line has to be this.  What is useful here is fair analysis of the full compensation package for public servants (including pension packages and the effect of levies) in comparison with the private sector—and the Irish economics profession has provided research of exactly this type.  What is not useful is analysis in which a pay cut is real if it happens in the private sector but not real if it happens in the public sector just because someone chooses to call it a levy.

I expect here that I will get a flood of comments linking the pension levy to the generosity of public sector pay packages.  But this would miss the point I’m making.  There is no link between this levy and public sector pensions.  The only real implication of the levy for public sector workers was to reduce their take-home pay.  Perhaps this step was needed (and perhaps more is needed) but let’s not pretend it didn’t happen.

The G20 London Summit

The prospects for the Irish economy are very sensitive to the resumption of global growth.  The VoxEU website provides some ‘instant’ analytical responses to the London Summit, including essays by some of the key UK civil servants involved in organising the summit:  the link is here.

I will be answering reader questions about the G20 summit on Monday at this website.

A Fair and Efficient Plan for Fixing Our Banks

Here‘s an article I wrote for today’s Irish Times which outlines a plan for dealing with the problems at our two major banks.