www.tasc.ie

Follow the MoneyHow to Pull on the Public Purse Strings

ObjectivesIntroduction to:• basic concepts (and jargon) of public finance and public spending• a comprehensive overview of how public expenditure is raised and

spending determined• fundamentals of the annual budgetary process and getting behind the

Budget Day headlines• some case studies and practical exercises

Following this workshop, you will:• understand public income and spending data• be familiar with the parts of the budget relevant to your area of interest• frame your arguments in the language of money that finance officials and

policymakers understand

Current Knowledge? Personal Aims?

• Before we go any further…• What is your level of knowledge and comfort working

with official statistics about public money?• What is your level of knowledge and comfort talking

about economics?• What do you want to know at the end of this half-day

workshop?• How much time will you be able to invest in using

official statistics on public finances?

What are the Public Finances?

• What is public ‘expenditure’?• What is public ‘revenue’?– Both are generally expressed as a percentage of

economic output (% of GDP) as well as in cash terms

What affects public spending levels?

• Greater or smaller role for the State in providing goods and services (e.g. welfare state or not)

• Age of population – e.g. pensions, health care• Size of defence budget• Size of national debt• GDP-GNP gap• State of the economy (‘business cycle’)• Pro-cyclical versus counter-cyclical

• DisastersEtc.

Quiz #1

• Which is Ireland’s level of public spending as a proportion of the economy (% of GDP)?

Govt.; 50%

Other; 50%

Govt.; 57%

Other; 43%

Govt.; 43%

Other; 57%

A. B. C.

Total Government Expenditure (% GDP)

Govt.; 50%

Other; 50%

Govt.; 57%

Other; 43%

Govt.; 43%

Other; 57%

Govt.; 36%

Other; 64% Govt.;

67%

Other; 33%

Govt.; 24%

Other; 76%

A. Netherlands (49.7%) EU Average (49.1%) UK (47.1%)

B. Denmark (57.2%) C. Ireland (42.9%)

D. Latvia (36.1%) E. Cuba (66.7%) F. China (23.9%)

Budget Jargon #1

• GDP (Gross Domestic Product)• GNP (Gross National Product)• GNI (Gross National Income)

• GDP = C + G +I + (X - M)– Consumption + Government + Investment + (Exports - Imports)

• GNP = GDP + Net Foreign Income - Net Foreign Payments• GNI ≈ GNP

– EU prefers GNI (includes EU transfers)

• COFOG (Classification of the Functions of Government)

Quiz #2

• Out of nearly €70 billion in public spending, how much do we spend on Social Protection?a. Half, circa €35 billionb. A third, c. €23 billionc. A quarter, c. €17.5 billiond. A fifth, c. €14 billion

Public Spending by COFOG 2012

General Public Services

14%

Defence1%

Public Order and Safety

4%

Economic Affairs8%

Environmental Protection2%

Housing and Community Amenities

2%

Health17%

Recreation, Culture and Re-

ligion2%

Education12%

Social Protection38%

NB This is public spending, not total spending. Does not include private market provision of services.What we are discussing today are Ireland’s public finances.

Where do we spend public money? COFOG Category € million % GDP

General Public Services, incl. National Debt €9,555.7 5.8%

Defence €667.1 0.4%

Public Order and Safety €2,715.9 1.7%

Economic Affairs €5,846.1 3.6%

Environmental Protection €1,311.3 0.8%

Housing and Community Amenities €1,371.0 0.8%

Health €11,666.9 7.1%

Recreation, Culture and Religion €1,292.9 0.8%

Education €8,548.8 5.2%

Social Protection €26,834.9 16.4%

Total €69,810.6 42.6%

Eurostat, COFOG 2012

Quiz #3

• These sources of Government revenue are in alphabetical order. Rank the Top Three biggest sources of revenue:

A. Capital Gains Tax (CGT)B. Corporation TaxC. Deposit Interest Retention Tax (DIRT)D. ExciseE. Income tax, including USCF. Inheritance and Gift Tax (CAT)G. Local Property Tax (LPT)H. Social Insurance (PRSI)I. VAT

Sources of Government Revenue (2013)

E. Income tax, including USC €15.8 billionI. VAT €10.3 billionH. Social Insurance (PRSI) €7.3 billion

D. Excise €5.0 billionB. Corporation Tax €4.3 billionC. DIRT €499 millionA. Capital Gains Tax (CGT) €367 millionG. Local Property Tax (LPT) €316 millionF. Inheritance and Gift Tax (CAT) €279 million

The Annual Budget CycleStage Timeline

Preparation for the next Budget Before and During Summer

Estimates (“White Paper on Receipts and Expenditure”)

1 week before Budget Day

Budget Day (Budget Statement by Minister for Finance)

Mid-October (latest) – EU rules

Stability Programme Update Published with Budget

Finance Bill Published after the Budget

Book of Revised Estimates Published weeks after the Budget

Finance Act Maximum: 84 days after Budget day

Supplementary and Additional Estimates As required (mid to end of year)

Appropriation Act End of Year

Monthly Exchequer Returns – updates on tax and spending

Exercise #1

• Why would you look for information about public spending and public finances?

• Where would you look for this information?• How time-consuming is it to find facts?• How reliable do you find that information to

be?

Official Information on Public Finances

What do you want to know? Useful source(s)What was announced in the Budget? 1. Budget Papers (Ministers’ Speeches

and Summary of Budget Measures)www.budget.gov.ie

How much money do we spend on different areas?

1. Budget Papers (Estimates and Revised Estimates)2. Dept. of Public Expenditure and Reform http://Databank.per.gov.ie

Where does Ireland raise taxes and other Government revenue?

3. Dept. of Finance http://Databank.finance.gov.ie and www.finance.gov.ie

How does Irish spending or taxation compare to other countries?

4. Eurostat (COFOG) http://ec.europa.eu/eurostat 5. OECD http://data.oecd.org/

Don’t worry, we’re going to look at each in more detail!

More Official Information on Public Finances

What do you want to know? Useful source(s)What is the current tax and/or spending situation, compared to the Budget/Estimates?

3. Dept. of Finance (Monthly Exchequer Returns)

Where is there a detailed breakdown of tax revenue?

6. Revenue Statistical Report http://www.revenue.ie/en/about/statistics/index.html

What options are there to change tax policy, including raising more revenue?

7. Tax Strategy Group (TSG) papershttp://www.finance.gov.ie/ga/what-we-do/tax-policy/tax-strategy-group

What was the final confirmed and audited spend of public money?

8. Comptroller and Auditor General (Report, Appropriation Accounts)http://audgen.gov.ie/

Even More Official Information on Public Finances

What do you want to know? Useful source(s)What is the detailed breakdown of welfare spending?

9. Welfare Services Statistical Reporthttps://www.welfare.ie/en/Pages/Annual-Statistical-Information-Reports.aspx

Where is there information on the deficit/surplus in public finances?

3. Dept. of Finance (Maastricht Returns)

Where is there information on the national debt?

10. NTMA (National Treasury Management Agency) http://www.ntma.ie/business-areas/funding-and-debt-management/debt-profile/

Where have specific spending items been debated or discussed by Government Ministers and politicians?

11. Oireachtas Debates, Committees and Parliamentary Questions http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/startpage?readform

Exercise #2

• What experience do you have of seeking information about spending from Government websites?– How comfortable are you reading tables of data?– How comfortable are you using search options in

databases to find what you need?– – How easy do you find MS Excel or similar?– – How easy do you find it to write about

c public finances (in report, funding bid)?

Budget Jargon #2

• Total Government Expenditure• Total Government Revenue• Central Fund (Exchequer)• Social Fund• Appropriation-in-aid• Tax expenditure• Tax credits, tax reliefs, tax breaks• Central versus Local• Gross versus Net• Capital versus Current• Voted versus Non-Voted• Debt versus Deficit

1. Budget Papers

• Ministers’ Speeches– Financial Statement– Estimates Statement

• Summary of Taxation Measures: Policy Changes• Estimates for Public Services• Estimates of Receipts and Expenditure for 2015• Various other reports, mostly economichttp://www.budget.gov.ie/

2. Dept. of Public Expenditure and Reform

• Estimate and Revised Estimateshttp://www.per.gov.ie/estpubexp2013/

• Databank.per.gov.ie– Votes and Vote Groups– Gross and Net– Appropriations-in-Aid (AIA Reports)– Multi-annual data (‘Trends’)– Public Service Numbers database (Full-Time Equivalent)

http://databank.per.gov.ie • Note: Votes are different from COFOG data

3. Dept. of Finance

• Databank.finance.gov.ie– Monthly Exchequer Tax Receiptshttp://databank.finance.gov.ie/

• Finance.gov.ie (website)– Exchequer Statementshttp://www.finance.gov.ie/what-we-do/public-finances/exchequer-returns/exchequer-statements – Maastrict Returns (EDP Notification Tables)http://www.finance.gov.ie/what-we-do/public-finances/data-reporting/general-government

4. Eurostat

• Statistical reportshttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/themes

• Search for datahttp://ec.europa.eu/eurostat

• COFOGhttp://epp.eurostat.ec.europa.eu/portal/page/portal/product_details/dataset?p_product_code=GOV_A_EXP

• Tax Trends in the EU (annual report)http://ec.europa.eu/taxation_customs/taxation/gen_info/economic_analysis/tax_structures/index_en.htm

5. OECD

• OECD Statisticshttp://www.oecd.org/statistics/ http://data.oecd.org (data explorer)

• OECD pages on Irelandhttp://www.oecd.org/ireland/ • Data on Irelandhttp://data.oecd.org/ireland.htm

6. Revenue

• Statistical Reportshttp://www.revenue.ie/en/about/statistics/index.html • Distribution of Income• Tax reliefs, tax breakshttp://www.revenue.ie/en/about/publications/statistical/2012/index.html

7. Tax Strategy Group (TSG)

• TSG Papershttp://www.finance.gov.ie/ga/what-we-do/tax-policy/tax-strategy-group

8. Comptroller and Auditor General

• Report on the Accounts of the Public Services• Appropriation Accounts• Value for Money Reports• Other reports (e.g. Health Boards, VECs)http://audgen.gov.ie/

Budget Jargon #3

• Social Security Contribution• Pay-Related Social Insurance (PRSI)• Social Fund• Insurance benefit/entitlement• Means-tested social assistance• Universal payment• Targeted payment• Supplementary or extra welfare payment• Welfare schemes

9. Dept. of Social Protection

• Welfare Services Annual Statistical Reporthttp://www.welfare.ie/en/Pages/Annual-Statistical-Information-Reports.aspx

10. NTMA

• Profile of the National Debthttp://www.ntma.ie/business-areas/funding-and-debt-management/debt-profile/

11. Oireachtas

• Debates• Committees• Parliamentary Questionshttp://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/startpage?readform

See also, www.kildarestreet.com• Alerts: https://www.kildarestreet.com/alert/

12. Other Sources

• CSO (www.cso.ie)– Data– SILC (Survey of Income and Living Conditions)

• Other Government Departments and Agencies– Statistics– Reports

• Citizens Information (e.g. tax and welfare rules)• Academic researchers

– Journal articles– Conference papers/presentations– One-to-one discussion

Exercise #3

To what extent does this kind of ‘tax-and-spend calculator’ provide an accurate picture?

http://publicpolicy.ie/where-does-your-tax-go/

Principles of Taxation

• Taxation as pooled resources paid into Central Fund – versus social security contributions paid into the Social Fund that

purchase entitlements– versus User Charges that pay for services at ‘market’ prices

• Not just taxes on income count– We are all ‘taxpayers’ (e.g. VAT, Excise)

• Social solidarity– Redistribution via social transfers and public services

• Progressive taxation– e.g. “From each according to his [or her] means…”

• Not a ‘burden’ to be ‘suffered’ but the price of civilisation

Talking Money, Making a Case…

• Final part of today’s workshop

– Finding and using relevant data to understand spending in your area

– Presenting your concern/your service in the context of the public finances

– Using (and getting beyond) the jargon– Demonstrating the public value of your argument

Budget Jargon #4

• Efficient versus Effective versus Economical• Cost-Benefit Analysis• Unit Cost• Return on Investment• Opportunity Cost• Regulatory Impact Analysis• Fiscal Impact Analysis• Unintended Consequences

Example: People who cannot afford heating

CSO SILC data– 12.9% of individuals were “without heating at some stage in

the last year” (2012)– The same figure was 6.0% in 2007

1. Making the Case for Public Funding– Why should we do this?

2. Spending on your Area of Interest– How can we do this (with public funds)?

3. How Will You Pay for That?– How can we afford this?

Exercise #4

• How would you make the case for public spending to address the needs of people who cannot afford to heat their homes?

Making the Case for Public Funding

• How would you make the case for public spending to address the needs of people who cannot afford to heat their homes?

– Moral case– Economic case– Public financial benefits of doing so• e.g. likely effect on spending in other areas (e.g. health)

Exercise #5

• What should we do to address the needs of people unable to afford heating?

Spending on your Area of Interest

• What should we do to address the needs of people unable to afford heating?– Increase incomes?– Reduce cost of energy, fuels?– Increase efficiency of fuel consumption?

Background information:– How many people cannot afford heating?– How much is already spent on existing schemes (e.g. fuel

allowance)?– Numbers of recipients and beneficiaries?– Unit cost?

Exercise #6

• Where will we get the money to address the needs of people unable to afford heating?

How Will You Pay for That?

• Where will we get the money to address the needs of people unable to afford heating?– General taxation?– Social insurance?– A cost-neutral approach?– Tax reliefs?– Loans?– Private financing/public-private partnership?

Q&A

• Any questions?• Other examples?

• Feedback?– Did you find information that you can use in your

work?– What would you like to know more (or less)

about?

• Please complete the evaluation sheet for us today!– The presentation slides will be circulated

• Send us feedback: nhaughey@tasc.ie

• Stay in touch: http://www.tasc.ie/– Open Government Toolkit section on the website

coming soon…

Final Words