Why the PDs Did So Badly ? Some Facts to Remember

In another characteristically great piece of analysis which he has titled "Fun, Fun, Fun ‘Til Her Daddy Takes Her Calculator Away", Michael Taft shows again how the groups who chiefly benefit from the State schemes most vulnerable to PD propaganda are the same ones who tended to vote PD. (The PD spin is mine, not Michael's).

Here are some extracts from a long piece:

We can all have fun in Household Budget Survey land....

Where else can you find that in the bottom 40% income groups, no one buys limes ? Or that the poorest 10% spend a higher proportion of their income on church contributions than anyone else? Or that the richest 10% spent nothing on funeral expenses (the rich must ‘die harder’)?

...I’d like to try my hand at a small set of figures: the extent to which higher income groups’ spending patterns attract higher state subsidies. For instance, if the state subsidises house-purchasing more than it does rent, we can get an idea of where that public expenditure is going by analysing the spending patterns of the different decline groups. Similarly with VHI relief or a whole group of other categories. ...

Public subsidies are heavily skewered to house purchase as opposed to tenants. ...[and]Nearly ¾ of mortgage interest relief goes to the upper-half of the adult population (the top four deciles of households equals 50% of all adults).

Relief for health insurance is only slightly less regressive though this may be an under-estimate as a number of low and even middle income households may not get the full tax relief if they are not fully in the tax net (these figures only relate to expenditure and not to the actual distribution of tax relief).

Taken together, these two reliefs cost the Exchequer (that is, the taxpayer – which is everyone; from the richest to the poorest) over €500 per year (that’s before the Government increased mortgage interest relief in the last budget – therefore, it’s [now]higher). It is questionable whether the vast majority of people are getting ‘value for money’ here.

It has long been established that pension contributions are highly regressive. The CSO gives us an update...While the top 25% of income earners account for nearly 70% of private pension expenditure – the distribution of tax relief would probably be even more regressive as those on the top rate get 41% relief while those on standard rate only get 20%. And this means a lot of money – employees and self-employed pension relief costs in the order of €1 billion a year (and that’s not counting the pension funds’ full tax exemption).

So the distribution of over €1.5 billion in public expenditure is skewered to the highest income groups. By contrast let’s take a look at one particular tax – refuse charges.

Charges for this absolute necessity of domestic life are skewered in favour of high income groups. This extremely regressive tax (or levy or charge) has such an impact that many low income households pay less in income tax or PRSI than they do refuse charges. In any event, the lowest income group pays five times more than the highest income groups as a % of gross income, even though they have nearly 18 times less income.

Please bear that last point in mind the next time you are tempted to get "sniffy" with those who object to being charged under the "polluter pays" principle, as I confess that I often am (despite the baby brother's repeated correctives).

I recommend going to Michael's website/RSS feed to read the full thing, if only to see the graphics which tell the stories even more clearly.

Six Million Reasons Why Public Sector Out-performs

No, it's not a misprint. The conventional wisdom which says that the private sector is always more economical just is not true.

Courtesy of the Cedar Lounge Revolution ("for lefties too stubborn to quit"), I learn that motorway constructed by the private sector cost at least EUR 8 million more - per kilometre ! - than the public sector.

I React in Dis-belief...

... and I hope that I am not alone.

Our Minister for Enterprise has expressed his "utter disbelief" that the ICTU is, among other things, suggesting that BES investments would be used as a tax-avoidance measure.

Neither I nor (I imagine) the ICTU is unaware that many BES companies benefit from the scheme, and that the State does well from its investment in some of them.

But the BES has been a terrific tax-avoidance scheme for all of its history, and most higher-rate taxpayers know it for nothing else.

I must refresh my knowledge of the cost-benefit studies. The last time I checked, the results were decidedly dodgy.

I hope that Mr Martin is not about to join the Martin Cullen school of project appraisal.

A Note on Prices and Competition

Competition tends to keep prices lower than would be the case in the absence of competition.

That, however, does not equate to saying that a multiplicity of sellers offering exactly the same price is evidence that there is no competition. It may, and often does, mean that there is lively competition.

For example, if all the petrol stations in a town charge the same for petrol, what will tend to happen if one of them changes the price ? If the change is upward, that outlet will, obviously, tend to lose business.

The owner's failure to commit commercial suicide proves something; but that something is not that there is an effective monopoly, as is often alleged, not just about the petrol retail sector, but about the meat factories, and the airlines, and just about every sector in the economy, it sometimes seems to me.

Of course, it is the case that some sectors are indeed characterised by effective monopoly conditions, but lack of price diversity by itself is not a reliable indicator of that.

The Groceries Order

The Chairman of the Competition Authority has been testifying to an Oireachtas committee today on the effects of the abolition last year of the order. The order prohibited below-cost selling of retail goods. The Authority has been a keen advocate of the change. I have been a profound sceptic: I still do not understand why there are any worthwhile benefits to below-cost selling. Given the extremely high concentration in the Irish retail sector and the lack of transparency consequent on the high foreign ownership share, it seems a crazy move to me.

It was "sold" to the public of course on the basis that it would reduce retail prices, and now the public is getting impatient because there is little sign of price reductions.

I haven't seen the text of what the Oireachtas Committee was told this morning, but I hope that it is an improvement on the "wait a little longer" message that other advocates such as the bould Eddie Hobbs have been peddling. I would like to think that the boffins have a model to measure the effect of the change, but I am not holding my breath.

However, I am not going to join the twits who say that because prices have risen, the change in the law has been a failure: perhaps without the change, the rise would have been greater.