Post Budget AnalysisThursday 13th Dec 2012
Budget 2013A Public Finance Perspective           Simon BarryChief Economist Republic of Ireland          December 2012
Fiscal correction now in its 5th year           Adjustment Package                     Main consolidation form            ...
Consistency on spending/revenue breakdown remainsin place                       Fiscal Adjustments to Date                ...
Budgetary policy over ’08-’12 has, in its totality, been clearly progressive;the largest reductions in income have been on...
…but Budget 2013 PRSI change is regressive                                                        Average Tax Rate (%)    ...
The public finances are showing improvement; the underlyingdeficit ex interest payments has halved since ‘09…             ...
…helped by now-improving revenues…                                                                                        ...
Non-interest spending is down ca 15% (Eur11 bn) fromthe 2008 peak                General Government Primary Spending, Eur ...
Overall fiscal position ahead of EU/IMF targets for over2 years…          EU/IMF Programme Primary Balance Targets:       ...
2012 has seen a further significant improvement ininvestor perceptions of the country’s creditworthiness…         %       ...
…with the EU/IMF programme providing cheapfunding for over Eur55bn of borrowing              %            Govt Bond Yields...
Even after the major effort thus far, deficit remains very large, moreneeds to be done to get to deficit to 3% target by 2...
…€5bn of further adjustment to come in ’14 and ‘15    Fiscal Consolidation Estimates and Breakdown 2014 - 2015            ...
Prospective fiscal drag remains considerable but iseasing         Planned Gross Annual Fiscal Consolidation to 2015,      ...
PMIs indicate Ireland’s traded sectors are outperforming thewider euro zone, not just other ‘vulnerable countries’        ...
The private sector, not fiscal policy, holds the key to Irishrecovery; the latest jobs trends offer much encouragement    ...
This document is intended for clients of Ulster Bank Limited and Ulster Bank Ireland Limited (together and separately, "Ul...
Brian Harvey                 The WheelDublin, 13th December 2012            brharvey@iol.ie                              19
Our benchmark                20
Government spendDown this year -2.3%Overall, down -4.3% since 2008Voluntary and community sector down -8% to -10% each ...
First, social impactMaintenance of basic social welfare rates, but changes around them have cumulative effectWelfare rat...
Second, impacts on V&C sector►Environment, Community, Local Development  ► LCDP down €6m 2013 to €48.4m  ► That is -10.9% ...
LCDPfunding2008-2013This is a programmetargeted atdisadvantagedgroups andcommunities                      24
Headlines (1)►Justice & Equality ► Department up +2.8% ► Equality down -20%►Education & Skills ► Down -0.4% ► National Edu...
Headlines (2)►Arts, Heritage, Gaeltacht ► Arts, culture & film, -5% (Arts Council is half)►Health ► Largest funder of volu...
Social Protection funding►Community employment €335 to €351m►Tus €65m to €96m►Job Bridge €54 to €81m►Community services €4...
Analysis, conclusions (1)Level of fall in government spending is small, less than 1% a year since economic & social crisi...
Analysis, conclusions (2)Impact on spatial poverty greater than generic poverty: targeting of disadvantaged communitiesN...
Upcoming SlideShare
Loading in …5
×

Presentation (simon barry & brian harvey) slides

485 views

Published on

Published in: News & Politics
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
485
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Presentation (simon barry & brian harvey) slides

  1. 1. Post Budget AnalysisThursday 13th Dec 2012
  2. 2. Budget 2013A Public Finance Perspective Simon BarryChief Economist Republic of Ireland December 2012
  3. 3. Fiscal correction now in its 5th year Adjustment Package Main consolidation form Planned Impact €bn* 1. July 2008 Expenditure 1.0 2. October 2008 (Budget 2009) Revenue 2.0 3. February 2009 Expenditure 2.1 4. April 2009 Revenue 3.5 (supplementary Budget) Expenditure 1.8 5. December 2009 (Budget 2010) Expenditure 4.1 Revenue 0.1 6. December 2010 Expenditure 4.0 (Budget 2011) Revenue 1.4 Other 0.7 7. December 2011 Expenditure 2.2 (Budget 2012) Revenue 1.1 8. December 2012 Expenditure 2.3 (Budget 2013) Revenue 1.2 Total 27.5 * Figures in all cases are broad orders of magnitude and refer to planned full-year gross impacts Slide 3
  4. 4. Consistency on spending/revenue breakdown remainsin place Fiscal Adjustments to Date Spending/Revenue breakdown Budgets 08 - 12 Budget 2013 Expenditure 65% 65% Revenues 35% 35% Source: Department of Finance Slide 4
  5. 5. Budgetary policy over ’08-’12 has, in its totality, been clearly progressive;the largest reductions in income have been on those with highest incomes Impact of Budgets 2008-2012 by Income Decile (% of Income) % Bottom 2nd 3rd 4th 5th 6th 7th 8th 9th Top 0 -2 -4 -6 -8 -10 -12 Source: ESRI -14 Slide 5
  6. 6. …but Budget 2013 PRSI change is regressive Average Tax Rate (%) Single, No Children, Private Sector Change 2012 vs. Change 2008 vs. Gross Income 2008 (low point ) 2012 2013 2013 2013 30,000 12.9 16.8 17.7 0.9 4.8 60,000 27.5 33.4 33.9 0.5 6.4 120,000 35.4 42.7 42.9 0.2 7.5 Married Couple, 1 Incomes, 2 Children, Private Sector Change 2012 vs. Change 2008 vs. Gross Income 2008 (low point ) 2012 2013 2013 2013 30,000 5.1 8.6 9.5 0.9 4.4 60,000 19.8 26.2 26.6 0.4 6.8 120,000 31.6 39.1 39.3 0.2 7.7 Source: Department of Finance Slide 6
  7. 7. The public finances are showing improvement; the underlyingdeficit ex interest payments has halved since ‘09… General Government Primary Balance, Eur bn (ex Banking Costs) 10 5 - -5 -10 -15 Source: Ecowin, UB, Department of Finance -20 f 06 07 08 09 10 11 12 20 20 20 20 20 20 20 Slide 7
  8. 8. …helped by now-improving revenues… General Government Revenue, Eur bn Exchequer Tax Revenue, €m50,000 7045,000 6540,000 up Eur1bn from 10 low35,000 6030,000 5525,00020,000 50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e 06 07 08 09 10 11 12Note: 2011 figures incorporate the reclassification of health levy receipts into the Universal Social Charge. Excluding this effect, 20 20 20 20 20 20 20tax revenues were still up in 2011, but by 0.8% y/y rather than the headline increase of 7.2% Source: Ecowin, UB, Department of Finance Slide 8
  9. 9. Non-interest spending is down ca 15% (Eur11 bn) fromthe 2008 peak General Government Primary Spending, Eur bn (ex Banking Costs) 80 down Eur11bn since 08 70 60 50 40 30 20 10 - 06 07 08 09 10 11 12 20 20 20 20 20 20 20 Source: Ecowin, UB, Department of Finance, UB Slide 9
  10. 10. Overall fiscal position ahead of EU/IMF targets for over2 years… EU/IMF Programme Primary Balance Targets: Performance vs. Benchmark 0 -5 -10 -15 -20 -25 1 2 0 11 12 11 11 12 -1 -1 -1 p- p- c- n- n- ar ar ec De Se Se Ju Ju M M D IMF Target Actual Slide 10
  11. 11. 2012 has seen a further significant improvement ininvestor perceptions of the country’s creditworthiness… % 8-Yr Govt Bond Yields 18 16 14 12 Source: Bloomberg 10 8 6 4 2 0 1 2 0 1 2 1 10 12 12 10 1 1 1 1 -1 -1 -1 1 1 n- n- n- p- p- p- c- c- c-ar ar ar Ju Ju Ju Se Se Se De De DeM M M Slide 11
  12. 12. …with the EU/IMF programme providing cheapfunding for over Eur55bn of borrowing % Govt Bond Yields vs. EU/IMF Lending Rates 18 16 14 12 10 8 6 4 2 Source: Bloomberg, NTMA 0 1 2 1 2 1 2 11 1 12 2 1 2 l-1 l-1 -1 -1 -1 1 -1 1 -1 -1 p- p- n- n- ov ov ar ar ay ay Ju Ju Se Se Ja Ja M M N N M M 9yr yield avg yield since Jan 11 Original EU/IMF Lending Rate rate at May 12 Latest (Nov 12) Notes: as at end Oct 12, Eur55.3bn of total available Eur67.5bn was drawn down with avg weighted loan life of 10.4 years Slide 12
  13. 13. Even after the major effort thus far, deficit remains very large, moreneeds to be done to get to deficit to 3% target by 2015 General Government Deficit as % GDP 5 0 -5 -10 3% Stability and Growth Pact Limit -15 Deficit inclusive of Underlying -20 banking sector costs deficit -25 -30 Source: Ecowin, UB, Department of Finance -35 04 05 07 08 09 10 11 f f f f 06 12 13 14 15 20 20 20 20 20 20 20 20 20 20 20 20 Slide 13
  14. 14. …€5bn of further adjustment to come in ’14 and ‘15 Fiscal Consolidation Estimates and Breakdown 2014 - 2015 2014 2015 Total % of Total Spending 2.0 1.3 3.3 65 Current 1.9 1.3 3.2 63 Capital 0.1 0 0.1 2 Tax / PRSI 1.1 0.7 1.8 35 Total 3.1 2.0 5.1 100 Source: Department of Finance Slide 14
  15. 15. Prospective fiscal drag remains considerable but iseasing Planned Gross Annual Fiscal Consolidation to 2015, Eur bn 8 Implemented / announced Planned 7 6 5 Source: NTMA 4 3 2 1 0 2009 2010 2011 2012 2013f 2014f 2015f Slide 15
  16. 16. PMIs indicate Ireland’s traded sectors are outperforming thewider euro zone, not just other ‘vulnerable countries’ Composite* PMIs: Ireland vs. Eurozone Manufacturing PMIs: Ireland vs. IT/Gre/Sp 65 65 60 60 55 55 50 50 45 45 40 35 40 30 35 Source: Markit Source: Markit, * Manufacturing and Services, 3m avg 25 30 Ireland Italy Greece Spain EZ Ireland Slide 16
  17. 17. The private sector, not fiscal policy, holds the key to Irishrecovery; the latest jobs trends offer much encouragement Breakdown of Employment, annual change (000s) 50 0 -50 -100 -150 Source: CSO, UB estimates -200 9 0 1 2 09 9 10 0 D 1 1 12 09 10 11 12 -0 -1 -1 -1 -1 -0 1 -1 p- p- p- p- n- n- n- n- ar ar ar ar ec ec ec Se Se Se Se Ju Ju Ju Ju M M M M D D Private Employees Public Employees Self Emp Slide 17
  18. 18. This document is intended for clients of Ulster Bank Limited and Ulster Bank Ireland Limited (together and separately, "Ulster Bank") andis not intended for any other person. It does not constitute an offer or invitation to purchase or sell any instrument or to provide anyservice in any jurisdiction where the required authorisation is not held. Ulster Bank and/or its associates and/or its employees may have aposition or engage in transactions in any of the instruments mentioned.The information including any opinions expressed and the pricing given, is indicative, and constitute our judgement at time of publicationand are subject to change without notice. The information contained herein should not be construed as advice, and is not intended to beconstrued as such.This publication provides only a brief review of the complex issues discussed and recipients should not rely on information contained herewithout seeking specific advice on matters that concern them. Ulster Bank make no representations or warranties with respect to theinformation and disclaim all liability for use the recipient or their advisors make of the information.Over-the-counter (OTC) derivates can involve a number of significant and complex risks which are dependent on the terms of theparticular transaction and your circumstances. In the event the market has moved against the transaction you have undertaken, you mayincur substantial costs if you wish to close out your position.Ulster Bank Ireland Limited. A private company limited by shares, trading as Ulster Bank, Ulster Bank Group and Banc Uladh.Registered in Republic of Ireland. Registered No 25766. Registered Office: Ulster Bank Group Centre, George’s Quay, Dublin 2.Member of The Royal Bank of Scotland Group.Ulster Bank Ireland Limited is regulated by the Central Bank of IrelandUlster Bank Limited. Registered in Northern Ireland. Registration Number R733 Registered Office: 11-16 Donegall Square East, BelfastBT1 5UB. Authorised and regulated by the Financial Services Authority and entered on the FSA Register (Registration Number 122315)except in respect of our consumer credit products for whichMember of The Royal Bank of Scotland Group.Ulster Bank Ltd is licensed and regulated by the Office of Fair Trading.Calls may be recorded. Slide 18
  19. 19. Brian Harvey The WheelDublin, 13th December 2012 brharvey@iol.ie 19
  20. 20. Our benchmark 20
  21. 21. Government spendDown this year -2.3%Overall, down -4.3% since 2008Voluntary and community sector down -8% to -10% each year 21
  22. 22. First, social impactMaintenance of basic social welfare rates, but changes around them have cumulative effectWelfare rates put are close to poverty line Above for older people, below for unemployed Poverty began to rise again 2009This year’s changes: Child benefit down to €130 Jobseeker benefit reduced to 6 to 9 months Telephone & household benefits Other smaller changes but cumulatively important 22
  23. 23. Second, impacts on V&C sector►Environment, Community, Local Development ► LCDP down €6m 2013 to €48.4m ► That is -10.9% ► Overall reduction is -42%►If it had been reduced in line with government spending, then it would be €81.1m (over)►Housing down -15%, where 34% of housing is provided by voluntary housing 23
  24. 24. LCDPfunding2008-2013This is a programmetargeted atdisadvantagedgroups andcommunities 24
  25. 25. Headlines (1)►Justice & Equality ► Department up +2.8% ► Equality down -20%►Education & Skills ► Down -0.4% ► National Education Psychological Service -2% ► FAS training for unemployed -4%►Development aid ► Poverty & hunger reduction -3%►Tourism, Transport & Sport ► Sports -6% (but more, due to underspend 2012) 25
  26. 26. Headlines (2)►Arts, Heritage, Gaeltacht ► Arts, culture & film, -5% (Arts Council is half)►Health ► Largest funder of voluntary organizations ► Main head is -2% (but includes all voluntaries) ► Other funding for HSE -1% to -2%►Youth ► €58.3m to €52.9m in 2013, €49.9m in 2013 ► Down -9.2%, -5.6% ► Most is for disadvantaged youth projects ► Counselling -12%, FRCs -5% 26
  27. 27. Social Protection funding►Community employment €335 to €351m►Tus €65m to €96m►Job Bridge €54 to €81m►Community services €45.4m to €46m ►The only good news, counter-trend. 27
  28. 28. Analysis, conclusions (1)Level of fall in government spending is small, less than 1% a year since economic & social crisis brokePattern of disproportionately reducing funding for voluntary, community organizations unaffected  Less in health, more in community (-42% LCDP overall)2013 has notable reductions in:  LCDP, 10.9%  Youth, -9.2%, -5.6%, at a time of 30% youth unemployment  Equality, -20%, with inequality growing  Housing, -15%, lists got longer every year since 1987  Training for unemployed, -4%, with 14% unemployment  Sport, -6%, despite known health benefits  FRCs -5%, counselling -12%. No explanation for any of these. 28
  29. 29. Analysis, conclusions (2)Impact on spatial poverty greater than generic poverty: targeting of disadvantaged communitiesNon-core reductions for those on welfare have cumulative effect for those near or already below poverty lineReduced resources for disadvantaged - and those who work with themReinforces a now well-established cycle of immizerization.  Thank you for your attention! 29

×