Tax increases or spending cuts: is Ireland’s government too big?

Very interesting. Try arguing this point with Jack O Connor. Or alternatively you could just bash your head off a pebble dash wall. Both will have equal result.

” €4bn worth of cuts will impact very little on a deficit of €22bn” ??

I think it is obvious that €4bn worth of cuts would make an impact, especially as it has been suggested that another €4bn will be cut again next year.

If the government is to spend money it should be in the form of capital expenditure.

*I think Tom O’Connor is a lecturer at CIT not UCC

Thanks FS, I’ve fixed Tom’s credentials.

Ireland rapidly increased it’s public sector annual cost during the boom years, through benchmarking, additional hires, increments and expanding service budgets.
This was always going to end in tears – and so here we are.

I believe that we would still have had this serious difficulty ticking away in the background even if the boom, albeit at a slower rate, had continued or fizzled out softly. We just would have encountered this squeeze a few more years down the line.
The spectacular boom collapse has just made the squeeze all the more crippling for the state – and a lot more immediate.

In recent years funding the public service on the back of the boom has been a lot like buying a large house with a large mortgage on the back of a series of big wins on the horses. The elation clouds your judgement.
The wins might pay the mortgage for the first
few years, but you won’t win all the time. Or as frequently as you did during your purple patch. And the mortgage is going to need it’s payment every month, every year for the next 30 years… regardless.

The public sector unions want Ireland to keep paying the current mortgage… The construction industry wants us to go back to betting on the horses…

We need to move to a smaller house?

[…] That’s according to economist Ronan Lyons, read his post on this here. […]

We really need strong leadership around about now – someone who can take on the public sector and finally turn it into a lean, cost-effective and efficient operation. There are too many of these outdated work practices, too little flexibility, too much administration. If an entrepreneur was hired to run the public service and run it like a business, I reckon we could halve the cost of it and probably increase it’s productivity. But the big question is……is the monster too big to control? And more importantly, which one of our political leaders has the guts to do it?

Those are incredible statistics for what is supposed to be a politically rightish leaning state

Hi Ronan,

This post is causing some debate on progressive-economy.ie . Michael Burke has pointed out that year-to-date government spending (to October 2009) is €51bn.

This report by Goodbody’s, which concurs with your analysis, estimates government spending for the year will be €73bn.

http://www.goodbodyonline.ie/include/pdf/ER20090717_Budget_Consolidation.pdf

The figure seems to be derived from the McCarthy report –

http://www.finance.gov.ie/documents/pressreleases/2009/bl100vol1fin.pdf

Table 1.1 Projected Government Finances 2009 (as per Supplementary Budget April 2009)

Have you any idea of why the discrepency exists between McCarthy’s estimates and spending reported by the department of finance here?

http://finance.gov.ie/documents/exchequerstatements/2009/Octoberexstatfinal.pdf

It’s difficult to see how both could be right at this stage?

—

Being discussed here :-

http://www.progressive-economy.ie/2009/11/home-truths-from-abroad.html

Hi Mack, thanks for pointing that out to me. There’s no mystery re where my figures came from. For cross-country comparability, you can’t use national sources, IMO, you have to use something like the EU or the OECD, to make sure you’re comparing apples with apples. My figures came from Eurostat:
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00023&plugin=1
And actually came from a version of the table when Ireland’s Gov-GDP ratio was projected to be 1% lower than currently (presumably these tables get updated every month or two). Knowing the GNP-GDP gap in 2008, I then adjusted for GNP and, knowing projected growth rates of Government expenditure (+2.7%) and of GNP (-9%) this year, was able to calculate a figure for the Gov-GNP ratio in 2009.
I can see why people might want to argue with the numbers, but until our Government (through the CSO) alerts Eurostat otherwise, this is the best cross-country comparison that I know of.

Thanks again for giving the opportunity to clarify,

R

[…] education and health, it’s unlikely that people want less of them in recessions). Secondly, Ireland is already paying a huge chunk of its economy (almost 55%) on its public services, particularly compared to the level of services provided in other countries spending a similar […]

[…] […]

[…] to spend on this basis. This year, Ireland’s government will have the unenviable tag of being the largest in the EU, relative to the economy that it manages. The increase in expenditure by the government has […]