30 replies on “The leprechauns are in Luxembourg, not in Ireland”
I wouldn’t just blame Eurostat. The Fed and Congress have made a horse’s arse of US capitalism. Yellen cannot generate growth. Companies are reduced to shifting cash flows around to deliver the impression of dynamism. McKinseyy have 4 principles of corporate longevity. #1 is no shiftIng around of cash flows.
The rules are European, the results are national, and the results are nonsense.
According to this morning’s radio, quoting Irish Independent, these figures will cost ‘Ireland’ an extra €400 million annually in EU contributions. Did any of our tax experts tell us who will be picking up that tab?
Which departmental allocation will the €400 come out of?
How about a 1% stamp duty tax for when these newly classified ‘Irish’ balance sheets are declassified to the next sucker tax jurisdiction.
Joseph, in June 2015 top lawyers of Cadwalader, Wickersham & Taft, a US law firm, met Kenny and Noonan in Dublin to sound them out on tax inversions (shifting tax residency to Ireland). The Irish side did refer to the impact on the EU contribution.
However, the Irish authorities only became concerned about tax avoidance after the revelations about Apple by a US Senate subcommittee and in 2014 when President Obama said this:
What we are trying to do is to say that if you simply acquire a small company in Ireland or some other country to take advantage of the low tax rate [and] you start saying, ‘we are now magically an Irish company’, despite the fact that you might have only 100 employees there and you have got 10,000 employees in the United States, you are just gaming the system. You are an American company.
This is what Arthur Cox, the law firm, was telling clients in 2011:
There are numerous advantages for multi-national companies with large Intellectual Property (“IP”) portfolios who locate and manage these portfolios in Ireland. The effective corporation tax rate can be reduced to as low as 2.5% for Irish companies whose trade involves the exploitation of intellectual property.
Colm, your antipathy for Eurocrats may have got the better of you!
Antoin Murphy in the 1980s identified a “black hole” in the Balance of Payments and a decade later Microsoft’s use of the Double Irish was revealed by The Wall Street Journal. Then tax inversions were welcomed and Accenture transferred its tax residency from Bermuda to Ireland along with about $10bn in IP.
The facts are that the Irish authorities turned a blind eye to national accounts distortions because the data were enhanced in particular for an international audience.
The CSO is an independent public agency but when the Central Bank or ESRI could not acknowledge the impact of tax avoidance on the data, what was the likelihood that Irish statisticians would sail against the wind in international committees on standards?
Michael the statistical conventions enshrined in ESA 2010 require that phantom capital (arising from tax avoidance or from any other source) be included, and depreciated, in countries which do not deploy that capital in the production of domestic output. This is an anomaly distinct from the dodgy arrangements giving rise to the tax avoidance, and capable of independent remedy through revision of ESA 2010.
Colm, OK the Irish reps may not have made any headway and it was very stupid to facilitate further tax avoidance by providing the overseas contract manufacturing dodge to companies within the same group.
Luxembourg itself has not had big swings in growth rates since financial services replaced steel as the main sector from the 1990s. The Netherlands which has a lot of pass-through FDI and foreign holding companies and about 20,000 letter-box firms including U2’s has not had significant volatility in growth rates in the past 25 years.
It’s interesting to observe the change of tune this week in what John Kenneth Galbraith called the conventional wisdom. We have seen it in the economic bust and more recently in belated acknowledgement of significant corporate tax avoidance.
It’s easy to understand why most people go with the flow as it’s easier to embrace the new conventional wisdom than risk the negative consequences of being a dissenter.
The Captain Renault type denials by ministers of tax avoidance or special (maybe not special when a lot were availing of them) deals for big companies in 2013 initially got wide support.
This was an Irish Times editorial in May 2013 after the Apple revelations, in effect wearing the green jersey in defence of the Government’s bluster:
The charges made now need to be countered, speedily and effectively, by both political and diplomatic means. First, by Government setting out a clear narrative on corporate tax that can be easily understood – at home and abroad – and that rebuts some of the erroneous claims made. Second, through a major diplomatic initiative in the US to ensure there is a better understanding of the Irish position on corporate taxation.
As the Taoiseach has pointed out, claims that Ireland is a tax haven are unjustified. The OECD, the international arbiter on the issue, has already decided that Ireland meets none of the criteria of a tax haven. Multinationals like Apple and Google employ many thousands in their operations in Ireland, which generate tax revenue for the State in payroll and other taxes. Nevertheless, in a time of recession, with public debt and budget deficits rising and tax revenues depressed, the political clamour for untapped revenue sources to ease austerity increases – not least in the US. In this regard the scapegoating of Ireland, for a problem partly of the US’s own making, is unfair and hypocritical. The failure of the US over many years to lower its high (35 per cent) rate of tax on corporate profits, and thereby encourage multinationals, like Apple and Google, to repatriate some of their huge global profits to the benefit of the American taxpayer, is something its own politicians might well first choose to explain.
The OECD is not an “international arbiter” on the definition of a tax haven as Netherlands, Switzerland, Ireland and Luxembourg are members and none have white sandy beaches with arching palm trees!
Senator Carl Levin and Senator John McCain, responded to a letter from the Irish ambassador to the US:
Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven.
John Bruton and an Arthur Cox partner wrote in The Wall Street Journal:
Foreign direct investment into Ireland is at all-time highs, and US multinationals remain very important to Ireland. However, less well known is that Irish companies employ as many people in the US as US firms do in Ireland — around 100,000 workers.
The official figure for workers in US affiliates of Irish firms in 2013 was 210,000 — this is an example of how fairy tales become the conventional wisdom.
It may have happened, but I don’t re call reading a GDP print from a country regarded part of the investable universe that looked anything like this one from Ireland. The near unanimous initial reaction was laughter and PKs quip was mild by comparison with comments exchanged verbally.
CSO really should have realised that the opportunity for humour doesn’t present itself in such a manner too often and they were offering up a sitter that would be hit out of the park. As Colm says a paragraph containing a broad range of alternative, rough indicators of economic activity would have made it a harder target.
But the key point is that this is another incremental reputational slide courtesy of unarguably accurate statistics, in that the figures themselves broadcast to the political world that Ireland is an integral part of ‘stuff going on’ which is past its geopolitical sell-by date. Its slow-motion, so theres no need to get over-excited, but high tide for the corporate tax game occurred some time ago.
“How come the most spectacular rise ever in the most widely used economic metric?” Asks the client.
“Ah, let me educate you about the more interesting aspects of the Irish corporate tax regime” says the analyst.
Everyone references GDP. Its bad PR. Like Shouting “LOOK AT THIS!”
I would suggest that this is a collective exercise in missing the point, the point being whether the EU system will change to take account of the Irish “aberration” and the answer is no.
“The EU Member State with the second highest AIC per capita is Germany at 24 % above the average followed by Austria with the level at 19 % above that average. Ireland, having the second highest level of GDP per capita in the EU-28, has AIC per capita at 5 % below the EU-28 average.”
The leprechauns are in both Ireland and Luxembourg. But not in the offices of Eurostat.
Any suggestion that the “aberration” results in higher contributions to the EU budget will elicit the slightest sympathy would be misplaced.
As to creating a reliable system of “national accounts”, would not a good point to start be the creation of a modern reliable system of “government accounts” rather than relying on the Exchequer and Audit Act of 1866?
With the Four Brexiteers (Johnson, Davis, Fox and Leadsom) on campaign, it is surely time to do so.
Thank you for making it clear that no matter where the leprechauns reside, it is the knowms in Brussels that matter.:-)
The chief lú chorpán lIves in Frankfurt. His name is Mario.
@Michael Hennigan
Are you still sticking to your forecast, which you used to post here ad nauseum, that it would be 2031 before employment levels in the Irish economy recovered to their 2007 levels?
Given the current rate of increase, and with the inevitable upward revision following the census, I’d say its more likely to be late 2017 or early 2018 when this milestone is achieved. So, a mere 23 years out. Better luck next time.
@ColmMcCarthy
Do you still think the T2 terminal at Dublin airport should have been mothballed? If it had been, the queues would now stretch to the border.
@grumpy
“incremental reputational slide”
So, you seriously believe that countries showing zero growth and which have rising unemployment and budget deficits are seeing their reputations improve, While Ireland’s reputation is going down the plughole (apparently) despite showing, even on the most pessimistic interpretation of the figures, 6%-8% growth and has rapidly falling unemployment and vanishing budget deficit.
All this hullaballoo on the part of certain economists is to distract attention from the fact that (a) the economy is indisputably growing rapidly (b) they totally failed to predict it. They were totally wrong back in 2011/2012 but, rather than admit it, they want to make a song and dance about the obviously over-estimated growth shown in the CSO figures for 2015 (only 2015 – the CSO growth figure for 2016 is probably a compensating under-estimate).
As for the absurd Krugman. I’ll ignore his racist ‘leprechaun’ comment. The reality is that, if the Irish economy continues to grow at even 5%-6%-7% per annum (never mind the 26%), his reputation is sunk. No wonder he’s angry.
On reflection, it was extremely cruel of the CSO to release both the economic growth figures and the census population figures in the same week. A double hammer-blow to the doom pornographers, which seems to have tipped them over the edge. They should have released them a few weeks apart to allow time for counselling and recovery. I haven’t seen such misery, hopelessness, grief, despair, pain and anguish since, since,… well, since yesterday in Clones when the Donegal woman next to me threw her head in her hands as Tyrone slotted over the winning points in stoppage time.
Al this weeping and wailing about whether Ireland is currently experiencing super-super-super growth (as the CSO figures say) or merely super-growth (as the doom economists now say) is miles from what the Irish economy needs at the present time.
What the Irish economy needs from its economists at the present time is formulation of a plan to keep infrastructure up with the rapidly-growing population. The situation is starting to become critical (particularly in housing) and likely to worsen as population growth can only but accelerate in the next few years. Since its peak in 2007 infrastructural development in Ireland has ground to a halt and the last politician to make infrastructural development a priority, Bertie Ahern, has been vilified for doing just that. I don’t blame FG or FF politicians for this neglect. They’ve been deceived by the doom economists as much as anyone. The main reason for abandoning infrastructural development has been the widespread belief, fostered by the media (the Irish Times series ‘Generation Emigration’ and all that), that since 2007 Ireland has been experiencing a population exodus similar to the immediate post-famine years. Back in 2010/2011 ESRI were estimating net emigration at 70k. Additionally, it was being claimed that all the Poles had left, that Ireland had no young people left, and that so many GAA players had left Kerry they might be forced to bring Mick O’Connell out of retirement at age 80. Well, it all turned out to be hooey and infrastructural bottlenecks and housing shortages are the price being paid. The population in the last pre-recession year of 2007 was 4,376,800. Its now 4,758,000, an increase of 382,000 (almost 9%). So, during the time its population was supposed to be collapsing, Ireland has actually added 3 Cork Citys.
FG and FF should now appoint a team of reputable economists to formulate a development plan to get infrastructural development up to speed to match the rapidly-growing population. This should have a far higher priority that quibbling about CSO figures which, in any case, will probably be eventually revised and smoothed out between the years. Alas, given their record, I can’t see any place for Colm McCarthy or Michael Hennigan in such a team.
So, a recruitment firm is to double its workforce.
Why would they do that if the economy isn’t growing rapidly?
Will they be employing leprechauns?
I don’t think it’s wise to use the term “phantom capital”. The assets being financed – both tangible and intangible – are very real in economic, legal and accounting terms. It is simply that the jurisdiction where they are formally located for taxation purposes is different from the one(s) where they are deployed to produce economic output. It is the inevitable outcome of public authorities in some jurisdictions – in this case primarily the US – applying a taxation regime that actively encourages large firms to avoid or defer taxation payments that any sensible taxation regime would extract from actual economic activity in these jurisdictions – or in the jurisdictions where the economic activity had taken place (this is the essence of “country-by-country” reporting)..
And this huge demand for arrangements to avoid or defer taxation payments by MNCs inevitably has called forth a supply to which Irish governing politicians, policy-makers, public agencies and rent-seeking private sector service providers have been more than eager to contribute.
The question that then arises is to what extent is it wise for the public authorities and private sector firms in a jurisdiction – in particular a relatively small jurisdiction in economic terms – to provide these arrangements and services. It would be very hard to contend that allowing the provision of these arrangements and services to be abused to the extent that they distort key macroeconomic parameters as much as they were last year is wise. I don’t think the Father Ted defence – the money was just resting in my account – will wash. Nor do I think that demanding that Eurostat change its rules so that the provision of these tax avoiding and tax deferral arrangements and services does not distort key macroeconomic parameters is wise either. Two wrongs don’t make a right, because it would be a second wrong mirroring the initial wrong being perpetrated primarily by the public authorities in the US.
Contrary to the assertion of this post I don’t think the leprechauns are in Luxembourg; and they’re definitely not in the CSO. But there’s certainly leprechaunish behaviour in the antics of the public authorities and private sector firms providing these tax avoidance and tax deferral arrangements and services. Sure, isn’t it just part of our charm and part of what we are.
I posted this link replying to JTO. (Sweden is one of many European countries going down the tubes in his assessment).
cf.page 8 and the parliamentary report expected in October.
Now, now, DOCM. With this link and your previous link to Eurostat on GDP per capita and AICs you’re going to be upsetting JtO unnecessarily. You should know by now that he doesn’t like data and information that highlights problems that need to addressed or the deficiencies of our governing politicians and policy-makers.
Au contraire. I have sent in a few posts since Thursday on different threads, highlighting what is by far the most serious problem facing the Irish economy, namely the fact that infrastructural development is failing to keep up with rapid population growth. I have called on FG and FF to jointly formulate a National Development Plan to address it. And I have criticised the deficiencies of governing (and opposition) politicians, whereby they swallowed whole the ludicrous media claims of a massive population exodus, and have allowed infrastructural development to slip back as a result. This is a far more serious problem than ‘leprechaun’ statistics.
Who could disagree? But where is the money to come from? Are you suggesting that we should embark on another FF style credit binge? We could use the fantasy GDP figures to justify it and keep everybody happy.
It will come partly from buoyant tax receipts which have risen by 9%-10% per annum for the last couple of years and from savings resulting from the collapse in unemployment. In case you didn’t notice, the budget deficit is gone – vanished. There will be a growing surplus from next year on. You might be confusing Ireland with the U. Kingdom (a common enough error in certain quarters) where the budget deficit is stuck at £75 billion (4% of GDP) and predicted to rise. The rest will come from private sector involvement. Given current low interest rates and the prospects for both economic and population growth in Ireland, private sector companies will be queuing up to invest in the infrastructure.
Indeed, and thank you. You have highlighted the need to maintain public (or collective) investment in physical and human capital. This is perhaps the principal issue during all the time we’ve been on this board on which we might agree. And this raises the question of financing and funding this investment – with these being two very different things in practice. For both good and bad reasons the ability of the Government to use the traditional approach – borrow to finance public investment and rely on taxation receipts from the expected resulting future increase in economic activity to service the borrowing – is very much restricted. Given Eurostat’s ESA2010 rules on government accounts and DG EcFin’s fiscal rules, the focus is very much on getting investment “off the government’s books”. Various forms of public-private arrangements achieve this, but they do so at excessive cost to citizens both as service-users and taxpayers. This partly explains the apparent popularity of the semi-state approach – and why, in particular, this model was chosen for Irish Water.
One of the key attractions of this model is that it achieves the important objective of getting any borrowing by the semi-state off the government’s books – provided of course the semi-state meets Eurostat’s Market Corporation Test. Final consumers or service-users (as households and businesses) fund all of the semi-state’s activities and this funding contributes to the financing of investment and to the servicing of other investment financing – mainly by providers of debt. This is the model that been used for decades for the commercial semi-states with, perhaps, the ESB being the principal and most profitable example. However, this model, as it is applied in Ireland, is also seriously flawed and imposes excessive and unjustifiable costs on final consumers.
These excessive and unjustifiable costs combined with the rent-seeking and inefficiencies in the other sheltered private and public sectors have driven the cost of living to an extortionate level. The price level for private household consumption in Ireland is the highest in the Euro Area (23% above the average), yet the AIC is 10% below the EA average. That is some whopping rip-off. It is of the order of €7,000 on average per household.
It is little wonder that so many ordinary citizens were disgusted and angered when they got a glimpse of how relatively low water charges would be funding some (and only some) of the rent-seeking the Irish semi-state model facilitates.
Squeezing out only a limited portion of this egregious rent-seeking would increase household disposable incomes and provide funding for significant increases in public investment. But there isn’t a snowball’s chance in hell of this happening since those in receipt of these rents are those who make or influence the making of all key decisions – and they would adamantly and vehemently deny that they are in receipt of economic rents.
I don’t think I used the phrase ‘going down the tubes’.
I pointed out that Ireland is currently a far more attractive location for FDI than any other EU country and I gave reasons for each. I don’t see how this can be disputed. I did point out also that Ireland needs to accelerate its infrastructural development to take full advantage of this attractiveness, which requires a buoyant construction industry, something we’ve not had since Bertie Ahern was Taoiseach.
In Sweden’s case the reasons I gave as to why its not as attractive a location for FDI as Ireland were: (a) its high-cost (comparative price level 2nd highest in EU and 15% higher than Ireland) (b) its high-tax (tax as a percentage of GDP circa 50%) (c) it has lousy education as a result of political correctness and the state usurping the role of parents (3rd from bottom among EU countries in PISA 2012 – Ireland 4th from top) (d) it has severe social and political problems resulting from uncontrolled immigration from Islamic countries (there have been riots in Stockholm every few months for the past 5 years and the political system is creaking as new borderline-racist right-wing parties flourish).
Sweden is a country which used to be the wealthiest in Europe. But, its slipped badly in recent decades. One telling statistic: in June 2012 unemployment rate was 15.0% in Ireland and 7.9% in Sweden – by June 2016 it was 7.8% in Ireland and 7.3% in Sweden. Clearly, Ireland’s rate will go below Sweden’s within a year.
Why not stick closer to home and answer the question that I posed? To govern is to make choices. If there is to be more expenditure on investment, there has to be less on everything else, including salaries in the public sector and cuts in taxation. With regard to Sweden, bloggers can read the Convergence Report and come to their own conclusions.
“On the CSO’s Gross Domestic Product figures showing Ireland grew by 26% last year, Mr O’Kelly said “We have been actively talking to investors. When you are explaining you are losing – but I would not get too excited about what happened. There are lots of other pieces of data you can use.” ”
Indeed! In terms of coming to a more informed view, or at least one that is closer to reality, of what is happening in the economy. But do the fiscal rules allow for this in calculating the expenditure benchmark?
183. Deputy Pearse Doherty asked the Minister for Finance to outline the revised figures for fiscal space in each of the years 2017 to 2021 in light of the recently revised CSO figures for GDP growth for 2015 to 26.3%. [22356/16]
Minister for Finance: Estimates of fiscal space based on the expenditure benchmark are largely unaffected by changes in actual GDP. Instead, the relevant input is the estimate of the potential growth rate of the economy, as estimated by the European Commission each Spring.
The rationale for this is simple: budgetary policy should not be pro-cyclical. In other words, fiscal space should not increase when there is a cyclical improvement in the economy and, similarly, fiscal space should not reduce when there is a cyclical downturn.
The fiscal space of just under €1 billion for 2017 set out in the Summer Economic Statement (SES) is not expected to change materially as almost all the inputs used to calculate it under the expenditure benchmark are fixed following the publication of the European Commission’s spring 2016 forecasts.
Revised estimates of the fiscal space for the years 2018-2021 will be published on Budget day, based on my Department’s projections for key inputs including the GDP deflator, reference rate and convergence margin.
The revised GDP growth rate for last year of over 26 per cent reflects the impact of a small number of large multinational firms, and bears little resemblance to underlying economic developments. In this regard, I want to assure the Deputy that government policy will not be based on one off or exceptional growth. Instead, we will set policy on the basis of more ‘normal’ growth rates such as those projected by my Department, and endorsed by the Irish Fiscal Advisory Council.”
In short, we are to rely on dubious figures produced by a deus ex machina in the form of the European Commission rather than construct some reliable figures of our own.
Very good news.
The CSO have declared their figures sound and won’t change how they are calculated.
It is imperative that the CSO remain independent and calculate their statistics according to the highest standards of professionalism. It would be disastrous if they were forced to tailor their statistics to what politicians or the likes of Gene Kerrigan wanted.
@ JohnTheOptimist
What is “Very good news”?
Who was suggesting that GDP and GNP should be dropped?
The CSO has implicitly acknowledged that it should do a better job in explaining distortions and underlying growth by establishing an advisory panel.
It’s nothing new to those of us who are not naifs when it comes to headline data.
Just 6 foreign firms that became Irish for tax purposes have over 600,000 staff and people like you can cheer a current account surplus when in fact it’s a deficit.
Then there are brass plate companies – one of them, King Digital Entertainment, maker of the Candy Crush Saga smartphone game, since 2013 was Irish with an address at the office of a Dublin law firm. It had no Irish employees when it listed on the NYSE and was acquired in 2015 by a US firm for $5.9bn. How many firms have a value above that on the Irish Stock Exchange?
Much of what happens at the IFSC is not tracked by the CSO.
Philip Lane, when Whately professor of political economy at Trinity College, wrote in March 2015 that the CSO’s Balance of Payments (BoP) detail for 2014 “shows little progress in recovering/identifying the cumulative €20bn (approximately) in “net errors and omissions” (a proxy for unrecorded financial outflows) during 2010-2011.”
In 2010 there was an unexplained outflow of €8.3bn and this rose to €11.7bn in 2011. In 2014 there was a minor difference of -€180m while a -€2.9bn in 2012 was followed by a +3.4bn in 2013.
In a December 2011 paper, Prof Lane wrote: “A substantial proportion may be attributable to unrecorded financial outflows since the current BoP measurement procedures do not directly capture acquisitions of foreign assets by households that are not intermediated through the domestic financial system. This may be especially a problem in relation to high net worth individuals. In particular, the large residual in 2010 may be related to capital flight during the financial crisis, with fears about the banking system prompting the transfer of assets to foreign bank accounts.”
My life is too short to start investigating every company in Ireland to see if their activities are being properly measured by the CSO. I have total confidence that they do. The CSO has scores, possibly hundreds, of the best economists in Ireland, certainly much better than I could ever aspire to be. Do you think they are unaware of the complexities of economic activity in today’s world? I work in a multi-national company. Sometimes when we release a new software product, software engineers based in a dozen different countries have contributed to its development. The ‘added-value’ is spread over many countries. What makes lay people think they can estimate the share of ‘added-value’ occurring in Ireland better than the CSO professionals? Obviously, in your case you do have some statistical expertise. But, I fail to see why the CSO should be sneered at and have its reputation trashed by the likes of Gene Kerrigan in the Sunday Independent. What statistical expertise does he have?
Luxury indeed when all people have to worry about is whether real growth is 25% or 10%.
Here are growth rates that are actually worthy of worry.
Northern Ireland +0.2% (that’s not 2%, but zero point two per cent)
Scotland +0.3%
Wales +0.4%
And something similar is forecast for 2018 and 2019.
These figures are disastrous from the point of view of keeping the Celtic countries chained to the United Kingdom. Some are saying that Ireland’s reputation has been damaged in the last few days. I predict its nothing compared with what we’ll see in the next few years. A new hardline-British-nationalist government has been installed in London and its leader says preserving the United Kingdom is her number one priority. Scotland is on the brink of quitting that Union. And now Enda Kenny says there may be a referendum on a United Ireland in Northern Ireland. No prizes for guessing what that means. As any perception that the Republic of Ireland is doing well outside the United Kingdom is fatal to the chances of holding the United Kingdom together, Ireland is going to get trashed as never before. I’m sure MI5 are recruiting already. We’ll be told that all growth is phantom, that unemployment is 30%, that a million emigrate each year and that nobody lives beyond 50. Interesting times ahead.
@ JTO
I, for one, never questioned the soundness of the CSO’s figures, as my posts above will confirm.
On the issue of where the needed investment might come from, the annual report of the NTMA is informative. It is also informative on the enormous level of public debt that the FF era has left us with. Any change in the current benign international financial circumstances could result not alone in in no new spending but an emergency budget! Brexit could prove to be the trigger for that change.
I am all for an optimistic view of the future. But a touch of realism also does not go astray.
@DOCM
I never said you did. Fair play to you.
I have finally read the document from Sweden that you kindly posted a link to. I’ve only skimmed through it as life is short.
My impression: very informative and well produced – Ireland should aim for similar
BUT:
the targets are very modest indeed
For example,
they predict annual real GDP growth between 2016 and 2019 of 2 per cent.
they predict an annual increase in employment between 2016 and 2019 of 1 per cent.
they predict that the unemployment rate will still be a quite high 6.5% in 2019
These are very modest targets indeed. Like a football manager taking up a new position promising to take the team to mid-table by 2019. Not bad, but hardly likely to get the fans excited. I’ll be very surprised if Ireland doesn’t do a lot better than all of those by 2019. So will many other countries. I think the reason for such modest targets can be found in one of the other tables. They plan to keep the tax take at around 50% of GDP.
However, their plans are much more ambitious than Ireland’s in two respects (and probably the reason for the high tax take):
(a) In keeping with modern ‘progressive’ theory, they place a great emphasis on achieving gender equality by 2019. I can’t imagine any document produced by MIchael Noonan placing such emphasis on gender equality. It will be a major achievement if they pull it off, given that Sweden now has officially 57 genders.
(b) They plan to have up to 450k asylum seekers over the period 2016-2019 (on top of the 150k in 2015) – comparable figures for Ireland would be 225k and 75k – if they pull that off, I’d expect massive social upheaval/rioting, ‘Nice’-type incidents, and a ‘Le Pen’-type leader to emerge – they are well on the way to all those already – Ireland seems rather boring/stable (whichever word you prefer) in comparison
So, the government has launched a massive house-building drive. It aims to get the annual number of number of new houses built up to 25k by 2019 and to 35k as soon as possible after that. This is exactly what I asked for in my post above. I see no reason why these targets should not be met. Ireland built twice that number in the decade to 2007. Some have said that Ireland can not get back to those levels because all the builders had emigrated. This claim was scotched by last week’s census results. The number of new houses being built annually is already rising sharply. It hit a low of 8,300 in 2013. But, this had risen to 12,600 in 2015. So far in 2016 the number is up 20% and in May it was up 30%. It looks like its heading for a total of between 15k and 16k in 2016.
Looking beyond into the mid 2020s, I can easily foresee the number of new houses being built annually returning to peak Celtic Tiger levels (60k plus annually). It depends on the trend of net migration and population growth. At the moment the omens for this look very strong.
However, the question needs to be asked as to why the number was allowed to fall so much. A total of just over 8k in 2013 was always ridiculous. What factors contributed to it falling that low? There should be a Dail inquiry. I’d say there are 2 reasons: (a) massive over-estimation of the surplus of houses in 2008-2010 (b) massive under-estimation of population growth (confirmed last week). If it wasn’t for the tragedy of homelessness, it would be almost comical. One minute we were being told that a decade’s economic growth was entirely down to over-building of new houses and that, as a consequence, there were 350 empty houses scattered the length and breadth of the lad. The next minute we were being told that that there is a shortage of houses and emergency measures are introduced to bring the number built back up to levels that were being denounced as excessive just a short time ago.
Anyone who wants to know why there is a housing shortage in Ireland in 2016 should read this, from IrishEconomy.ie on 13 September 2009. What memories of long-disappeared names it brings back.
EoinBond was just Eoin then. And JohnTheOptimist was just John. I think the predictions of those two have stood the test of time. I was interested to see that in September 2009 I predicted that Ireland’s population would reach 5 million by 2020. Bang on target in last week’s census.
30 replies on “The leprechauns are in Luxembourg, not in Ireland”
I wouldn’t just blame Eurostat. The Fed and Congress have made a horse’s arse of US capitalism. Yellen cannot generate growth. Companies are reduced to shifting cash flows around to deliver the impression of dynamism. McKinseyy have 4 principles of corporate longevity. #1 is no shiftIng around of cash flows.
The rules are European, the results are national, and the results are nonsense.
According to this morning’s radio, quoting Irish Independent, these figures will cost ‘Ireland’ an extra €400 million annually in EU contributions. Did any of our tax experts tell us who will be picking up that tab?
Which departmental allocation will the €400 come out of?
How about a 1% stamp duty tax for when these newly classified ‘Irish’ balance sheets are declassified to the next sucker tax jurisdiction.
Joseph, in June 2015 top lawyers of Cadwalader, Wickersham & Taft, a US law firm, met Kenny and Noonan in Dublin to sound them out on tax inversions (shifting tax residency to Ireland). The Irish side did refer to the impact on the EU contribution.
However, the Irish authorities only became concerned about tax avoidance after the revelations about Apple by a US Senate subcommittee and in 2014 when President Obama said this:
This is what Arthur Cox, the law firm, was telling clients in 2011:
Colm, your antipathy for Eurocrats may have got the better of you!
Antoin Murphy in the 1980s identified a “black hole” in the Balance of Payments and a decade later Microsoft’s use of the Double Irish was revealed by The Wall Street Journal. Then tax inversions were welcomed and Accenture transferred its tax residency from Bermuda to Ireland along with about $10bn in IP.
The facts are that the Irish authorities turned a blind eye to national accounts distortions because the data were enhanced in particular for an international audience.
The CSO is an independent public agency but when the Central Bank or ESRI could not acknowledge the impact of tax avoidance on the data, what was the likelihood that Irish statisticians would sail against the wind in international committees on standards?
Michael the statistical conventions enshrined in ESA 2010 require that phantom capital (arising from tax avoidance or from any other source) be included, and depreciated, in countries which do not deploy that capital in the production of domestic output. This is an anomaly distinct from the dodgy arrangements giving rise to the tax avoidance, and capable of independent remedy through revision of ESA 2010.
Colm, OK the Irish reps may not have made any headway and it was very stupid to facilitate further tax avoidance by providing the overseas contract manufacturing dodge to companies within the same group.
Luxembourg itself has not had big swings in growth rates since financial services replaced steel as the main sector from the 1990s. The Netherlands which has a lot of pass-through FDI and foreign holding companies and about 20,000 letter-box firms including U2’s has not had significant volatility in growth rates in the past 25 years.
It’s interesting to observe the change of tune this week in what John Kenneth Galbraith called the conventional wisdom. We have seen it in the economic bust and more recently in belated acknowledgement of significant corporate tax avoidance.
It’s easy to understand why most people go with the flow as it’s easier to embrace the new conventional wisdom than risk the negative consequences of being a dissenter.
The Captain Renault type denials by ministers of tax avoidance or special (maybe not special when a lot were availing of them) deals for big companies in 2013 initially got wide support.
This was an Irish Times editorial in May 2013 after the Apple revelations, in effect wearing the green jersey in defence of the Government’s bluster:
http://www.irishtimes.com/business/economy/ireland/tax-policy-under-the-spotlight-1.1403091
The OECD is not an “international arbiter” on the definition of a tax haven as Netherlands, Switzerland, Ireland and Luxembourg are members and none have white sandy beaches with arching palm trees!
Senator Carl Levin and Senator John McCain, responded to a letter from the Irish ambassador to the US:
John Bruton and an Arthur Cox partner wrote in The Wall Street Journal:
The official figure for workers in US affiliates of Irish firms in 2013 was 210,000 — this is an example of how fairy tales become the conventional wisdom.
It may have happened, but I don’t re call reading a GDP print from a country regarded part of the investable universe that looked anything like this one from Ireland. The near unanimous initial reaction was laughter and PKs quip was mild by comparison with comments exchanged verbally.
CSO really should have realised that the opportunity for humour doesn’t present itself in such a manner too often and they were offering up a sitter that would be hit out of the park. As Colm says a paragraph containing a broad range of alternative, rough indicators of economic activity would have made it a harder target.
But the key point is that this is another incremental reputational slide courtesy of unarguably accurate statistics, in that the figures themselves broadcast to the political world that Ireland is an integral part of ‘stuff going on’ which is past its geopolitical sell-by date. Its slow-motion, so theres no need to get over-excited, but high tide for the corporate tax game occurred some time ago.
“How come the most spectacular rise ever in the most widely used economic metric?” Asks the client.
“Ah, let me educate you about the more interesting aspects of the Irish corporate tax regime” says the analyst.
Everyone references GDP. Its bad PR. Like Shouting “LOOK AT THIS!”
I would suggest that this is a collective exercise in missing the point, the point being whether the EU system will change to take account of the Irish “aberration” and the answer is no.
http://ec.europa.eu/eurostat/statistics-explained/index.php/GDP_per_capita,_consumption_per_capita_and_price_level_indices
“The EU Member State with the second highest AIC per capita is Germany at 24 % above the average followed by Austria with the level at 19 % above that average. Ireland, having the second highest level of GDP per capita in the EU-28, has AIC per capita at 5 % below the EU-28 average.”
The leprechauns are in both Ireland and Luxembourg. But not in the offices of Eurostat.
Any suggestion that the “aberration” results in higher contributions to the EU budget will elicit the slightest sympathy would be misplaced.
As to creating a reliable system of “national accounts”, would not a good point to start be the creation of a modern reliable system of “government accounts” rather than relying on the Exchequer and Audit Act of 1866?
http://www.irishstatutebook.ie/eli/1866/act/39/enacted/en/print.html
With the Four Brexiteers (Johnson, Davis, Fox and Leadsom) on campaign, it is surely time to do so.
Thank you for making it clear that no matter where the leprechauns reside, it is the knowms in Brussels that matter.:-)
The chief lú chorpán lIves in Frankfurt. His name is Mario.
@Michael Hennigan
Are you still sticking to your forecast, which you used to post here ad nauseum, that it would be 2031 before employment levels in the Irish economy recovered to their 2007 levels?
Given the current rate of increase, and with the inevitable upward revision following the census, I’d say its more likely to be late 2017 or early 2018 when this milestone is achieved. So, a mere 23 years out. Better luck next time.
@ColmMcCarthy
Do you still think the T2 terminal at Dublin airport should have been mothballed? If it had been, the queues would now stretch to the border.
@grumpy
“incremental reputational slide”
So, you seriously believe that countries showing zero growth and which have rising unemployment and budget deficits are seeing their reputations improve, While Ireland’s reputation is going down the plughole (apparently) despite showing, even on the most pessimistic interpretation of the figures, 6%-8% growth and has rapidly falling unemployment and vanishing budget deficit.
All this hullaballoo on the part of certain economists is to distract attention from the fact that (a) the economy is indisputably growing rapidly (b) they totally failed to predict it. They were totally wrong back in 2011/2012 but, rather than admit it, they want to make a song and dance about the obviously over-estimated growth shown in the CSO figures for 2015 (only 2015 – the CSO growth figure for 2016 is probably a compensating under-estimate).
As for the absurd Krugman. I’ll ignore his racist ‘leprechaun’ comment. The reality is that, if the Irish economy continues to grow at even 5%-6%-7% per annum (never mind the 26%), his reputation is sunk. No wonder he’s angry.
On reflection, it was extremely cruel of the CSO to release both the economic growth figures and the census population figures in the same week. A double hammer-blow to the doom pornographers, which seems to have tipped them over the edge. They should have released them a few weeks apart to allow time for counselling and recovery. I haven’t seen such misery, hopelessness, grief, despair, pain and anguish since, since,… well, since yesterday in Clones when the Donegal woman next to me threw her head in her hands as Tyrone slotted over the winning points in stoppage time.
Al this weeping and wailing about whether Ireland is currently experiencing super-super-super growth (as the CSO figures say) or merely super-growth (as the doom economists now say) is miles from what the Irish economy needs at the present time.
What the Irish economy needs from its economists at the present time is formulation of a plan to keep infrastructure up with the rapidly-growing population. The situation is starting to become critical (particularly in housing) and likely to worsen as population growth can only but accelerate in the next few years. Since its peak in 2007 infrastructural development in Ireland has ground to a halt and the last politician to make infrastructural development a priority, Bertie Ahern, has been vilified for doing just that. I don’t blame FG or FF politicians for this neglect. They’ve been deceived by the doom economists as much as anyone. The main reason for abandoning infrastructural development has been the widespread belief, fostered by the media (the Irish Times series ‘Generation Emigration’ and all that), that since 2007 Ireland has been experiencing a population exodus similar to the immediate post-famine years. Back in 2010/2011 ESRI were estimating net emigration at 70k. Additionally, it was being claimed that all the Poles had left, that Ireland had no young people left, and that so many GAA players had left Kerry they might be forced to bring Mick O’Connell out of retirement at age 80. Well, it all turned out to be hooey and infrastructural bottlenecks and housing shortages are the price being paid. The population in the last pre-recession year of 2007 was 4,376,800. Its now 4,758,000, an increase of 382,000 (almost 9%). So, during the time its population was supposed to be collapsing, Ireland has actually added 3 Cork Citys.
FG and FF should now appoint a team of reputable economists to formulate a development plan to get infrastructural development up to speed to match the rapidly-growing population. This should have a far higher priority that quibbling about CSO figures which, in any case, will probably be eventually revised and smoothed out between the years. Alas, given their record, I can’t see any place for Colm McCarthy or Michael Hennigan in such a team.
So, a recruitment firm is to double its workforce.
http://www.rte.ie/news/2016/0718/803062-jobs/
Why would they do that if the economy isn’t growing rapidly?
Will they be employing leprechauns?
I don’t think it’s wise to use the term “phantom capital”. The assets being financed – both tangible and intangible – are very real in economic, legal and accounting terms. It is simply that the jurisdiction where they are formally located for taxation purposes is different from the one(s) where they are deployed to produce economic output. It is the inevitable outcome of public authorities in some jurisdictions – in this case primarily the US – applying a taxation regime that actively encourages large firms to avoid or defer taxation payments that any sensible taxation regime would extract from actual economic activity in these jurisdictions – or in the jurisdictions where the economic activity had taken place (this is the essence of “country-by-country” reporting)..
And this huge demand for arrangements to avoid or defer taxation payments by MNCs inevitably has called forth a supply to which Irish governing politicians, policy-makers, public agencies and rent-seeking private sector service providers have been more than eager to contribute.
The question that then arises is to what extent is it wise for the public authorities and private sector firms in a jurisdiction – in particular a relatively small jurisdiction in economic terms – to provide these arrangements and services. It would be very hard to contend that allowing the provision of these arrangements and services to be abused to the extent that they distort key macroeconomic parameters as much as they were last year is wise. I don’t think the Father Ted defence – the money was just resting in my account – will wash. Nor do I think that demanding that Eurostat change its rules so that the provision of these tax avoiding and tax deferral arrangements and services does not distort key macroeconomic parameters is wise either. Two wrongs don’t make a right, because it would be a second wrong mirroring the initial wrong being perpetrated primarily by the public authorities in the US.
Contrary to the assertion of this post I don’t think the leprechauns are in Luxembourg; and they’re definitely not in the CSO. But there’s certainly leprechaunish behaviour in the antics of the public authorities and private sector firms providing these tax avoidance and tax deferral arrangements and services. Sure, isn’t it just part of our charm and part of what we are.
I posted this link replying to JTO. (Sweden is one of many European countries going down the tubes in his assessment).
cf.page 8 and the parliamentary report expected in October.
http://ec.europa.eu/europe2020/pdf/csr2016/cp2016_sweden_en.pdf
Now, now, DOCM. With this link and your previous link to Eurostat on GDP per capita and AICs you’re going to be upsetting JtO unnecessarily. You should know by now that he doesn’t like data and information that highlights problems that need to addressed or the deficiencies of our governing politicians and policy-makers.
Au contraire. I have sent in a few posts since Thursday on different threads, highlighting what is by far the most serious problem facing the Irish economy, namely the fact that infrastructural development is failing to keep up with rapid population growth. I have called on FG and FF to jointly formulate a National Development Plan to address it. And I have criticised the deficiencies of governing (and opposition) politicians, whereby they swallowed whole the ludicrous media claims of a massive population exodus, and have allowed infrastructural development to slip back as a result. This is a far more serious problem than ‘leprechaun’ statistics.
Who could disagree? But where is the money to come from? Are you suggesting that we should embark on another FF style credit binge? We could use the fantasy GDP figures to justify it and keep everybody happy.
It will come partly from buoyant tax receipts which have risen by 9%-10% per annum for the last couple of years and from savings resulting from the collapse in unemployment. In case you didn’t notice, the budget deficit is gone – vanished. There will be a growing surplus from next year on. You might be confusing Ireland with the U. Kingdom (a common enough error in certain quarters) where the budget deficit is stuck at £75 billion (4% of GDP) and predicted to rise. The rest will come from private sector involvement. Given current low interest rates and the prospects for both economic and population growth in Ireland, private sector companies will be queuing up to invest in the infrastructure.
Indeed, and thank you. You have highlighted the need to maintain public (or collective) investment in physical and human capital. This is perhaps the principal issue during all the time we’ve been on this board on which we might agree. And this raises the question of financing and funding this investment – with these being two very different things in practice. For both good and bad reasons the ability of the Government to use the traditional approach – borrow to finance public investment and rely on taxation receipts from the expected resulting future increase in economic activity to service the borrowing – is very much restricted. Given Eurostat’s ESA2010 rules on government accounts and DG EcFin’s fiscal rules, the focus is very much on getting investment “off the government’s books”. Various forms of public-private arrangements achieve this, but they do so at excessive cost to citizens both as service-users and taxpayers. This partly explains the apparent popularity of the semi-state approach – and why, in particular, this model was chosen for Irish Water.
One of the key attractions of this model is that it achieves the important objective of getting any borrowing by the semi-state off the government’s books – provided of course the semi-state meets Eurostat’s Market Corporation Test. Final consumers or service-users (as households and businesses) fund all of the semi-state’s activities and this funding contributes to the financing of investment and to the servicing of other investment financing – mainly by providers of debt. This is the model that been used for decades for the commercial semi-states with, perhaps, the ESB being the principal and most profitable example. However, this model, as it is applied in Ireland, is also seriously flawed and imposes excessive and unjustifiable costs on final consumers.
These excessive and unjustifiable costs combined with the rent-seeking and inefficiencies in the other sheltered private and public sectors have driven the cost of living to an extortionate level. The price level for private household consumption in Ireland is the highest in the Euro Area (23% above the average), yet the AIC is 10% below the EA average. That is some whopping rip-off. It is of the order of €7,000 on average per household.
It is little wonder that so many ordinary citizens were disgusted and angered when they got a glimpse of how relatively low water charges would be funding some (and only some) of the rent-seeking the Irish semi-state model facilitates.
Squeezing out only a limited portion of this egregious rent-seeking would increase household disposable incomes and provide funding for significant increases in public investment. But there isn’t a snowball’s chance in hell of this happening since those in receipt of these rents are those who make or influence the making of all key decisions – and they would adamantly and vehemently deny that they are in receipt of economic rents.
I don’t think I used the phrase ‘going down the tubes’.
I pointed out that Ireland is currently a far more attractive location for FDI than any other EU country and I gave reasons for each. I don’t see how this can be disputed. I did point out also that Ireland needs to accelerate its infrastructural development to take full advantage of this attractiveness, which requires a buoyant construction industry, something we’ve not had since Bertie Ahern was Taoiseach.
In Sweden’s case the reasons I gave as to why its not as attractive a location for FDI as Ireland were: (a) its high-cost (comparative price level 2nd highest in EU and 15% higher than Ireland) (b) its high-tax (tax as a percentage of GDP circa 50%) (c) it has lousy education as a result of political correctness and the state usurping the role of parents (3rd from bottom among EU countries in PISA 2012 – Ireland 4th from top) (d) it has severe social and political problems resulting from uncontrolled immigration from Islamic countries (there have been riots in Stockholm every few months for the past 5 years and the political system is creaking as new borderline-racist right-wing parties flourish).
Sweden is a country which used to be the wealthiest in Europe. But, its slipped badly in recent decades. One telling statistic: in June 2012 unemployment rate was 15.0% in Ireland and 7.9% in Sweden – by June 2016 it was 7.8% in Ireland and 7.3% in Sweden. Clearly, Ireland’s rate will go below Sweden’s within a year.
Why not stick closer to home and answer the question that I posed? To govern is to make choices. If there is to be more expenditure on investment, there has to be less on everything else, including salaries in the public sector and cuts in taxation. With regard to Sweden, bloggers can read the Convergence Report and come to their own conclusions.
FYI
http://www.rte.ie/news/business/2016/0714/802375-ntma-annual-report/
“On the CSO’s Gross Domestic Product figures showing Ireland grew by 26% last year, Mr O’Kelly said “We have been actively talking to investors. When you are explaining you are losing – but I would not get too excited about what happened. There are lots of other pieces of data you can use.” ”
Indeed! In terms of coming to a more informed view, or at least one that is closer to reality, of what is happening in the economy. But do the fiscal rules allow for this in calculating the expenditure benchmark?
http://www.fiscalcouncil.ie/wp-content/uploads/2012/01/ExpenditureBenchmarkNote_310315_Final_1.6.pdf
The answer, it seems, is no!
Dáil written answers 19/7
Fiscal Data
183. Deputy Pearse Doherty asked the Minister for Finance to outline the revised figures for fiscal space in each of the years 2017 to 2021 in light of the recently revised CSO figures for GDP growth for 2015 to 26.3%. [22356/16]
Minister for Finance: Estimates of fiscal space based on the expenditure benchmark are largely unaffected by changes in actual GDP. Instead, the relevant input is the estimate of the potential growth rate of the economy, as estimated by the European Commission each Spring.
The rationale for this is simple: budgetary policy should not be pro-cyclical. In other words, fiscal space should not increase when there is a cyclical improvement in the economy and, similarly, fiscal space should not reduce when there is a cyclical downturn.
The fiscal space of just under €1 billion for 2017 set out in the Summer Economic Statement (SES) is not expected to change materially as almost all the inputs used to calculate it under the expenditure benchmark are fixed following the publication of the European Commission’s spring 2016 forecasts.
Revised estimates of the fiscal space for the years 2018-2021 will be published on Budget day, based on my Department’s projections for key inputs including the GDP deflator, reference rate and convergence margin.
The revised GDP growth rate for last year of over 26 per cent reflects the impact of a small number of large multinational firms, and bears little resemblance to underlying economic developments. In this regard, I want to assure the Deputy that government policy will not be based on one off or exceptional growth. Instead, we will set policy on the basis of more ‘normal’ growth rates such as those projected by my Department, and endorsed by the Irish Fiscal Advisory Council.”
In short, we are to rely on dubious figures produced by a deus ex machina in the form of the European Commission rather than construct some reliable figures of our own.
Very good news.
The CSO have declared their figures sound and won’t change how they are calculated.
http://www.independent.ie/business/irish/cso-wont-change-how-it-makes-up-economic-growth-34888919.html
It is imperative that the CSO remain independent and calculate their statistics according to the highest standards of professionalism. It would be disastrous if they were forced to tailor their statistics to what politicians or the likes of Gene Kerrigan wanted.
@ JohnTheOptimist
What is “Very good news”?
Who was suggesting that GDP and GNP should be dropped?
The CSO has implicitly acknowledged that it should do a better job in explaining distortions and underlying growth by establishing an advisory panel.
It’s nothing new to those of us who are not naifs when it comes to headline data.
Just 6 foreign firms that became Irish for tax purposes have over 600,000 staff and people like you can cheer a current account surplus when in fact it’s a deficit.
Then there are brass plate companies – one of them, King Digital Entertainment, maker of the Candy Crush Saga smartphone game, since 2013 was Irish with an address at the office of a Dublin law firm. It had no Irish employees when it listed on the NYSE and was acquired in 2015 by a US firm for $5.9bn. How many firms have a value above that on the Irish Stock Exchange?
Much of what happens at the IFSC is not tracked by the CSO.
Philip Lane, when Whately professor of political economy at Trinity College, wrote in March 2015 that the CSO’s Balance of Payments (BoP) detail for 2014 “shows little progress in recovering/identifying the cumulative €20bn (approximately) in “net errors and omissions” (a proxy for unrecorded financial outflows) during 2010-2011.”
In 2010 there was an unexplained outflow of €8.3bn and this rose to €11.7bn in 2011. In 2014 there was a minor difference of -€180m while a -€2.9bn in 2012 was followed by a +3.4bn in 2013.
In a December 2011 paper, Prof Lane wrote: “A substantial proportion may be attributable to unrecorded financial outflows since the current BoP measurement procedures do not directly capture acquisitions of foreign assets by households that are not intermediated through the domestic financial system. This may be especially a problem in relation to high net worth individuals. In particular, the large residual in 2010 may be related to capital flight during the financial crisis, with fears about the banking system prompting the transfer of assets to foreign bank accounts.”
My life is too short to start investigating every company in Ireland to see if their activities are being properly measured by the CSO. I have total confidence that they do. The CSO has scores, possibly hundreds, of the best economists in Ireland, certainly much better than I could ever aspire to be. Do you think they are unaware of the complexities of economic activity in today’s world? I work in a multi-national company. Sometimes when we release a new software product, software engineers based in a dozen different countries have contributed to its development. The ‘added-value’ is spread over many countries. What makes lay people think they can estimate the share of ‘added-value’ occurring in Ireland better than the CSO professionals? Obviously, in your case you do have some statistical expertise. But, I fail to see why the CSO should be sneered at and have its reputation trashed by the likes of Gene Kerrigan in the Sunday Independent. What statistical expertise does he have?
Luxury indeed when all people have to worry about is whether real growth is 25% or 10%.
Here are growth rates that are actually worthy of worry.
http://www.irishtimes.com/business/markets/pwc-forecasts-no-post-brexit-recession-for-northern-ireland-1.2726979
PwC forecasts for growth in 2017:
Northern Ireland +0.2% (that’s not 2%, but zero point two per cent)
Scotland +0.3%
Wales +0.4%
And something similar is forecast for 2018 and 2019.
These figures are disastrous from the point of view of keeping the Celtic countries chained to the United Kingdom. Some are saying that Ireland’s reputation has been damaged in the last few days. I predict its nothing compared with what we’ll see in the next few years. A new hardline-British-nationalist government has been installed in London and its leader says preserving the United Kingdom is her number one priority. Scotland is on the brink of quitting that Union. And now Enda Kenny says there may be a referendum on a United Ireland in Northern Ireland. No prizes for guessing what that means. As any perception that the Republic of Ireland is doing well outside the United Kingdom is fatal to the chances of holding the United Kingdom together, Ireland is going to get trashed as never before. I’m sure MI5 are recruiting already. We’ll be told that all growth is phantom, that unemployment is 30%, that a million emigrate each year and that nobody lives beyond 50. Interesting times ahead.
@ JTO
I, for one, never questioned the soundness of the CSO’s figures, as my posts above will confirm.
On the issue of where the needed investment might come from, the annual report of the NTMA is informative. It is also informative on the enormous level of public debt that the FF era has left us with. Any change in the current benign international financial circumstances could result not alone in in no new spending but an emergency budget! Brexit could prove to be the trigger for that change.
http://www.ntma.ie/news/ntma-2015-annual-report-and-2016-midyear-update/
I am all for an optimistic view of the future. But a touch of realism also does not go astray.
@DOCM
I never said you did. Fair play to you.
I have finally read the document from Sweden that you kindly posted a link to. I’ve only skimmed through it as life is short.
My impression: very informative and well produced – Ireland should aim for similar
BUT:
the targets are very modest indeed
For example,
they predict annual real GDP growth between 2016 and 2019 of 2 per cent.
they predict an annual increase in employment between 2016 and 2019 of 1 per cent.
they predict that the unemployment rate will still be a quite high 6.5% in 2019
These are very modest targets indeed. Like a football manager taking up a new position promising to take the team to mid-table by 2019. Not bad, but hardly likely to get the fans excited. I’ll be very surprised if Ireland doesn’t do a lot better than all of those by 2019. So will many other countries. I think the reason for such modest targets can be found in one of the other tables. They plan to keep the tax take at around 50% of GDP.
However, their plans are much more ambitious than Ireland’s in two respects (and probably the reason for the high tax take):
(a) In keeping with modern ‘progressive’ theory, they place a great emphasis on achieving gender equality by 2019. I can’t imagine any document produced by MIchael Noonan placing such emphasis on gender equality. It will be a major achievement if they pull it off, given that Sweden now has officially 57 genders.
(b) They plan to have up to 450k asylum seekers over the period 2016-2019 (on top of the 150k in 2015) – comparable figures for Ireland would be 225k and 75k – if they pull that off, I’d expect massive social upheaval/rioting, ‘Nice’-type incidents, and a ‘Le Pen’-type leader to emerge – they are well on the way to all those already – Ireland seems rather boring/stable (whichever word you prefer) in comparison
So, the government has launched a massive house-building drive. It aims to get the annual number of number of new houses built up to 25k by 2019 and to 35k as soon as possible after that. This is exactly what I asked for in my post above. I see no reason why these targets should not be met. Ireland built twice that number in the decade to 2007. Some have said that Ireland can not get back to those levels because all the builders had emigrated. This claim was scotched by last week’s census results. The number of new houses being built annually is already rising sharply. It hit a low of 8,300 in 2013. But, this had risen to 12,600 in 2015. So far in 2016 the number is up 20% and in May it was up 30%. It looks like its heading for a total of between 15k and 16k in 2016.
Looking beyond into the mid 2020s, I can easily foresee the number of new houses being built annually returning to peak Celtic Tiger levels (60k plus annually). It depends on the trend of net migration and population growth. At the moment the omens for this look very strong.
However, the question needs to be asked as to why the number was allowed to fall so much. A total of just over 8k in 2013 was always ridiculous. What factors contributed to it falling that low? There should be a Dail inquiry. I’d say there are 2 reasons: (a) massive over-estimation of the surplus of houses in 2008-2010 (b) massive under-estimation of population growth (confirmed last week). If it wasn’t for the tragedy of homelessness, it would be almost comical. One minute we were being told that a decade’s economic growth was entirely down to over-building of new houses and that, as a consequence, there were 350 empty houses scattered the length and breadth of the lad. The next minute we were being told that that there is a shortage of houses and emergency measures are introduced to bring the number built back up to levels that were being denounced as excessive just a short time ago.
Anyone who wants to know why there is a housing shortage in Ireland in 2016 should read this, from IrishEconomy.ie on 13 September 2009. What memories of long-disappeared names it brings back.
http://www.irisheconomy.ie/index.php/2009/09/15/morgan-on-property/
EoinBond was just Eoin then. And JohnTheOptimist was just John. I think the predictions of those two have stood the test of time. I was interested to see that in September 2009 I predicted that Ireland’s population would reach 5 million by 2020. Bang on target in last week’s census.