The absence of current data may be impeding the best management of our economic crisis, writes GARRET FITZGERALD.
THE FACT that during the month of February the Taoiseach had not been provided with any data on the flow of revenue during that month explained his shocked demeanour at the beginning of this month when he came into the Dáil to announce what was a major supplementary budget.
Yet 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 in most respects that body is dependent upon a prompt flow of data from Government departments and agencies – not all of them 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 cease 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 staff to Roscommon to get information from the registrar’s records.
In relation to the current economic and financial crisis, the Government urgently needs hard data on the present drop in private sector earnings – the absence of which makes economic forecasting very difficult and inhibits 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 how we are likely to recover some of the competitiveness that was 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.
Although one cannot draw firm conclusions from the tax revenue figures for a single month, the 12.5 per cent drop in income tax revenue 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.
At the very least this suggests that there is now good reason to watch the income tax data in the months ahead with a view to seeing 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 own 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 despite their technical quality are inevitably many months out of date when they appear.
Thus the latest house price data that the PermanentTSB/ ESRI has been able to publish, suggesting a house price fall of less than 10 per cent in 2008, relates mainly to house sales in a 12-month period that ended nine months ago.
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 Irish Timesdisplay advertisements. For this purpose I employed the asking price and the square footage of 85 houses with three to four bedrooms offered for sale that day in four areas of Dublin.
Comparing that data with asking prices for an almost equal number of houses advertised in these four areas of Dublin during the last month or so, it emerges that in all of the areas 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 – a selection of Dublin houses judged to merit display advertising – but it suggests to me that we may now be nearer than some believe to a levelling off in the prices of dwellings.
Meanwhile I have also encouraged the My Home website to repeat a comprehensive review of house prices that it published last year.
Garret FitzGerald and John Bowman will be in conversation at the National Library of Ireland on Tuesday next at 8pm in the library’s Politics Campaigns and Communication series. Reservations and more information from 01-603 0317