About The €7.5 Billion Cumulative Adjustment Figure

There has been a lot of reporting about how the cumulative adjustment for the next few years is going to be higher than €7.5 billion and how this was the figure that was announced at the time of the last budget.

I was a bit puzzled by this reporting because I had been under the impression that the figure for cumulative adjustments was €8.5 billion. Here’s why. Here’s the Stability Programme Update released at the time of last year’s budget, which is the document provided to the European Commission to illustrate the details of our multiyear plan.

Click on the document and go to page 19. Table 9 describes €3 billion per year in additional measures to be “delivered” in 2011 and 2012 as being made up of €1 billion per year in capital program adjustments that were “already identified and incorporated into the base” and €2 billion per year of additional adjustments.

For this reason, page 20’s description of the adjustments in future years shows €2 billion in 2011, €2 billion in 2012, €1.5 billion in 2013 and €1 billion in 2014, which adds up to €6.5 billion. However, since Table 9 tells us that an additional €1 billion a year in capital adjustments had been identified and incorporated into the base, I had believed the profile for total adjustments planned was €3 billion in 2011, €3 billion in 2012, €1.5 billion in 2013 and €1 billion in 2014, which adds up to €8.5 billion.

However, it turns out that the baseline for capital spending is a continuation at prevailing levels. Table 10 shows Gross Voted Capital falling from €6.445 billion in 2010 to €5.5 billion in 2011 and staying there afterwards. You can add this €1 billion cut in 2011 to the €6.5 billion identified elsewhere in the table to get to the €7.5 billion.

What about the additional €1 billion of capital spending cuts that Table 9 tells us had been identified and incorporated into the base from 2012 onwards? Apparently, the 2012 element of these “identified cuts” doesn’t exist. (It appears that someone in Finance mixed up their levels and changes.)

So, €7.5 billion is indeed the correct figure. However, those of you who, like me, had thought that the government had been planning €3 billion in adjustments in 2012 haven’t had it right.

7 replies on “About The €7.5 Billion Cumulative Adjustment Figure”

how come the Indo is talking about a 15bn worse case adjustment then. Given their record, this probably should become the base. The article seems to imply 7bn of current and 3bn of capital making 10bn in cuts. I assume the other 5bn is tax.
Assuming a certain amount of front loading are we not talking about a 6bn adjustment in 2011.

Tull, the only point I’m making is that €7.5 billion is the projected cumulative adjustment as of last December but that someone who’d read Table 9, such as myself, would probably have believed that the figure was €8.5 billion.

On how much is needed now, perhaps move up to the latest post!


Of course I have seen the figures in the media like:

2012: €2bn
2013: €1.5bn
2014: €1bn

But I assumed they were simply leaving out the capital adjustment as a given.

The choreographed nature of the oppositions briefing yesterday was cringing in its predictability and dumb conservatism.
God help us all from such willing servants of the monetory powers.

I say bring in the IMF directly and let Trichet talk local parish politics to us.
At least it would be more entertaining then to listen to these pretend leaders who are getting paid a fat salary and pension to act as executives.

ps Noonan is a better actor then Burton – perhaps a more rigorous method acting course for Joan would be in order.
Maybe in the future when some financial journalist queries a deeply profound fiscal figure she can respond by saying ” Are you talking to me , are you talking to me…….”

the capital cuts in capital were calculated on the basis of reductions from the 5 year envelope (with the 2008 PCP/ NDP as the base year) and are not calculated on comparisons of year on year spend.


Ah I see.

So under the new capital plan we will be spending €1bn less in 2011 then we would have done under the old one – ditto for 2012.

It was still very poorly illustrated in the DoF documents though.

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