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Proposals by the British coalition government to abolish a quarter of the list of eight hundred public bodies have garnered considerable attention. The full list of public bodies and their proposed destiny can by found here. In some instances functions are being transferred into government departments and in other cases privatized. Curiously the casualty list includes some rather effective value for money regulators, notably the Audit Commission. Their local government audit functions are to be transferred to private audit firms. The Australian state of Victoria made a similar move some years ago, turning the Auditor-General into a purchasing authority in the 1990s. The policy was soon reversed as both political and capacity concerns about audit in Victoria became apparent.

The coalition government is retaining public bodies chiefly on grounds that they perform technical functions, that impartiality is required or that transparency in factual determinations is required (as with central statistical functions). There is a valuable discussion by Ian Magee of the Institute for Government here. Magee notes that value for money was not properly considered in the proposed institutional reforms.  Even if the principles are correct it is not clear they are applied correctly when the Human Fertlization Embryology Authority is on the list for abolition – it has had both an important technical role and removed significant controversial decisions from the partial realm of politics over a number of years. In this instance it is said the functions are to be transferred to other regulators and this is part of broader theme in the proposals of rationalization of regulatory bodies. In Ireland the Cowen government has already commenced a programme of abolition of state agencies leading to the first significant reductions in numbers of agencies, following on from the report of An Bord Snip Nua. Data on this trend will be discussed at next month’s launch of the Irish State Administration Database, produced by a team working under the leadership of Dr Niamh Hardiman in the UCD Geary Institute.

There are two interesting economics seminars at TCD in the coming days:

1.  Daniel Leigh (IMF) will present the recent WEO study “”Will It Hurt? Macroeconomic Effects of Fiscal Consolidation” 9am-10.30am on this Thursday

2. Gylfi Zoega (University of Iceland) will present a paper next Tuesday 12.30-2 on the Icelandic situation: “Lessons from a collapse of a financial system”

Both seminars are in IIIS seminar room on Level 6 of TCD Arts Block. All welcome.

A research colleague, Brian O’Kelly, and I have been looking at the impact of poor bank regulation in Ireland during 2003-2008, and the Irish credit bubble that this poor regulation fostered, on Irish GDP and other economic measures.  I am scheduled to talk about this research down in Kenmare this weekend.  I want to make some informal remarks in this blog, based on some simple calculations that are easy to follow.

Here is a simple question: what is the effect on cumulative GDP of the massive distortions in bank lending described in the Honohan report?  The good news is that the net cumulative effect, even after accounting for the €50 billion bank bailout costs, is not too far from zero.  The bad news is that the GDP benefits were all received during the 2003-2007 period when GDP was artificially increased by these extremely poor bank regulation policies, whereas the GDP costs are in the 2008-and-beyond period.