Government Accounts

The monthly Exchequer Account publications tend to get more attention than they deserve because of the frequency of their release.  Although the Exchequer Account is useful, it is a somewhat distorted view of the overall fiscal situation.  On the revenue side it excludes PRSI and Motor Tax, among others, while the expenditure side is based around the largely meaningless concept of “net expenditure”.

The Exchequer Account gives the misleading impression that the government “spends €50 billion and brings in €30 billion”.  We can get a truer, but less timely, insight into the fiscal situation from the CSO’s National Income and Expenditure Accounts which were published a few weeks ago for 2010. 

Here we focus on Table 21:  Receipts and Expenditure of Central and Local Government.  Tables 22 to 29 provide further details of the aggregate figures provided here.

First, here is government expenditure since 2006.  Item 246: Redemption of Securities and Loan Repayments is excluded from the extract reproduced below.

Grants to Enterprises includes €4,000 million to Anglo Irish Bank in 2009 and  €31,575 million of Promissory Notes issued to Anglo, INBS and EBS in 2010.  These are the only items directly related to the banking bailout in the table.  If these are excluded total expenditure was €71,737 million in 2009 and €69,947 million in 2010. 

Government expenditure in 2010, excluding the banks, was 44.8% of GDP and 54.6% of GNP.

Second, here is government revenue.  Item 236: Borrowings is excluded in this instance.

Government revenue in 2010 was 32.8% of GDP and 39.9% of GNP

Since running close to a balanced budget in 2007, expenditure has increased from €68 billion to €70 billion while revenue has fallen from €67 billion to €51 billion.

In 2010, there was an overall deficit of €18.8 billion.  This is expected to fall to around €15 billion this year.  It has been revealed that a “three-year plan” will be published in the autumn giving outline details of how this will be brought down to €5 billion by 2015.

On the expenditure side the largest items are transfer payments and public sector pay.  The capital budget has already been cut by one-half.  The deteriorations on the taxation side are well known as these are  not clouded by the archaic accounting practices used to generate the Exchequer Account.  

The “low-lying fruit” has been picked and the time for the “heavy lifting” is approaching.

Leaving Cert Results

Here is a quick look at the overall Leaving Cert performance of students taking Economics in the Leaving Cert.  Just over 8% of Leaving Cert students took Economics as a subject.

This year around 3,700 took the Higher Level Paper and it can be seen that the distribution of marks was consistent with the previous two years.    There were 1,063 candidates for the Ordinary Level Paper.

A breakdown of the marks for all 34 Leaving Cert subjects can be seen here.

There were no candidates for Ancient Greek and Hebrew Studies. Of the papers that were taken the lowest number of candidates was the 32 who sat the Higher Level Agricultural Economics paper.  The most attempted paper was the Ordinary Level Maths paper with 37,505 candidates.

The number of students that took the Higher Level Maths Paper did indeed set a record low as was previously discussed here.

Trading Volumes in Irish Bonds

There has been ongoing interest in the yields available on Irish government bonds.  Using actual trades Bloomberg calculate an implied 10-year yield.  This surged to over 14% in the run up to the Brussels summit on the 21st of July.  The yields have fallen on almost everyday since and yesterday finished at 9.5%.

However, little attention has been given to the trading volume on these bonds.  Here is a little insight into trading volumes from the start of the year to August 9th.

For most days the trading volume is very low.  The average daily trading volume for the year is just 0.28% of the total number of bonds outstanding (c.89.6 billion).  For the January 2014 bond the average trading volume in 2010 was six times larger than it has been in 2011.  Trading volumes in Irish bonds in 2011 have generally been very low.

There has been an increase in the time since the EU summit when  yields also began to fall.  The average daily trading volume has been 0.82% since the EU summit.  The other occasion when trading volumes increased slightly was the first two weeks in April.  This was immediately following the March 31st publication of the bank stress tests and again was a time when bond yields were falling.

The Exchequer Balance

The mid-year Exchequer Return released on Monday gives a somewhat noisy insight into the state of the public finances.  It is hard to draw exact conclusions about the behaviour of tax revenue and government expenditure because of the changes introduced in last December’s budget and the reporting of the relatively meaningless ‘net’ expenditure measure which was also affected by the Budget. 

Anyway, in this little poke into the figures we will just look at the Exchequer Balance which allows us to throw all these anomalies into the mix and focus on the final outcome.

Here are the cumulative Exchequer balances for the past five years.

At €10.8 billion, the Exchequer Deficit for the first six months of the year is better only than the €14.7 billion deficit recorded in 2009, but is worse than the €8.9 billion deficit recorded in 2010.  However, the Information Note which accompanies the returns tells us not to worry because:

The year-on-year increase in the deficit was primarily caused by the €3,085 million in non-voted capital expenditure Promissory Note payments to Anglo Irish Bank, INBS and EBS. Excluding these, the deficit fell by over €1 billion.

This is meaningless and should more appropriately be described as misleading.