A question… July 5, 2012Posted by WorldbyStorm in Economy, Irish Politics.
Reading the SBP at the weekend I found this…
The debate was reignited last week by Minister for Transport Leo Varadkar, who suggested freezing increments was a fairer option than cutting public services.
The protection of increments in the Croke Park deal goes straight to the heart of the budget debate, since up to 80 per cent of the spending for health, welfare and education consists of pay costs.
“It’s very hard to justify giving anyone any kind of pay increase in the year ahead while we are cutting services, and I think that is one that is particularly difficult,” Varadkar said last week.
This is a fascinating analysis by Varadkar. But… is he correct?
Karl Whelan on the Irish Economy wrote a useful piece last year. In it he checked the reports we send to Brussels and noted that overall:
Pay and pensions = 25.5% Social payments = 37.8% Intermediate consumption = 11.4% Interest payments = 8.4% Capital formation = 6.4% Other (including subsidies) = 10.5%
And he continued: “So not 70%. Closer to one-third of that figure. And, as I’ve dicussed before, when income taxes paid by public sector workers are factored in, the net cost is significantly less.”
Okay, that’s the overall level of expenditure across all departments. Let’s look at the individual areas.
The welfare system currently accounts for 40 percent of the government’s total spending, health care 27 percent, and education 17 percent.
Which means that 84 per cent of all government expenditure is in those three areas. If you prefer you can go and download the Comprehensive Expenditure Report 2012-14. it’s good reading and it has some interesting information.
Overall Current Expenditure by type is Pay 30%, Pensions 6%, Social Protection 38% and all other expenditures 26%. Now the Report notes ‘The two core components are social protection expenditure and pay. The majority of public servants are involved in the delivery of core public services. Together, the health, education, justice and defence sectors account for three quarters of the total number of public servants.”
I took my own look at wage expenditure in the context of Gross and Net Current Expenditure and my figures, very roughly (and they could be well out because it’s hard to entirely divine the overlap between say social protection and Jobs, Enterprise and Innovation, appear to show an expenditure of 40 % or thereabouts. Even if we threw in the 6 % pension bill on top of that and increased it to 10% we’d still be just on 50%.
If the overall pay/pension figures are 36% and the three largest areas by quite some way are Health/Education and Welfare then it seems impossible mathematically for the percentage to be so far adrift that it’s 80 per cent.
But my question is am I misreading this? Any thoughts?