Month: March 2010

Exchequer Returns for February

Here‘s a link to the exchequer returns for February and here‘s the release comparing tax outcomes to the targets set out in the budget. (Here are the full set of targets for the year.) Tax revenues are 1.3% behind target for the year.

If replicated over the year, that would imply a shortfall for the year of €310 million which isn’t such a big deal. That said—and I don’t claim to be an expert on the month-to-month stuff and I know lots of this stuff is really noisy—income tax receipts being down 6% relative to target seem like bad news, More generally, I’m starting to get worried at how we keep falling short of targets.

The GDP and unemployment statistics from last year showed the really steep declines in activity ended in the second quarter. I’m looking for an unwinding of the huge year-over-year declines by April or so. If that doesn’t happen, we could end up pretty far off target.

National Pensions Framework

The new National Pensions Framework is available here (press release here). 

Details are surprisingly sparse in places for a document so long in the making.   But the proposed reforms are generally sensible.   It is also good to see recent behavioural economics research having an impact on policy.   Some highlights:

·         The retirement age is to rise in stages, reaching 68 by 2028.   While this is unlikely to be the end of the increases, it provides a good start in terms of reducing long-term fiscal imbalances.   Getting better control over long-term finances will also help boost near-term creditworthiness, especially as the NTMA attempts to issue 30-year bonds

·         The new auto-enrolment scheme (to be launched in 2014) is well informed by work in behavioural economics.   The design details generally make sense: automatic enrolment (with automatic re-enrolment after two years for those who opt out); matching government and employer contributions; low administrative costs through utilising the PRSI system, and low-cost investment defaults

·         Tax relief standardised at 33 percent rather than at the marginal rate.   This is high enough to provide an incentive for pension provision, while getting rid of a regressive feature of the old system

Slide 11

Sarah Carey’s column in today’s Irish Times does a good job of introducing the public to the Department of Finance’s thinking about the banks as articulated in Slide 11 of the slides from the Minister’s presentation last week. However, I think it will take a lot more than a few op-ed columns to slay the beast that is the Iceland! talking point.

As an aside, for those who can’t get enough of the Iceland!ic banking crisis, here are two reports co-authored by eminent economists written prior to the crisis endorsing Iceland’s fabulous banks. Here‘s one from 2006 co-authored by Columbia University’s Rick Mishkin, a former Fed Governor (Best section – “Could Bank Refinancing Be a Problem?”). And here‘s one from 2007 co-authored by Richard Portes of the London Business School. (Best section – “The banks:successful and resilient”.)

As another aside, I note that some people were poking fun at the slides. However, it is very unusual for a politician to usual visual aids like this to illustrate their arguments and, based on my observation of his talk at the McGill Summer School, Minister Lenihan uses this material very effectively. So politicians using slides is a good thing: Don’t encourage those who’d recommend the minister keep his head down and deliver a monologue without charts and tables!

Pumped hydro is the flavour of the week

Following an apparent revival of the Spirit of Ireland on Monday, it’s now Organic Power‘s turn to look into pumped hydro to store electricity, using salt water and the Atlantic Ocean as the lower reservoir.  I have not changed my mind during the week or indeed the year, but Organic Power works at a more realistic scale than Spirit of Ireland; Organic Power works with experienced people; and it is does not seem to be looking for public subsidies.

Best of luck to them. Let’s hope their current investigations spring a surprise.

Introductory Statement by Governor Honohan to Joint Oireachtas Committee on Finance and the Public Service

The opening statement by Governor Honohan can be read here.