The absence of up-to-date data may be impeding Government decision-making, writes GARRET FITZGERALD.
THE FACT that, during February, the Taoiseach had not been provided with any data on the flow of revenue that month explained his shocked demeanour when he came into the Dáil to announce, what is in fact, a major supplementary budget.
But this is only one of several ways in which the absence of up-to-date data may be impeding the effective management of our crisis by the Government. This is not the fault of the Central Statistics Office, for that body is itself dependent upon a prompt flow of data from Government departments and agencies – not all of which are helpful in this respect.
We have even experienced the unilateral cessation of the provision of important data to the CSO – through, for example, the 1997 decision of the Registrar of Births, Deaths and Marriages to stop compiling data on the age of women at marriage – an action that deprives us of important social data with potential policy implications. Since then we have seen such data only in respect of two years – 2002 and 2005 – and those figures had to be compiled by the CSO sending its own staff to Roscommon to extract information from the registrar’s records.
The Government urgently needs hard data on the present drop in private sector earnings – the absence of which makes economic forecasting very difficult, as well as inhibiting the Government in its efforts to persuade public sector workers to accept the case for a reduction in their generally higher net earnings.
The scale of the current decline in average private sector earnings is also a key factor in assessing the extent to which during this recession we are likely to recover some of the competitiveness lost as a result of the public spending-induced inflation of the early years of this decade.
There have recently been frequent media reports of private sector pay cuts and/or reduced working hours, as well as a doubling of unemployment – mainly of private sector employees – to just over 200,000. Not, it should be stressed, to the 354,000 “Live Register” figure, which the media has persisted in presenting sensationally and irresponsibly as the number of people unemployed – despite the CSO’s clear warning to the contrary each month when it publishes the Live Register figures.
These currently include some 150,000 people not in that category, including, for example, large numbers who work part-time – in many cases by choice – but who are included in the register because their earnings are supplemented by the State. Although one cannot draw firm conclusions from the tax revenue figures for a single month, the 12.5 per cent drop in income tax exceeded by four percentage points the drop in receipts that might have been expected to have arisen from the decline of around 125,000 (or 8 per cent to 9 per cent), in the number of private sector employees since the end of 2007.
This suggests that there is now good reason to watch the income tax data in the months ahead to see whether these confirm, or modify, this first indication of a possibly significant drop in average private sector pay.
However, given the importance of the current trend of private sector pay, the Government ought not to have to rely on such a crude indicator as total income tax receipts. Instead it should insist on having made available to it up-to-date data on such elements of taxation as PRSI and PAYE payments, separately for each of the main sectors of the economy – all of which should be available in the Revenue Commissioners’ data base.
Another important area where we also lack up-to-date information is in respect of house prices. Part of the problem here is the Government’s failure to change the law that last year was found to prevent the publication of prices actually secured in respect of such transactions – as distinct from those sought by auctioneers.
In the meantime we are almost totally dependent upon several indices of house sales that are many months out of date when they appear due to delays arising from the unreformed character of our antiquated legal record system.
I have recently been able to develop my own amateur Dublin house price index, because in mid-September 2007, 15 to 18 months after house prices had already started to fall, I whiled away a journey from Limerick to Dublin by analysing that day's display advertisements in The Irish Times. I employed the asking price and the square footage of 85 houses with three to four bedrooms for sale that day in four different parts of Dublin.
Comparing those with asking prices for an almost equal number of houses advertised in these four different parts of Dublin during the last month or so, it emerges that average asking prices per square foot for such house space are now at least 30 per cent below my already reduced September 2007 average prices.
As I understand that the differential between prices sought and prices actually secured is now 5 to 10 per cent greater than 18 months ago, it appears that since prices peaked about three years ago, the overall decline has been around 40 per cent.
Of course this is a limited sample but it suggests to me that we may now be nearer to a levelling off in the prices of dwellings.
Finally, having repeatedly urged the Government to introduce an early supplementary budget, I would add that in thus starting to tackle our very large revenue shortfall, it should now steer a middle course. It ought to do enough to reassure the markets that the Irish political system has the will and the capacity to get on top of our problems, but at the same time it needs to be careful not to over-deflate an economy already facing a huge rise in unemployment as well as the first actual fall in consumer prices in three-quarters of a century.
Good luck with it, Brian.