Tag Archives: government

Structure of Irish Government Finances 1995-2012 in Pictures

The government finances are something that always seems to baffle people. The CSO and Eurostat provide great detail but it can be hard to navigate. Below see some charts that I have extracted from these.  The raw data (in summarized form) are also below.

Total Irish government revenue and expenditure, in 000m. Note the reasonably broad balance over time and then the effect of the banking crisis...

Total Irish government revenue and expenditure, in 000m. Note the reasonably broad balance over time and then the effect of the banking crisis…

Breakdown of main spending headings of Irish government
Breakdown of main spending headings of Irish government

Main revenue headings as % total revenue. Yes, capital taxes are that small.....

Main revenue headings as % total revenue. Yes, capital taxes are that small…..

Are we really that highly taxed? Direct and Indirect taxes as % GxP

Are we really that highly taxed? Direct and Indirect taxes as % GxP

The interest burden on the state finances is going the wrong way...

The interest burden on the state finances is going the wrong way…

Public Sector wages (pensions are included in social section) are <30% total spending

Public Sector wages (pensions are included in social section) are <30% total spending

Total social expenditure (social welfare, state and PS pensions etc) now accounts for 50% total state revenue… See how that shot up when the recession hit?

Here are the data if you want to play round some more

Screen shot 2013-04-23 at 09.45.31

Screen shot 2013-04-23 at 09.45.36Screen shot 2013-04-23 at 09.45.41

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The behavioural aspects of the collapse of the Croke Park Extension

10.10.11This is a expanded version of a column published in the Irish Examiner 20 April 2013. In the christian bible the First Book of Kings  has a wonderful vignette of how not to win friends and influence people. King Rehoboham is discussing policy with his advisors, having recently taken the throne from Solomon. The advisors suggest a lightening of the burden. Rehoboham, retorts

And now whereas my father did lade you with a heavy yoke, I will add to your yoke: my father hath chastised you with whips, but I will chastise you with scorpions.

It doesn end well. Nor will the outcome of Croke Park 2. One of the amazing things about the croke park extension that was voted down was how on earth it was ever really expected to be accepted.  The evidence from this debacle is that the government seems to have very little collective or institutional insight into how people act when faced with decision making under uncertainty. And that’s inexcusable; the greatest growth in economics and finance over the last while has been in that very area. In the UK the Cabinet Office has a strong well-regarded team of people dedicated to applying the latest research to government decisions. We get Brian Hayes. The hysterical shrieking of Brendan Howlin that “he would run out of money” and the cold rowing back by Alan Shatter on promised garda recruitment was an added bonus in this stew of psychological insight. It was also indicative that these two ministers either don’t know that we have 33b in cash sitting on deposit right now or chose to elide budget allocations with cash. We wont run out of cash. We are flush with cash.

Lets leave aside the worries we might have that government are supposed to govern, not to abrogate these decisions to others. We elected them to run the place not to run from hard decisions.  Lets, for the moment, leave aside the economic issues. We are running a deficit and that needs to be filled.

Lets concentrate instead on the behavioral aspects of this. What was being asked was the following : please take a pay cut, because if you don’t then we will cut your pay (by an unspecified but perhaps larger amount) and perhaps those of others. What was being appealed to was a trifecta : that people were able to judge the relative uncertainties (the certainty of whips today versus the possibility of scorpions tomorrow?), that they would be altruistic enough to override any qualms on this issue and think of the lower paid and that they would then be able to make a cold decision on same.

People are generally not that receptive to altruistic arguments in the abstract. Simply saying “take a hit so others cant” might sound good but it may not, did not, get the desired response.  If we want to get them to do things that are not in their immediate self interest, such as pay tax or change behavior, there is a vast body of research on how to get this done. In general we can consider 6 factors that influence decision-making, and in every one of these the goverements argument and argumentation failed. Its astounding to sit back now and see how badly handled the argument was. Public sector workers are, despite the rhetoric from the right, responsible and mature citizens and probably know better than most how bunched the state is. They are 350,000 citizens and voters and no, they dont all vote Labour. And they were treated like naughty children being asked to choose going to bed without supper or a smack on the bum. Lets look at the 6 items in some more detail.

Reciprocation People feel obligated to return favours. But not only was nothing being offered, the evidence is that offers made by unions of reciprocation were rebuffed.

Authority People look to experts to show the way but unlike in the overall macroeconomic environment it is rare that experts will emerge stressing the vital importance of saving 2% of the overall salary and pension bill. The stakes are paradoxically too small.

Consistency People want to act consistently with their values and there is a genuine perception that all sectors have taken enough pain

Scarcity People place higher values on resources that are limited and ones wages are now more limited than before.

Social Consensus  People look to others to guide their behavior and  there was no consensus here that this was needed nor did the government create one, instead adopting a hectoring and bullying tone.

Liking People are supportive to ideas or actions they like, and who likes wage cuts?

Beyond that we find that there is a whole host of further issues with which we might be concerned. One behavioral bias that is known to be seriously damaging to investment decision-making is anchoring.

This is where, for example, a vendor of a house is fixated on the price of the most recent sale or on their own purchase price, and loses sight of any fundamental value concept. We see this in the croke park debate; 300m has become a totemic shibboleth, a number for whom the government died in the trenches.  The anchoring ran right into what behavioral analysts call loss aversion – some of the debate rang on the lines “well, the public sector took the rise in income in the boom and now should take the fall with the same grace. This is not how people deal with losses, they are disproportionally felt compared to a rise. This appears to be a fairly universal human behavior, and while private sector workers might quite fairly note that they have had to swallow pay cuts, the key issue is : would they have if they had been asked in similar fashion? Allied to this is the endowment effect : people tend to ask for more money to part with something than they would themselves pay to acquire it. Possession, of increments, flextime, etc, is inherently valuable over and above the monetary value of the thing owned.  Ally to that the status quo bias, not a preference for hairy rockers but a strong innate conservatism, and we see the task the government faced.

This task was doable. And some reduction in the overall pay bill is needed while we remain in massive deficit. But instead of considering the evidence on how to influence people, instead of reaching out to behavioral finance and economics specialists, they adopted a hectoring bullying tone that all but guaranteed their defeat. Willful ignoring of hard won knowledge has a price and its one we are all paying now.

What the government and in particular the Labour ministers, engaged in was hectoring. Hector came to a bad end, with his corpse despoiled and having to be ransomed from vindictive strangers. A more conciliatory, adult tone might yet save Labour from the fate of the Trojans.

Why we should keep and abolish the Seanad ; Sean(s), Science and Senators

Sometimes a debate comes along in the upper house that is worth listening to. Usually, and this is I think, down to the (limited) franchise, this comes from the university senators.

Last week Senator Sean Barrett (TCD) moved a series of amendments to the Industrial Development (Science Foundation Ireland)(Amendment) Bill 2012. This bill is in essence to extend the remit of Science Foundation Ireland to allow it to fund not just basic but also applied research. Now, lets leave aside the research on how hard it is for government to “pick winners” (actually, lets not…see this very balanced research paper) the bill like all bills goes through the process of the Seanad reviewing it. Bear in mind that the bill is for a multibillion euro process which will convey enormous power and clout on a quango. No matter how good a quango or how optimal its solutions may emerge as being, its surely a good idea to have many views on the design.

Sean Barret proposed a series of amendments. They are as below. Not one got to be incorporated in the bill. Not one. In many cases (See the debate here)  the minister , Sean Sherlock, agreed with the spirit or the wording of the amendment but in essence told the upper house to trust him/his advisors/SFI. Apart from Sean of the total 60 senators only three others spoke, all to praise Sean B, but not to actually offer any insight or views.

Sean asked for nothing wild : to have SFI take on the views of external professional bodies, to have SFI grant holders not be allowed to buy out of teaching students, to ensure that a value for money element was enshrined into the grant review, to make provision for new areas to be brought into the ambit of SFI if science dictated, to curtail the power of the minister to overrule science in favour of politics.  Mention was made of the exclusion of botany and mathematics from the priorities. His remarks were learned, witty, historically informed and cogent. They were exactly what you would expect from a member of an upper house, agree with them or no, and were there more like this then there would be a case solid as a rock for keeping the Seanad.

This set of amendments is hardly scientific Jacobism, but as these amendments were “not invented here” Sean Sherlock didnt take them on board.   Mathematicians can jolly well find some project to support, as can botanists. Teaching is not his concern its an SEP (someone elses problem).  Everything we do is subject to the ruthless rapier scrutiny of ….the Department of Finance…We have a priority list and that is a list of priorities we chose as priorities. We cant ask the Chartered Engineers for their views on a scientific project as then we would have to ask the divil and all, maybe even the Irish Texts Society. And so on. By turns dismissive, patronising  supportive without actioning, Sean S did his duty which was to steer the bill through.

If we are to have an upper house then both the members of same and the government must respect it. That means that they dont automatically not accept amendments from uppity outsiders, and that when the future of the scientific underpinnings of the state are being discussed people bother to turn up and debate the issues (even if like Sean B they know that the government will not bother their barney with paying the blindest bit of attention). If the government wont take on even motions that they agree with and if senators cant be bothered, then we should dispense with the pretence and drop the Seanad.  In the meantime, trust Sean.

sherlock

Pork, fixins and Professional Politicians

fixinsIn the Sunday Independent today (I know, I know…) theres a most interesting piece. It notes that the offices of TDs are exempt from local authority rates while charity shops are not.  This prompted me to think about the nature of politics. The exemption from rates applies not to their offices in the Oireachtas, but to the politician shops, for that is what they are, that are now a feature of the main street of many towns. Time was when politicians held their clinics in the back room of a pub. Now they have plush offices with their names emblazoned in lurid neon. These serve to advertise the wares of Timmy O’Hooligan or whomever, and are basically invitations to come ask him to intervene on their behalf (fixins) or to provide information (which the citizens information bureau down the road has anyhow). So its selling pork, fixins, info and so on.

Under the Valuation Act 2001 the basis is set for the levying of  commercial rates. These same are a huge bubbear for many companies, and the debate on what exactly one gets for these rates paid to the local government is ongoing. Whatever it is its fair to say that a bookies office, a dentists surgery, a politician shop, all cheek by jowl on a street get the same. But the politician shop is exempt from commercial rates by virtue of Schedule 4 Section 19 of the Valuation Act 2001.

Along with politician shops also exempt are a whole clatter of other things : mainly they fall in to three categories – agricultural land, social good ( non profit museums, care centers, hospitals, colleges etc) and public works (lighthouses etc). Now, politicians have offices. These are located in and around the parliament. Thats where they work. They are not compelled to have a shop on the main street. They choose to do that. Politiicians get very sniffy when their professionalism is called into question. If they are operating from the shop as professional pork pullers, fixin merchants, information mongers and so on, they should surely be treated the same way as the other personal services on the street? If they are saying they are exempt, it must be because they want to be seen doing this as a public good (see citizens information) or else they are claiming they are doing this as a charity (why then get paid pretty well). The other alternative is that its a form of amateur dramatics….

In the USA fixins refer to the bits and pieces that go with food – pickle, biscuit, coleslaw, gravy etc. Like politician shops they are optional. One can have pork or whatever without the fixins. Theyre supplemental, not essential. So too are politician shops – they have offices in the parliament in which they have secretarial staff and where they are contactable, we have citizens information and other local bureau to give us advice on how to get a pothole fixed or a pension form filled in, and we have no need of these shops. Politicians elect to have them, at our expense, to show their wares, to sell themselves, to increase their income earning potential. In other words, they are commercial activities.

If they  want to be treated like professionals, then act like same. Pay the rates the other professionals pay and expense them against tax. If they wont do so then they are amateurs. And we dont need amateurs running the place.

The Garda should take pay cuts to maintain numbers – discuss

1224242572490_1aaaaSo it seems that the police are running out of money, with reports (here, here) that the force will not have the funds this year to pay for its complement. The commissioner has stated before that he would not like to see, and would feel that he cant really deliver a service, if numbers fall below 13,000. Complement now stands at 13,400.  If you are unsure of what a police officer in modern ireland actually does see this reflection of an officer leaving. I suspect that the cuts in numbers will, as usual, fall on frontline services. When, as RTE news reports this morning, the first person appointed in a murder investigation is not a lead detective, or a forensic analyst, but a financial controller, we have left logic far behind and are on the shores of la-la land.

There is a bit of a meme out there that instead of cutting numbers we should cut pay in the public service. Without doubt there are areas where police pay is rather….strange. There are lots of unusual allowances and these need to be worked out over time. But the principle, of cutting pay and retaining numbers, is interesting. The logic, that instead of cutting 10% of the force we should cut 10% of the pay from the existing force, is one of the seductive logical traps. Why not cut 20%, and INCREASE the force. Hell, why not cut 50%, or 85% and get a cop on every corner? Of course, thats never argued. But its the logical counterpart of this.

Karl Whelan once noted to me that there are a lot of people out there who feel that any wage greater than zero is too much for public sector workers. Hes right, I think….

David Andrews, Michael Collins and blurring the line between state and private

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David Andrews was the Foreign Minister of Ireland at the time the Good Friday Agreement was signed. This is a towering achievement for him, and for all others. Its a tragedy that he has sullied, as I believe he has, this by an attempt to sell a signed copy of the final draft of the agreement. The has now it seems seen sense and withdrawn the document from sale. However, one wonders why he thinks its his to sell? The agreement, signed by the Gerry Adams, Bertie Aherne, John Hume etc, was given to those only who were present. Now I am not a lawyer, but it seems plain as a pikestaff to me that when a foreign minister signs a document and is given a copy of same signed by all that document IS NOT HIS TO SELL. Its not even his, its ours, the citizens of the country whom he represents. I would like to think that had I been in his place I would have proudly donated it to some archive or other.  This would be the classy thing to do. Whats not classy is to flog it for a few grand.  We might well ask what de Bert did with his copy….It would be useful if the other signatories were to confirm what they have done with their copies. We might also ask further what other documents other ministers have taken into their possession ex officio, and whether they have retained them or sold them? The blurring of the boundaries of state and private here are frankly breathtaking.

000225a8-314This isnt the first time we have seen this tawdry sale of what seem to me anyhow to be state assets. Take Michael Collins, or General Collins as he was at the time of his death. In recent years we have seen put up for sale his personal sidearm (property in my view of the Army whose commander he was and on whose authorisation and behalf he was carrying same) taken (by whom? on whose authority?) from his vehicle, and his cap badge, again taken from the site of his death. Lets not even go into the sale of his hair clipped from his corpse. Medieval relics aint in it.

Whatever happened to class? Imagine the furore in the USA if someone tried to sell the bloodstained clothes of JFK? or in the UK if General Jeremy Moore tried to sell the signed copy of the Argentine surrender of the falklands? We may have lost our sovereignty but do we have to lose our class?

What should we do with the Seanad?

So what to do with the Seanad? It now seems certain that there will be referendum on the (very complicated) proposal to reduce the parliament from two to one chambers.

Leaving aside the practicalities of same, and disregarding whether after what promises to be a bruising abortion battle in the first half of the year and the prospect of another stiff budget in late 2013 the coalition really wants to go to the mat on this issue, what are the options for the upper house?

First, there is a widespread view that the Seanad is at best dysfunctional and at worst irrelevant. The most recent poll suggested that by a fairly large majority the electorate would see it as the latter, with 55% suggesting it should go.

Second, the option being put to the people is likey to be a single issue : yes or no to have the seanad retained. But this I might suggest is to oversimplify the issue. From leaving things as they are to complete abolition there is a wide range of options. Reform, which cannot I think come from within the existing structures, should be attempted before abolition.

Lets recap: the seanad can only delay legislation on bills, it can initiate legislation, and it has a most curious makeup. Of the 60 members 6 are elected by the graduates of two of the universities, even though the provision exists to extend this franchise; 11 are direct appointments by the Taoiseach, and 43 are elected by panels. For more details on these see the Seanad website

This brings me to my reform proposals, drawn from nothing much more than 48 years living in the country and watching with amazement the antics of the elected members.

  1. Widen the electorate. At present the electorate to the Seanad is extremely limited and wildly unrepresentative. Recall that there are 43 members elected by “vocational panels” To most people this is of course both opaque and an affront, as these panels are political panels regardless of their presupposed idea to represent various vocations. The electorate of these panels consists of county councillors, dail and Seanad members. For all the gross unfairness of the two university graduate constituencies at least they represent tens of thousands of people – 15,000 voted in the University of Dublin election and 33,000 in the National University election. By comparison the electorate for the panels is about 1000. People who are county councilors and who are graduates from the two universities thus have 7 votes for the upper house. And politicians wonder why the ordinary public hold them in some certain contempt? Widen the electorate. Make it universal. Indeed make it open to all who hold Irish citizenship regardless of location.
  2. Make it work. Its hard to have confidence in a house designed to act as a watchdog and oversight on the lower house when it doesnt. Its hard to recall the last time a Seanad voted down a Dail proposal. So if it wont do that make it work some other way. Make all newly proposed secretaries general of government departments and all CEOs of companies either owned by or in which the state has more than 33% stake appear before the Seanad, to ask and be asked hard questions. Make their appointment contingent on a positive vote.
  3. Break the link with the Dail. At present there is a widespread belief that the Seanad is a place where old politicians go to vegetate, failed Dail candidates go to ruminate on a renewed Dail run next time round, or else where aspirant Dail members cut their political teeth. In the same way as we broke the link between membership of the oireachtas and of county councils, we can and should do so for the two houses of the oireachtas. Make it impossible for anyone who stands for election to one to stand for election to the other within a 5 year period. This would force politicians to choose
  4. Make it last. Part of the problem it seems to me is that the Seanad is tied to the electoral cycle. This provides its reputation as a soft landing for rejected Dail candidates, which I suggest could be broken. But lets go further and break the link more, with a standing electoral cycle for the Seanad as 4 years. This would , I suggest, free the Seanad to do what it is we want it to do.
  5. Keep it on its toes. One of the nice things about the US system is that it has frequent elections. This at least in principle allows a regular and real pulse to be taken of the nation. Lets import this and have the electorate judge the seanad and the government by extension, with 1/4 of the members up for election every year. And no, this needn’t be a massive undertaking, our way of electing is archaic at best…but thats another issue.
  6. Give it teeth. If we are to have a second, upper house, then it has to be able to do more than delay legislatin. Let it have power to throw out bills and to make serious amendments.
  7. Make it serious. Although in theory the cabinet can contain Senators it very very rarely does. If the Senate is serious make 1/3 of the members of the cabinet be required to be from same. This would of course be feasible only if we at the very minimum allowed universal sufferage.
  8. Make them ours. This ridiculous corporatisim, whereby members are , mar dhia, elected to represent the interests of vocations, might have made some sense in the 1930s. It makes zero sense now. Widen the constituencies when we widen the electorate. Lets have a national and a diaspora constituency, where we have (say) 45 members in the national and 15 in the diaspora. Above all abolish the ability of the government to stuff party placemen and the forgotten into the Seanad. For every decent independent Taoiseach nomination there are a dozen who would make caligulas horse seem like Gladstone.
  9. Make it a prize. If the upper chamber is to be anything it should be reflective and thoughtful Lets make any Irish citizen who achieves an externally validated major prize a member for a term. What prizes? Lets start with the Nobels and the Field Medal (the nobel of Math). Lets consider others, such as chess grandmasters, or Schock prizes in logic, or an Oscar…. Lets make the Seanad reflect both our desires and our achievements.

Im sure there are dozens of other good ideas floating about. One of them is not a blanket abolition.