The trouble with debt

NAMA has begun the process of buying toxic debt from our ailing financial institutions.  The first tranche sees €16 billion in loans being bought for a price of €8.3 billion – a ‘haircut’ of 47%.  This €8.3 billion is being borrowed to finance these purchases.  In essence, public debt is being created to buy private debt which may or may not be paid back.

Three years ago the amount of money being borrowed by Johnny Ronan, Liam Carroll, Bernard McNamara and their ilk had no effect on the ‘man on the street’.  With NAMA buying the loans issued to these developers with public debt it is not only Johnny Ronan who is taking a kick in the groin.

Can we measure Private Sector Credit in Ireland?

One of the most commonly used measures of the “bubble economy” in Ireland was the expansion of private sector credit in Ireland.  This is the total amount of money lent to Irish residents from our financial institutions.  The pattern on this variable for the past decade is very clear.

Private sector credit rose continually from €100 billion at the start of the decade to break through the €400 billion mark towards the end of 2008.  This has been a fall back since then, and the most recent figure from February is €365.5 billion.  This has occurred because repayments on existing debt have been more than the issue of new loans and because the banks have begun to slowly write down the value of bad debts on their balance sheets.

Is Eurozone inflation about to become an issue?

Eurostat today released a flash estimate of Eurozone inflation for March.  They estimate the annual rate of inflation to be 1.5% – a big jump from the 0.9% rate recorded in February.

From an Irish perspective the important thing is not necessarily the factors that determine the rate as we are a small proportion of the Eurozone (<2%).  Rather the issue is the impact the rate has on ECB interest rate policy.

CSO Data from last week

The CSO were busy last week with a lot of key economic data released.  The data published included

• Quarterly National Accounts (Q4 2009)
• External Trade (Jan 2010)
• Balance of Payments (Q4 2009)
• Quarterly National Household Survey (Q4 2009)
• Construction Output Index (Q4 2009)

Below is a set of slides on some key indicators using the updated data series.  I may add commentary on some of the patterns at a late date but for the moment I will allow the reader to draw their own conclusions.

CSO Data March 2010

Cooking the books

Today has been a tumultuous day on the economic front with public sector pay negotiations concluding, Quinn Insurance going into administration, and, of course, all the banking and NAMA related announcements.

The biggest of these is undoubtedly the latter of the three.  The numbers used in today’s analysis of the Irish banking failure are staggering.  The ‘Big Bang’ was that Anglo Irish Bank will require anything up to an additional €10 billion on top of the €8.3 billion it will receive “this week”.  With €4 billion given to the bank last year this is a total state contribution of €22.3 billion.

Yet, in interviews after today’s statement, the Minister for Finance, Brian Lenihan, said that today’s measures would not lead to any additional borrowing by the National Treasury Management Agency on behalf of the State.

The borrowing projections for the year were outlined in the Budget and are best seen from Table 10 of the Stability Programme Update (page 19).  The actual outturn for 2009 and the projections for 2010 are given below.  The table in the SPU also gives projections for 2011 to 2014 but the European Commission has already rubbished these as being based on overly optimistic growth predictions.  Anyway here’s my version of the table.

“Others believe in us”

Minister for Finance, Brian Lenihan, concluded his statement to the Dail today by saying:

[O]thers believe in us. We must now begin to believe in ourselves.

He used quotes from some external commentators to support this view. A short extract from his statement shows this.

How big is a billion?

Big numbers are back in the news today.  It seems timely to offer an update of this post.  Today there will be lots of talk of billions here and billions there: NAMA, the banks, Quinn Insurance.  Just how big is a billion?

Here is me and a million euro in 100 euro notes.

I could pick it up, put it in a bag  and walk around without anyone noticing I was carrying a million euro.  What about me and a billion?  The answer is below the fold.

Ireland is in a Depression

The release of the fourth quarter 2009 Quarterly National Accounts reveal that Ireland is in a depression.  The commonly cited definitions of a depression are:

1. A recession which lasts for more than two years (eight quarters)
2. A decline in GDP of more than 10%

GDP in Ireland has declined for each of the last eight quarters and ten of the last 11.
GDP in Q4 2009 was 12.3% lower than the equivalent GDP figure in Q4 2007. (€47.885 billion versus €41.913 billion).  If we were to look at GNP figures the outcome is even bleaker – a drop of 16.7%.
Here we can see when we entered recession and when we entered depression. Click to enlarge.

The trend in both GDP and GNP is still down.  If a depression is worse than a recession, what’s worse than a depression?

‘Turning the Corner’ – not a chance!

The Irish economy was declared to have ‘turned the corner’ towards the end of 2009 when the CSO released the Q3 quarterly national accounts last December.  At that stage the CSO reported a quarter on quarter change in GDP of +0.3%.  We questioned it at the time.
Today, the CSO have released the quarterly accounts for Q4 2009 and have revised the Q3 figures.  The revised figures show a quarterly change in Q3 of  -0.1%.  GDP actually fell! With the CSO saying that the change in Q4 was a much accelerated fall –2.1% the Irish economy has not contracted for eight quarters in a row and 10 of the last 11.  Remember a recession is defined as two consecutive quarters of negative growth.
Here are the quarterly GDP growth rates for the past 11 quarters.

Quarter	2007 Q2	2007 Q3	2007 Q4	2008 Q1	2008 Q2	2008 Q3	2008 Q4	2009 Q1	2009 Q2	2009 Q3	2009 Q4
Growth Rate	-2.0	-0.2	+2.1	-1.2	-2.1	-0.0	-4.7	-2.0	-0.7	-0.1	-2.3

See Table 4 of the CSO release.
The current drop of –2.3% in Q4 2009 is the second largest in the recession (depression?).
In a statement reacting to the figures the Minister for Finance, Brian Lenihan said:

“Today's figures show that the annual pace of decline in GDP slowed considerably as the year progressed. There was a fall in GDP of 2.3 per cent between the third and fourth quarters. Excluding the impact of the ongoing decline in new house building, GDP was roughly unchanged in the fourth quarter.
Today’s figures are consistent with my Budget Day projections for this year and as I outlined, I expect that the economy will resume growing in the second half of the year. ”

It is pretty easy to check if the Minister’s assertion that if we exclude construction that “GDP was roughly unchanged in the fourth quarter”.  A quick calculation shows that GDP excluding construction declined by –1.8%,  not quiet unchanged.  Here’s a little graph of the two quarterly growth rates: total GDP and GDP excluding construction.

QNHS and the Composition of the Labour Force

The CSO have released the data for the Q4 2009 Quarterly National Household Survey.  Here are some updated graphs from a previous post. Click all graphs to enlarge.

First we see that the number of non-Irish nationals in the labour force continues to decline, with 14,400 fewer in the labour force compared to Q3 2009.  There were declines in both the employed (-7,600 to 255,200) and the unemployed (-6,800 to 47,900).
As a percent of the workforce, the number of non-nationals continues to decline and from a peak of 16.4 in early 2008 is now down to 14.1%, a level last seen in late 2006.

The origin of these workers continue to show that the main driven of change in this category is workers from the EU Accession states.  There was a drop of 11,700 in the number of workers from these countries in the Irish labour force.

The non-seasonally adjusted unemployment rates for Irish and non-Irish workers show that there was a sharp drop in the unemployment rate of non-Irish nationals.  This dropped from 17.2% to 15.8%.  This drop occurred because a large number of this group who were unemployed left the labour force (and by assumption the country).

Breaking down the unemployment rate further we see that the best performing group are those from the EU15 (excluding Ireland and the UK) with an unemployment rate of 8.4% (up from 7.8%).  The group worst affected by unemployment are workers from the EU Accession states with an unemployment rate of 18.6% (down from 19.5%).

Spot the Difference

Here’s a graph of a decade’s worth of data from Eurostat on the General Government Deficits in Ireland and Greece. Click to enlarge.

The estimate from each country for 2010 is also provided, and represented by the dashed lines.  I can’t see much difference for the most recent data. 

EU Growth Rates

Way back on March 4th Eurostat published the Quarterly Accounts for the 27 members of the EU.  This gives data on GDP and the components of GDP for the fourth quarter of 2009.  The headline figure of a QoQ growth rate of 0.1% suggested that the European recovery was continuing, albeit at a slower rate.

However, in Ireland we are still waiting for Q4 data from the CSO.  If you look at the table on page 3 of the report you will see that Eurostat are missing data for three countries: Ireland, Luxembourg and Malta.

The Distortion of Taxation

Here is a great little example of the distortionary effects that taxation can have.  Taxes have a ‘deadweight loss’ over and above the amount collected by the taxes.  Here the loss is an asset that in the absence of taxation would continue to be used.

Newly independent Aol is still struggling with the fate of Bebo, the social network they acquired for $850 million in 2008.

No one argues that Aol underpaid for Bebo. And the social network has fallen from 22 million monthly unique visitors when it was acquired to just 14.6 million today (Comscore worldwide). But even so, Bebo clearly has some value on the open market.

Despite that value, Aol’s best financial option for Bebo will likely be to abandon it rather than sell it, say corporate tax experts we’ve spoken with.

Here’s why – complicated corporate tax rules will let Aol write off the full purchase price of Bebo if they declare it worthless and abandon the asset. With Aol’s effective tax rate of around 45%, that’s $380 million and change in their pocket in taxes that they’d be able to avoid.

A sale of Bebo would almost certainly be less attractive. If someone were to pay them $100 million for the service, which is optimistic, Aol could still offset the remaining $750 million as a tax loss. But it could only apply against long term capital gains, and Aol doesn’t have any to offset against. They’d have to carry that loss forward and hope for future gains to offset it against.

Private Sector Wage Cuts

The RTE website carries a story this morning on a survey carried out by the Small Firms Association (SFA):

Almost Half of Small Firms Cut Wages Last Year

The headline would lead us to believe that there had been falls in wages in small firms last year.   In actual fact, the survey indicates very little about wage changes, though we do get some detail on wage levels. 

The only wage change that information is provided on is for entry-level graduate positions, which '”decreased across almost all job categories”.  More details of the survey are available at the SFA website here.

In RTE’s defence the text of their story is correct.  About half of the small surveyed cut their overall wage bill.  This can be done through two means.

1. Cut wage levels
2. Reduce employment numbers

The survey reveals that 43% of the firms cut employee numbers.  Although we are given little detail on wage levels we can infer that a large amount of the fall in payroll costs can be accounted for with the fall in employees.

We still have little evidence of wide-ranging private sector pay cuts.  The CSO collect data on pay levels with the Earnings Hours and Employment Costs Survey (EHECS).  An analysis of the most recent figures (Q2 2009) is available here. 

The CSO are due to publish the Q3 2009 before the end of the month.  That should add to our understanding of the pattern of wages in the current recession.

Data on all other EU countries are available up to Q4 2009.  See this release from Eurostat where the only missing data are for Ireland.  Across the EU wages rose 2.2% in 2009.  The only countries to show a decrease were: Denmark (-0.3%), Estonia (-6.2%), Latvia (-6.5%), Lithuania (-11.4%), Malta (-0.4%), Slovenia (-2.5%), and Slovakia (-0.3%).

Rugby makes you thirsty

The issue of pubs closing on Good Friday has been brought to the fore in recent weeks with the upcoming Magners League game between Munster and Leinster scheduled for Thomond Park on the same day. 

There have been pleas from many sources for Limerick pubs to be allowed open to cater for the crowds.  Many strange claims have been made.  For example, in a piece on the RTE website we can extract the following.

Vintners spokesperson Dave Hickey said they hope their application will be successful.

They say they will be making the case that publicans could lose up to €6m in trade brought into the city by the sell-out match.

If the pubs are going to ‘lose’ €6 million alone surely their case has some merit.  However, consider that the capacity of the redeveloped Thomond Park is 26,500.  In order for the pubs to earn €6 million in revenue, each and every person (all of them) would have to spend €225 euro on drink or have about 50 drinks each!

Thirsty work, going to rugby matches! 

Estimating Ireland’s Black Economy

In a nice little paper from 1997 published in the now defunct Irish Banking Review, Gabriel Fagan produced the following estimates of Ireland’s Black Economy from 1963 to 1995.

Fagan’s 1997 paper is available here.  Fagan also wrote a more detailed paper that was published in The Journal of the Statistical and Social Inquiry Society of Ireland.  This paper published in 1994 is available here.

The estimates provided above are based on the monetary approach to estimating the black economy.  The assumption is that there are ‘excess currency holdings’ in the economy over and above what is necessary for the volume of transactions reported in the National Accounts.  The next step is that this extra currency in circulation is used in the black or cash economy so as to avoid detection.

Fagan (1997) estimated the following equation

where C is the amount of currency in circulation, M1 is the narrow money supply (currency plus deposits), Y is Gross National Product, R is a long government bond interest rate and T is a measure of the tax burden (total tax revenue as a proportion of GNP).  Fagan (1997) also included a time trend and reported the following results

Fagan used the increase in currency holdings as a results of increases in the tax burden to produce the estimates of the black economy up to 1995 provided above.

Updated data on the same variables used by Fagan is provided here.  This dataset has observations from 1960 to 2007.  Using this new dataset a version of Fagan’s original equation is estimated.

The full results are available here which suggest that all may not be well with the model specification.  We will ignore these and use this simple model to find an estimate of the black economy.

We can do this by using the following steps.

1. Find the change in proportion of the money supply held as currency in the economy that are the results of changes in taxation.
2. Estimate the volume of these excess currency holdings.
3. Find the volume of currency needed for the transactions reported in the national accounts.
4. Calculate the velocity of circulation in the formal economy.
5. Use 2 and 4 to find the level of income in the black economy.
6. Find the percent of GNP that this estimate comprises.

An updated spreadsheet with all of these calculations is available here.  Here is a graph of the estimates from Fagan (1997) and those calculated here.

Although there are difference from 1960 up to 1980, the two series track each other through most of the 1980s and for the years in the 1990s for which Fagan estimates are available.  This is highlighted in this graph.

From the new estimates we see a downward trend in the size of the black economy during the Celtic Tiger period.  This continued up to 2003, for which there is a black economy estimate of just 5.6% of GNP.  A rise since then gives a most recent estimate for 2007 of just over 8.5% of GNP.

Presentation to the Cork Society of Chartered Accountants

Last week I gave a presentation to the CSCA Annual Practice Day.  The presentation followed the ‘turning the corner’ theme that has been a feature here.  The slides used in the presentation are given below.

Practice Day Presentation 2010

Danny McCoy on Supply Side Incentives

Danny McCoy picks up on a theme made in the preceding post.

"We know from history that when growth comes it can be jobless growth. Our success will be shortening the distance between growth resuming and employment increasing. Our social welfare system can be a drag in terms of ensuring that employment comes along significantly."

Social welfare rates – even after reductions to some payments in December's budget – are a disincentive to some people returning to work, he said, and added that the government needs to look at the amount of time for which those on the dole can claim the full allowance. So how long should that period be? One year, two years?

"Nobody wants to see people left destitute or anything like that, and there should be safety nets, but there is no tapering off in social welfare benefits. We can't afford, for their human dignity, to leave them on the dole for the rest of their lives. If two years is what people believe that they could stay out of the labour market, it's far too long. Businesses would like to see people having the facility to get back [to employment] at rates which employers can afford."

The full interview is from yesterday’s Sunday Tribune.

People respond to incentives – the supply side edition

This amazing graph (click to enlarge) shows the percentage of unemployed people who returned to work in Pittsburgh in the period 1980-85.  The horizontal axis on the graph represent weeks relative to the time when unemployment benefit payments to the individual cease (week 0).

Negative numbers indicate the number of weeks of unemployment benefit remaining for the individual.  Positive numbers tell how many weeks it is since the individual stopped receiving unemployment benefits.

In the weeks just before the payments stopped about 2% of those unemployed returned to work.  On the week the payments stopped this shot up to over 25% and quickly went back down.

The evidence is clear. People respond to incentives.  Why work when your income can be replaced with welfare payments?  As soon as the payments expire some 25% of people find a job.  More here.

This is not evidence to support the abolition of unemployment benefits. Instead is argues that the payments should possible be staggered downward to try and smooth out a pattern like that seen in the above graph.

[In an interesting aside I was recently asked to consider what would be an appropriate comparison to make when evaluating the level of unemployment benefit.  One suggestion could be that we should treat our unemployed no worse than we treat our prisoners.  After all, to do otherwise would suggest that crime pays.  How much do we spend on a prisoner in Ireland each year? Answer: €97,700!]

Duncan and our food

In a recent episode of his RTE show, Eco Eye (not yet available online), Duncan Stewart explored the source of Irish food.  He seemed alarmed at the fact that in 2008 Ireland imported just over €4.5 billion worth of food.  He failed to mention to we also exported over €7 billion in the same category.  Full retails of our external trade in food are given here. Click to enlarge (figures in €millions).

Duncan is correct though the 2009 figure will down to about €4.2 billion.

During the show Duncan went to fresh food producers around the country, spent a few enjoyable Saturdays at some of the ever increasing number of Farmers’ Markets, and wondered why a small number of multiple retailers have virtual control over our food supply.  The thoughts of domestic food producers feeling pressure from the retailers were to the fore.

The programme raised many interest points and is worthwhile viewing from a number of perspectives.

Duncan ended the show with the following quote (paraphrased):

“Ireland imports €4.5 billion worth of food every year.  Of that €3 billion could be produced here.  That is €3 billion euro that could be flowing around the Irish economy and sustaining 10,000 jobs.”

This reminded me of a quote often attributed (possible in error) to Abraham Lincoln:

“I don’t know much about the tariff, but I know this. If I buy a coat in England, I get the coat and England gets the money. If I buy a coat in America, I get the coat and America gets the money.”

What is the flaw in Lincoln’s (and Duncan’s) logic?

They really like us

A piece from last week’s Los Angeles Times is headed Irish public pays a price for nation's fiscal austerity but the general impression is of an economy that has ‘turned the corner’ and is a ‘shining light’ when compared to some of our EU colleagues.

Some excerpts:

The outside world applauded last December when Ireland unveiled its harshest budget in a generation. Stinging cuts and higher taxes were needed to tame a runaway public deficit and give the limping Celtic Tiger some of its roar back, officials said.

Three months later, Ireland has become something of a poster boy for good behavior in bad times, held up as an example to Europe's other debt-laden economies, particularly Greece.

Officials say they had no choice but to inflict painful cuts in order to start bringing down a whopping deficit of about 12% of gross domestic product, far in excess of what's allowed under rules for the 16 countries that use the euro. The nation's total debt is about 47.4% of GDP.

Although international markets greeted the austerity plan favorably, as an indication that Dublin was serious about reining in its deficit, opinion at home hasn't been so kind.

Indeed, economists around the world cite Ireland as a positive counterpoint to Greece, which is also grappling with a debt crisis that has threatened the stability of the euro.

Where Athens concealed its financial woes for years, Dublin copped early to its deficit and took emergency action to stop the rot. Greece's credibility has been shredded, enough that the European Union has essentially put the government there under supervision; Ireland has managed to repair some of the damage to its reputation and maintain its independence.

The piece does go on to cite some examples of domestic disharmony with the policies enacted, but the general perception of a positive international reaction is developed further.  Why is this?

There is nothing to suggest the budget deficit is been brought under control.  Tax revenues continue to fall.  Expenditure cuts are being offset by increases in social welfare payouts.  Our deficit may be worse this year than last.

We are applauded for not concealing our financial woes.  Yet the NAMA experiment is ‘off-balance sheet’.  The quoted Debt/GDP ratio of 47.4% will not increase once €54 billion is spent to buy distressed loans from the banks.  Including this would bring out debt ratio to about 85% and the ongoing deficit will see this race past 100% in the next 18 months. 

There is no doubt that this international perception is good for Ireland and our borrowing costs, but in order to ensure it doesn’t evaporate we will have to live up to it at some stage. There is no sign of that happening yet.

Playing with words

A generally uninteresting report on the RTE website discussing the Sinn Fein Ard Fheis contains the following gem.

Delegates have voted in favour of a motion calling on the Government to decommission the National Asset Management Agency.

Tax Defaulters 2

After collating the data published on tax defaulters available from the Revenue Commissioners it has been possible to track some additional trends to those reported in The Irish Examiner and looked at here.

First up we can examiner the number of cases reported each quarter from 2001: Q4 to 2009: Q3

 

As can be seen the numbers were below 100 for the first five quarters in the same and then shot up as the investigation in the bogus non-resident accounts (DIRT evasion) reached a conclusion.  Since then the number has shown a gradual downward trend and figures are now back to 2001 levels.

Although the number of published defaulters may be trending downward the average settlement has been rising.

 

The average settlement started out below €100,000.  The average settlement in 2009 Q3 was just below €250,000.

The total settlement is made up of two elements:

1. The amount of tax outstanding
2. The level of interest and penalties imposed

A clear pattern from the data is that the total settlement is determined as much by the interest and penalties as it is by the amount of the tax.  Over the 32 quarters in the sample, the Revenue established that there was €355.5 million in evaded tax due.  The total settlements made by the 4,959 defaulters total €867.6 million.  The difference of €541.1 million is due to interest and penalties.

The interest and penalties imposed are 160% of the total amount of tax due.  There were some cases where the interest and penalties were some 700% greater than the original amount of tax due.  In one case, €75,000 in tax was due but the total settlement was nearly €600,000 as a result of the interest and penalties imposed. 

Here we see the increase in the total settlements made above the amount of the tax as a result of the interest and penalties. Ouch!

The largest penalty imposed was of €9.7 million on Bovale Developments who had an underpaid tax bill of €12.5 million from a total settlement of €22.2 million.

Tax Defaulters

On January 1 The Irish Examiner  ran a report on tax defaulters in Ireland.  They carried a number of short articles on the issue.  See here, here and here. 

Accompanying the article were a number of tables which are not available online.  Scans of these tables are available below.  Click title to see table.

• Number of Defaulters per 10,000 Population by County
• Top 10 Occupations by County
• Top 30 Defaulter Towns
• Top 10 Defaulters
• Top 5 Defaulters in the Top 8 Occupations

The data used by The Irish Examiner covers the period Q4 2001 to Q3 2009.  The data is available from The Revenue Commissioners here.  The cases reported come from Part 2 of the Defaulters list.  It is interesting to note that the proportions of the total settlements that are made up of “tax due”  and “interest and penalties”.

The 4,961 cases in the analysis meet the following criteria.

Settlements are not published where the amount is less than the threshold (€12,700 (pre 2005) or €30,000), where the amount of fine or other penalty does not exceed 15% of the amount of tax or where the taxpayer has, in advance of any Revenue investigation, voluntarily furnished complete information relating to undisclosed tax liabilities.

These cases only make a small proportion of the overall tax evasion cases processed by the Revenue Commissioners.

Using the numbers in the third of the articles linked to above it is possible to create the following table.

Occupation	Number of Cases	Average Settlement
Legal	32	€460,847
Medical	not given	€297,134
Company Directors	733	€270,087
Builders	616	€230,244
Farmers	904	€111,803

Mortgage Arrears Data

The Financial Regulator has published some interesting data on mortgages and mortgages arrears in Ireland.  The release is available here.
The numbers show that there are nearly 800,000 outstanding mortgages in Ireland with a total balances of about €118,000,000,000 (€118 billion).  This gives an average balance of just under €150,000.
Some 28,603 mortgages are in arrears of more than 90 days.  The total balance on these mortgages is €5.33 billion.  The average balance of the mortgages in arrears is €186,000.

Retail sales data

The CSO have published the preliminary January figures for the Retail Sales Index.  When the December figures were released we concluded that they were not 'turning the corner'.  The conclusion is largely unchanged on inspection of the January figures.
Retail sales in January 2010 are down on the January 2009 figure but the annual rate of decline on a monthly basis is showing some signs of improving.

The improvement in the volume index is less pronounced.  See here.
We have still got quite a way to go until we reach the 0% line and return to positive growth.  This is unlikely to get much better in February as the Exchequer Returns just released indicate that the VAT take for February was down on the Feb 09 figure.
The pattern of the index does not make pretty viewing.

Getting even smarter

We have previously seen that Singapore is considered one of the ‘smartest’ places in the world and considered how this might tie in to our goal of Building Ireland's Smart Economy.  We also saw that we may be getting smarter with the introduction of a 50c per item prescription charge.

Yesterday we took a step to taking another leaf out of the Singapore book with the release of the National Pensions Framework. (Abridged press release also available.)

This will see the introduction of a compulsory system of pension savings in 2014.  Singapore introduced a system of retirement savings in 1955 and this has evolved into The Central Provident Fund.  While initially established to provide savings for retirement the CPF has evolved into a system that provides and savings and investment across a range of areas:

• Retirement
• Education
• Home Ownership
• Investment
• Health

The total contribution rates to the CPF are around 35% of gross earnings (20% by employees and 15% by employers).  The contribution has an upper limit and also the rate drops with age.  Around 6% of earnings are allocated to the Special Account which is used to fund retirement.  A presentation I gave on the overall CPF system with particular emphasis on the health savings is available here.

The proposed contributions to the Irish retirement scheme is also 6% of gross earnings (4% from employees and 2% of employers).  One of the biggest issues to be addressed before the system can be introduced is getting the IT infrastructure in place.  The website for Singapore’s CPF gives an excellent template.  See here.

The CPF was established in 1955 and has been improved and expanded slowly since then.  The system of health savings through the Medisave accounts was not introduced until 1984.  Who knows, maybe in 2043 we will be even smarter and have introduced our own system of medical savings accounts.

Constantin Gurdgiev has some great questions on the proposed scheme.  I do not know how they will be addressed in the Irish system.  From what I know of the Singapore model I have tried to provide answers to his questions based on their system.  These answers are available here. 

We must wait to see how they will be answered here but I would hope that Gurdgiev’s conclusion that this will just be an additional tax (on private sector workers) will be proved wrong.

February Exchequer Returns

The Department of Finance has released the Exchequer Returns for February 2010.  As with the previous month’s figures they do not make for cheery reading.  The documents available are:

• Exchequer Statement
• Analysis of Tax Receipts
• Analysis of Net Voted Expenditure
• Information Note from the Department

The headline tax figure indicates that the rate of decline in tax revenue shows no sign of improving.  January 2010 tax revenues were 17.7% down on the January 2009 return.  For February 2010 we see that the difference on the equivalent month last year was 17.9%.  The decline is actually worse!

Grade Inflation

Based on reports we know that Minister for Education, Batt O’Keeffe, is considering the impact of grade inflation in second- and third-level education in Ireland.

It has emerged that the Minister has ordered the State Examination Commission to examine Leaving Cert. results and the Higher Education Authority to report on third-level results.  I’m not sure why he has needed to do this as the data is already available in the Department of Education website!  In particular, findings on the Leaving Cert. are available here and here.

Using the data we will consider the pattern of results in the Leaving Cert. Economics exam.  A graph such as the following is strongly suggestive of grade inflation. Click to enlarge.

The graph gives the percentage of students taking Leaving Cert. Economics who score a Higher Level Grade C or above.  The graph is based on data presented in the following table.  Let’s have a look at some of these numbers.