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.

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FT: Moody’s warns of second rescue for Portugal

If the objective is restored market access, the limits of exisitng crisis resolution arrangements were further exposed by Moody’s four-notch downgrade of Portugal.   The FT has the story here.   This bit is particularly important:

Moody’s cited the tortuous negotiations over Greece in its note, warning that although the likelihood of a restructuring in Portugal was lower than in Greece, the European Union’s “evolving” approach to providing further support “implies a rising risk that private sector participation could become a precondition for additional rounds of official lending to Portugal in the future as well.”

The full Moody’s statement is available via ft.com/alphaville.

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Ranking of Irish Universities (and Economics Departments)

Rankings are funny things. Economists love them. There are rankings by department, by citation, and by subdiscipline. My favourite one is the top dead economist. You’d think it would be Adam Smith, but no.

Some people even rank their rankings.

There are even rankings of business schools, academics, and celebrity economists in Ireland, thanks to Richard Tol and colleagues. The rankings aren’t without controversy. In particular, some see ranking as academic bureaucracy and nothing more, others (like frequent IrishEconomy poster Ernie Ball) point to the perverse incentives such rankings produce in academic life, as well as other serious issues. Ferdinand Von Prondzynski summarises the arguments well here. Here is another particularly harsh assessment of these rankings.

Today’s university rankings show two Irish universities and economics departments in a particularly good light. TCD and UCD come out really well in several areas. Other universities, including mine, don’t feature as prominently at all. Brian Lucey has done the spade work on his blog going through the report, and I reproduce his summary below the fold. Some remarkable findings in there–TCD mathematics is 15th in the world, TCD psychology is top 50, for example–as well as the news that UCD and TCD economics departments are both in the top 50 100 (ht Enda H). Well done to them.

I’m particularly interested in commenters’ reactions to this latest report, and what it might mean for universities in Ireland that a. don’t make the cut in terms of rankings, and b. those that do. Rather than rehashing the tired “rankings-good/rankings-bad” argument, let’s focus, if we can, on what these rankings imply for the funding each university receives by subject area, in the light of the Hunt Report and it’s eventual implementation.  Should resources flow disproportionately to the ‘winners’–TCD and UCD–or alternatively to other universities to bring up capacity? Should all universities do everything, or should there be partitions by subject area? Should UCD’s mathematics department, to pick an example at random, give up and go home, given than TCD’s is so obviously world class? Take a look at the summary below to begin.

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Nama’s Mortgage Enhancement Scheme

In today’s Irish Times, Fiona Reddan has an interesting short article about Nama’s planned mortgage-enhancement scheme. The scheme is intended to unload some of Nama’s large inventory of houses and flats without unduly lowering property prices.  The scheme, at least as it has been described so far, will work as follows.  Suppose that Nama wants to sell a particular flat for €100,000.  It will offer a buyer the following deal. The purchaser must put down €10,000 in cash, and take out a mortgage from a bank for €72,000.  Nama will pay (itself) the remaining €18,000 and record the flat as sold at 10,000+72,000+18,000 = €100,000.  If after an initial period, say five years, the fair market value of  the house is more than €82,000 (the amount already paid by the homeowner) than the homeowner must “top up” the difference to a maximum of €18,000.  If the fair-market value of the house is €82,000 or less at this date, the homeowner has no need to pay the remainder.

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Large Primary Budget Surpluses

The ECB’s June monthly bulletin has an interesting box on pages 94-95 on “Past Experiences with Sustaining Large Primary Budget Surpluses” (defined as sustained episodes with cyclically-adjusted primary budget surpluses of at least 4.5 percent of GDP for 5 years or more).  The bulletin is here.