Shake It ‘Til the Facts Spill Out


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Sometimes you just want to pick up the radio and shake it until the tiny little people inside start talking sense.  Take Minister Frances Fitzgerald on the Pat Kenny show yesterday:

Minister:   The country is broke.   The path back for every citizen in this country is going to be so tough.   And yet we’re the fourth highest in the OECD when it comes to spending on public services.  That’s often forgotten. 

Never mind the country-is-broke lark (we’re not too broke to pay over €3 billion a year on a non-existent bank).  Nor the ‘path back’ reference (easy for some, harder for others).  But the fourth highest spender on public services in the industrialised world?  Huh?  Not only should it be forgotten, it shouldn’t even be remembered because it is simply not the case.

Eurostat provides a comprehensive database on spending on public services, or Government final consumption expenditure.  They provide total spending, percentage of GDP, per capita and spending in power purchase parities (PPPs which factor in living costs).  It should be noted that this doesn’t count spending on social transfers (pensions, unemployment payments, family income supports, etc.).
Here is the spending per capita on public services in the EU-15.

Ireland doesn’t rank as a large spender on public services.  We rank 9th in the EU-15 league, ahead of the UK, Germany and, not surprisingly, the Mediterranean countries.  We spend 16 percent below the average of the other EU-15 countries.

  • We would have to spend an additional €5.5 billion on public services just to reach the average of other EU countries.
  • We would have to spend an additional €8.7 billion on public services just to reach the average of other EU countries not in bail-out (excluding Portugal and Greece).

We’d have to spend an awful lot more money to be like an average EU country (though, yes, spending more money is not a guarantee of improved output).

Maybe the Minister was referring to public spending measured in PPPs to factor in the cost of living.  High cost countries need to spend more to get the same value as low cost countries.  So how do we stack up in this measurement?

In this measurement, Ireland shares 11th place in the standings with Germany.  Now, we’re only ahead of the Mediterranean countries.

Was the Minister referring to spending on public services as measured by percentage of GDP?  I don’t think so.  The other EU-15 countries spend an average 22.3 percent of their GDP on public services; in Ireland, it is 18.3 percent.  We would need to increase spending by €6.3 billion just to reach the average on this measurement.

Eurostat also estimates the spend, as a percentage of GDP, for the years 2012 and 2013.  These estimates show that Ireland would have to increase spending on public services by €7.1 billion in 2012 and €7.9 billion in 2013 just to reach the average of other EU-15 countries.  This shouldn’t be surprising as the Government intends to cut public services up to 2015 at least.

Of course, some will raise the issue of military spending.  Unlike other EU countries, especially the UK and Greece, we don’t spend a lot on military (neither should the UK or Greece).  This, say some, skewers the spending figures.

So what happens if we subtract spending on military services?  Not a whole lot.  Ireland would still need to spend an extra €4.9 billion to reach the average of other EU-15 countries in 2011.  This figure would still rise in 2012 and 2013 if the Eurostat estimates hold.

There are other arguments.  For instance, other countries have a higher elderly population which require more expenditure on health and other age-related services.  This is true.  But Ireland has a higher youth demographic which requires a higher spend on education and youth-related services (justice, recreation & leisure, etc.).  Further, Ireland has a much lower population density than other EU-15 countries with the exception of Sweden and Finland.  There are 65 people per square kilometre in Ireland; the average of the other EU-15 countries is 171 while in the Netherlands it is 492.  Thin density means that public services (health, education, water, energy, security, etc.) have to be spread out, making it difficult to reach the scale that can be obtained in highly urban societies.

However you spin it, the Minister is wrong.  There is no measurement which can come even close to justifying her claim that we are one of the highest spenders on public services in the industrialised world.  The truth is that we’d have to spend billions just to reach the average of other EU-15 countries.  We are a low-low spend economy when it comes to public services.

If people want to argue that fiscal consolidation based on spending cuts is superior to a tax-based fiscal consolidation, fine.  If people want to argue that much of our spending on public services is inefficient, fine.  Let’s test the evidence, let’s come up with proposals to increase efficiency.

But first and foremost, lets’ start with the facts.  Let’s describe the situation as it really is.  If we don’t, the debate becomes degraded and reality becomes anything you want it to be.

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7 Responses

  1. malteser

    September 11, 2012 7:39 pm

    It’s not the amount spent that’s the problem. It’s how it’s spent. The public sector is full of people who would be fired in days if they work in the private sector. The public sector also suffers from duplication on an extreme level, and the waste is disgusting. I’m not talking about front line public service workers, but middle management, behind the scene work. And I know this, because I work in the public service, behind the scenes in an office. Before we ask for more money for the public service, we should reform the service we have and make it more efficient first!

  2. Donagh Brennan

    September 11, 2012 9:16 pm

    It’s disappointing that someone who links themselves to the SPARK campaign chooses to join in the bashing of the public sector with the usual cliches about the super-efficiency of the private sector over the moribund waste of the public sector.

    Surely it takes only a moment to realize that the biggest waste of public money at the moment is occurring because of the massive inefficiencies of certain private sector workers. In order to pay for this massive inefficiency and waste of “tax payers” money services are being cut from single parents and their children. I won’t go on, as Malteser might not be representative of the SPARK campaign, so for the commenter I’ll point to Michael’s previous post where he informs us that “Over 60 percent of public sector workers earn less than €50,000 a year – and this doesn’t take into account the impact of the pension levy. There are less than 15 percent on higher incomes (above €70,000) and a minute 2 percent in six figures.”

    The attacks on the public sector from the beginning of this crisis have been all about reducing pay, not only in the public sector but in the private sector as well. As Michael Taft points out, cuts (or reform, if you prefer) in the public sector has a knock effect in the private sector, reducing incomes and jobs.

    The reason is to boost profits in a recession without the need to invest.

    Meanwhile those without wealth to avoid tax are forced to pay for this dreadful private sector waste and inefficiency.

  3. William Wall

    September 11, 2012 10:14 pm

    Malteser, I would like to dissent from the view that the private sector is efficient. I have torn my hair out (almost completely) in dealing with computer companies. I’m fed up with ‘just in time deliveries’ – the phrase refers to the practice whereby you have to order something 6 weeks in advance so they’re just in time by the time they deliver it – provided the post doesn’t ‘go astray’. I have yet to meet a builder who doesn’t suddenly discover that he underestimated the job. Banks routinely magic away your money for the weekend and end up having to repay over payments. Some banks even screw up their computer updating and your accounts and cards cease to function for six weeks or so while they assure you that they care for you. I have never met an insurance company that is prepared to insure you against something that’s likely to happen to you. I have seen publishers (nowadays they’re ‘driven’ by marketing strategies) completely screw up the marketing – not to mention waste money on frippery. Friends who work in offices tell me they spend half their time on Facebook or checking out holiday destinations. Intra office email costs a fortune and leads to mountains of inbox junk. The only thing that the private sector is really good at is making profits in the good times and transferring their debts to the citizens in bad times. Maybe you should get out and work in the real world – as they’re constantly saying – and see what shite passes for efficiency. Private sector efficiency is a myth. And don’t forget its bosom companions – precarious labour and outsourcing.

  4. crunchy

    September 11, 2012 10:57 pm

    Personally i havent got an ax to grind with either the public sector or trade unions[some of my best friends are public sector trade unionists…….. :)] but i think whats really indefensible about croke park is the way that the most severe adjustment is forced on new recruits creating a two tier workforce. God forgive me for channeling Eddie Hobbs but its a case of the insiders looking out for themselves and devil take the hindmost.

    Im well out of my depth here, but afaic the strength of the argument for Keynesian policies in the US, UK etc rest on negligible or even negative real interest rates, if your practically getting the money for nothing then its a no brainer to go and invest it in something productive. However if your interest rates are at best 6 – 7% well its seems a little less open and shut, even allowing for the deflationary effect of cut backs. .

    Donagh , i presume that the private sector workers you referring to are bankers. The main problem we’re facing is that the collapse of the housing bubble took down a huge chunk of the economy and there isnt really anything obvious to replace it with. Now yes to a certain extent that’s the fault of the bankers, but its also a failure of regulation, economic policy etc.

  5. paul

    September 12, 2012 11:14 am

    Hi Crunchy,

    The way that new recruits are being singled out for reduced payments is lamentable, but its not part of the Croke Park agreement, and I don’t think any union has accepted that it is appropriate to treat them in this way.

    Wrt interest, the usurious rates we would need to pay on the open market are due to the massive banking debt burden rather than a budget deficit. It is probably true that any stimulus would have to happen with european support, but that doesn’t mean that a stimulus is a bad idea. I don’t understand how the public debate has been set up here, whereby only policy decided in Dublin is open to debate. We are part of the EU, and surely have a right to question EU policy.

    We may not have the power to change it, but then most of us don’t have the power to change policy in Dublin either and it doesn’t stop us complaining about it.