Friday, July 19, 2013

19/7/2013: Ireland: Six Points on Government Spending Stats for Q1 2013

Four key trends in Irish Government expenditure through Q1 2013:

Chart above shows three aspects of Irish Government spending:

  1. Overall, expenditure continues to outstrip revenues, generating deficits well in excess of the target and accelerating in Q1 2013 once again, although part of this acceleration is seasonal and part is riven by the IBRC shut-down cost (see my earlier post on this:
  2. Decline in Government spending since Q1 2009 has been much shallower, once we strip out banks measures than at the aggregate level. This highlights the nature of our fiscal statistics reporting, whereby there is not a single full database (by either the Department of Finance, or CSO) which actually provides clear accounting for ex-banks spending. Question is: why? The IMF this week praised Irish Government for delivering on fiscal transparency. Yet, the very same Government continues to cherry-pick data to show desired effects. 
  3. Q1 2009-Q1 2013, overall reduction in gross public spending ex-banks, based on Q1 figures alone (so a caveat here) is closer to EUR470 million or 2.67%. Meanwhile, tax and social security contribution revenues are up EUR979 million or 9.2%. And this disregards the fact that much of the expenditure reductions came from higher charges on private users of public services, not an actual budget cut to budget-covered institutions.

Chart above shows breakdown of the expenditure for four main lines of spending:

  1. Compensation of employees has declined 7.53% on Q1 2009 (saving EUR390 million). We were promised billions in savings here and we have attained… well sort of short of that. 
  2. Use of goods and services (gross of taxes payable) declined 37.47% or EUR1.01 billion, with parts of these savings now arising due to timing issues. Bunching in spending on this line has increased from 2009 through 2012. Q1-Q2 quarter on quarter changes used to be negative (higher spending in Q1 than in Q2) in 2009 and 2010 and they are now positive for 2011 and 2012. Swing in the rate of change q/q between Q1-Q2 2009 and 2012 was from -13.2% to +10.4%. Which neatly summarises the austerity we've been living through: taxes massively up, capital spending massively down, current spending… err… 'don't ask-don't tell'

One of the worrying trends in the overall expenditure, however, is the interest on our debt. Chart above shows its evolution over time and a clear trend up and up even as taxes are continuing to rise. Now, I know it is trendy nowadays to say 'debt don't matter'… actually, when 20% of your tax revenue goes to pay interest on it… err… it sort of obviously does.
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