The Minister for Public Expenditure and Reform has announced the Government’s plans for the sale of state assets. Interestingly, rather than sell a minority stake in the ESB the plan now is to sell non-strategic power generation capacity – in my view a more sensible approach.
The Irish Times reports
NEARLY 50 hospital consultants and almost 1,000 nurses of different grades are set to leave the health service before new pension changes come into effect at the end of February, the first official figures show.
and
In other parts of the public service about 1,130 staff in the education sector are understood to have applied to leave
This brings back memories (misty water-coloured memories) of pre-election promises
Additional Reduction in Back-Office Public Sector Numbers: As set out in our Reinventing Government plan, Fine Gael will reduce the size of the public service by 10% – just over 30,000 – without undermining key front-line services in health, policing and education, through over 105 reforms to cut back-office bureaucracy and delivery improved value for money. This means that Fine Gael will reduce back-office administrative positions in the public service by an additional 18,000 over and above the 12,000 reduction partners to seek further efficiencies in work practices
I guess these are back-office consultants, nurses and teachers.
The Minister for Transport, Mr Varadkar, in commenting on whether a referendum will be necessary for Ireland to sign up to the fiscal compact is reported to have made the commonplace point that
There’s only one reason why you have a referendum and that’s where there is a requirement to change the constitution.
Em, not quite.
Apart from a political view that a referendum might be desirable in any event, there is a particular mechanism in the Constitution of Ireland for holding a referendum, even when a measure does not require constitutional amendment. This is set out in Articles 27 and 47, whereby one-third of the Dáil and a majority of the Seanad could petition the President to decline to sign and promulgate a Bill “on the ground that the Bill contains a proposal of such national importance that the will of the people thereon ought to be ascertained.”
The detailed provisions of Article 27 envisage that if such a petition were successful, the will of the people could be ascertained either by referendum (in which at least one-third of those on the register would have to vote “no” in order to veto, by virtue of Article 47) or, in effect, by a general election.
I guess the fiscal compact itself may not in fact be a Bill, but presumably the detailed fiscal provisions of the agreement will have at least that legal form. Apart from whether the required numbers of TDs and Senators would line-up for the petition which Article 27 envisages, whether or not this mechanism will be applicable seems to me, as a non-lawyer, to turn on whether the Bill in question is a “Money Bill”. Money Bills appear to me to exempt from Article 27 (reading back to Articles 23 and 22) but I may be mis-reading that, so perhaps we might get some legally informed views in comments.
Yesterday’s release of the end-of-year Exchequer Statement provides the opportunity to update the quick look we gave to the mid-year figures. The conclusions drawn in July are largely unchanged. First the overall Exchequer Balance.
At €24,917 million in 2011, this was the largest Exchequer deficit ever recorded. The Press Statement released with the figures says that it’s not too bad though.
The Exchequer deficit in 2011 was €24.9 billion compared to a deficit of €18.7 billion in 2010. The €6.2 billion increase in the deficit is due to higher non-voted capital expenditure resulting primarily from banking related payments. The majority of these payments are once-off payments relating to the recapitalisation of the banks and an exchequer deficit of €18.9 billion is forecast for 2012.
Excluding banking related payments the Exchequer deficit fell by €2¾ billion year-on-year.
Ah, “once-off” banking payments. Next year’s “once-off” banking payments will be €1.3 billion to IL&P and possibly some further payments to the credit union sector. So what €8.95 billion of “banking related payments” do we have to remove to turn a €6.2 billion deterioration in the Exchequer deficit into a €2.75 billion improvement?
UPDATE: I had guessed what was included in this calculation but the Department of Finance have posted a useful presentation providing the details. This is from slide 4.
The issue is the inclusion of the Promissory Notes. If we exclude this €3.1 billion payment along with all the other banking amounts then the Exchequer Deficit is lower this year.
We didn’t make a payment on the Promissory Notes last year but we will make this €3.1 billion payment each year to 2023 and lower payments right up to 2031. From next year there will be accrued interest added to the Promissory Notes that will increase the General Government Debt. You cannot exclude something that is going to happen for the next two decades as a basis for saying the deficit is getting smaller.
We can strip out a lot of the banking complications by looking at the balance of the Exchequer current account. This does include the €1.2 billion of income earned from providing the guarantee to the covered banks which is counted as current revenue.
The final outturn and annual pattern of current account deficit has been largely unchanged for each of the last three years. Between 2007 and 2009 there was a €20 billion deterioration in the current balance. In the two years since the achievement has been to keep the drop to €20 billion. There has been no improvement in the current account deficit.
Looking the Exchequer interest payments gives some insight into how this has been achieved.
For a country that has to borrow to fund the deficits shown above it is pretty amazing that the interest expense in 2011 was lower than in 2010. The explanation is that some of the interest costs were covered from an account other than the Exchequer Account. Again, the press statement is helpful.
Taking into account the funds used from the Capital Services Redemption Account (CSRA) as well as Exchequer payments, total debt service expenditure was up €1.1 billion year-on-year in 2011, at close to €5.4 billion. This reflects the burden of servicing a higher stock of debt.
For 2011, the Budget target was a General Government Deficit of 9.4% of GDP. The actual deficit will be around 10.0% of GDP. This slippage (largely the result of lower than expected tax revenue) was not a significant issue as the deficit limit set by the European Commission was 10.6% of GDP.
For 2012, the Budget target is a deficit of 8.6% of GDP. The deficit limit set by the EC is also 8.6% of GDP. If there is any slippage or lower than expected nominal growth we will not meet the deficit limit.
Anthony Murphy, now at the Dallas Fed, is a renowned Irish econometrician with a strong research interest in housing markets. Back in 2004 he was commissioned by the National Competitiveness Council to study the competitiveness implications of the housing boom.
The first paragraph of his report read: “Ireland’s booming housing market has attracted and continues to attract a considerable amount of attention, both domestically and internationally. Irish house prices are extremely high by historic and international standards, both in absolute terms and relative to incomes. The strength and duration of the house price boom is unique. Many other countries and regions have experienced large house prices booms. However, at least in the 1980’s and early 1990’s, most of these booms have ended in a house price bust.”
The report, which is here, was obviously written in very judicious language but was highly critical of the fiscal contribution to the boom. (His demolition in Section 3.5 of many of the research papers written on the boom is also well worth reading). The NCC declined to publish it. Though I have a good deal of respect for Forfás and the NCC in general, I am forced to ask: how much attention might it have received, and might it have made any difference, if it had been published?