Budget Perspectives 2007
Embargo: Tuesday October 10 2006 at 00.01a.m.
The Economic and Social Research Institute and Foundation for Fiscal Studies are holding their ninth Budget Perspectives Conference on Tuesday, 10 October 2006. The Conference will examine some of the key economic and public finance issues that need to be considered in framing the forthcoming Budget.
Venue: Hilton Dublin Hotel, Charlemont Place, Dublin 2
Date: Tuesday, 10 October 2006
Time: 9.00 am
There will be four presentations at this year's Conference -
1. The Macroeconomic Background to the Budget, and the Implications for the Public Finances.
Alan Barrett, Ide Kearney, and Yvonne McCarthy (ESRI)
2. Growth in Disability Benefit Payments.
Brenda Gannon (NUI Galway);
3. Child Poverty and Child Income Support
Tim Callan, Kieran Coleman, Brian Nolan and John Walsh (ESRI)
4. State Financial Support for the Horse Racing Industry
Tony Fahey (ESRI) and Liam Delaney (UCD Geary Institute).
The Conference brochure can be downloaded from our web site at www.esri.ie.
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Budget 2007: The Macroeconomic Context Autumn 2006
Dr. Alan Barrett, Dr. Ide Kearney, Yvonne McCarthy (ESRI)
(9.25 a.m. to 10.05 a.m.)
In a presentation to the conference, the authors of the ESRI's Quarterly Economic Commentary present the forecasts for 2007 from the Autumn Commentary and highlight the implications for the public finances in 2007. Among the points discussed are the following:
· The international context will be broadly favourably in 2007, although not as favourable as in 2006.
· Growth in the euro-zone is forecast to be 1.9 per cent, down on the 2006 figure of 2.6 per cent. Growth in the US is forecast to be 2.5 per cent, again down on the 2006 growth figure of 3.4 per cent.
· Turning to the domestic economy, consumption is forecast to grow strongly in 2007, at a rate of 7.4 per cent. This is partly as a result of the spending of funds in SSIAs. Strong employment growth (3.5 per cent) and nominal wage growth (5.5 per cent) will also contribute to supporting the acceleration in consumption growth in 2007.
· I nvestment is forecast to grow by 6.5 per cent in 2007. The biggest contribution will come from non-housing building and construction largely as a result of the roll-out of the new National Development Programme.
· Strong growth in consumption is likely to produce increases in VAT and excise revenues of more than 10 per cent in 2007. Our forecasts for strong growth in employment lead us to estimate a possible increase of over 6 per cent in income taxes.
· More generally, we estimate that approximately 11 per cent extra current revenue will be available to the Minister in 2007, relative to 2006, or €5bn.
· We estimate that over 8½ per cent more expenditure will be needed to fund current services, including welfare services, in 2007 at the same level as in 2006. In euro terms this amounts to €3.3bn. This is higher than the budgeted figure of 7¼ per cent or €2.7bn.
· Given a planned increase in the capital deficit of €0.9bn these figures imply a G eneral Government balance of 1.4 per cent of GDP in 2007; this means that the Minister could have an estimated €2.7bn to spend on budget day.
For further information contact:
Dr. Alan Barrett (ESRI) @ 6671525 (office)
Dr. Ide Kearney (ESRI) @ 00 31 206930020 (office);
Yvonne McCarthy (ESRI) @ 6671525(office)
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The Growth in Disability Payments
Brenda Gannon ( Irish Centre for Social Gerontology, National University of Ireland, Galway).
(10.05 a.m. to 10.45 a.m.)
In recent years, there has been a notable increase in the receipt of social welfare disability payments in Ireland;
· 1.8 per cent of the population received Disability Allowance in 2004 compared to 1 per cent in 1995.
· In 2004, public expenditure on illness and disability was 14 per cent of total social welfare spending, and 1 per cent of GDP.
The core question is if in fact the incidence of true disability has increased, or are financial incentives influencing mis-reporting of disability?
· Recently, the Public Accounts Committee (PAC) reviewed a pilot scheme of intensive monitoring, and found that about 10 per cent of people reporting back-pain were truly in need of disability payments.
· Results from an econometric study of mis-reporting support the PAC report. Subjective reports of the seriousness of the same disability vary across individuals, and can depend on whether an individual is in or out of employment. The study compared actual answers to questions on disability with a prediction of how the individuals would have answered if in employment. It was estimated that about half of those reporting that they were unable to work due to illness/disability would not have reported their disability or illness if in employment.
· These approximate figures must be interpreted with caution - they depend on the severity of illness, length of waiting times for medical assessment and type of illness.
The policy implications for Ireland are:
· Review of the medical assessment procedure to reduce waiting times, and to reduce expenditure by the Department of Social and Family Affairs on medical practitioners.
· Introduce further systems of integration between Department of Social and Family Affairs and Revenue Commissioners in order to reduce time taken to detect overpayments.
· Effective monitoring is required, perhaps by making the pilot initiative a nationwide policy, and appropriately distinguish between those in genuine need of social welfare and those who are mis-reporting or no longer incapable of work.
· Cost-benefit analysis of intensified screening is required.
· Individuals found capable of work need to be re-integrated into the labour force, so as to reduce the number applying for other social welfare payments.
For further information on this paper contact:
Brenda Gannon (Irish Centre for Social Gerontology, NUI Galway) ++ 353 91 495459, email:brenda.gannon@esri.ie.
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Child Poverty and Child Income Support
By Tim Callan, Kieran Coleman, Brian Nolan and John R. Walsh (ESRI)
(11.05 a.m. to 11.45 a.m.)
In Ireland and the UK, the risk of poverty for children is high by international standards, compared with other EU or OECD countries. The Irish and UK governments also share a stated objective of eliminating child poverty, although the targets attached to this objective are rather different. Ireland (and the UK) can learn from "best practice" in other countries about effective strategies to reduce child poverty, as brought out by a new study on child poverty and income support policies presented at an ESRI/FFS conference today.
Comparing countries with low and high rates of child poverty suggests that a key difference is the overall income support provided through the social welfare system. Substantial increases in universal Child Benefit have been implemented in Ireland in recent years, while the UK has opted for greater targeting of child income supports. Comparison with the best-performing countries suggests that while such policies can help reduce child poverty, they will not be sufficient on their own to achieve ambitious child poverty targets. Stronger income supports for adults as well as children, accompanied by measures to encourage welfare recipients to take up employment opportunities and thus reduce the extent of welfare dependence, are the key to better outcomes for households with children.
For further information on this paper contact:
Tim Callan, (Research Professor, ESRI): Tel. 01-6307145 or email tim.callan@esri.ie
Brian Nolan, (Research Professor, ESRI):Tel 01 6671525 or email brian.nolan@esri.ie
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State Financial Support for Horse Racing in Ireland
Tony Fahey (ESRI) and Liam Delaney (UCD)
(11.45 a.m. to 12.30 p.m.)
Horse racing receives significant public funding in Ireland.
· In 2005, the state provided the industry with the equivalent of €38 for every person who attended a race meeting.
· Between 2001 and 2006, total state aid to the industry amounted to €317 million.
· The biggest use to which state aid is put is as a contribution to prize money. In 2005, Horse Racing Ireland, the public body through which the state channels its aid to the industry, contributed €29.9 million to prize money. This was 58 per cent of the total prize fund for horse racing, and was the equivalent of 55 per cent of the state grant to the industry.
This paper seeks to identify and highlight a number of issues that need to be considered in deciding the future of this funding after current government commitments to the industry run out in 2008.
A key issue is the taxation of gambling. When the present system of state support for horse racing began in 2001, it was financed by a 5 per cent tax on off-course betting. That tax has since been cut to 1 per cent. The revenue from it is now supplemented by funding from general taxation in order to make up the grant to horse racing.
Competition from internet gambling, which is difficult to tax, has been given as one reason why the tax on off-course betting has been reduced.
Horse racing has certain social and economic benefits, but these leave open the question of whether or at what level public funding to the industry should be provided.
For further information please contact:
Tony Fahey (Research Professor, ESRI):01 6671525, or 087 6535325, tony.fahey@esri.ie,
Liam Delaney (Senior Researcher, UCD Geary Institute): 01 7164633, liam.delaney@ucd.ie.
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