Leprechaun Economics Explained

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Taoiseach Enda Kenny

Further to yesterday’s eye-popping CSO figures

Taoiseach and Fine Gael leader Enda Kenny fielded questions from Fianna Fáil leader Micheal Martin about the reported 26.3% growth in the economy.

From the debate…

Taoiseach Enda Kenny: “First, the figures produced yesterday are unprecedented. They do not reflect accurately what is happening in the economy. Obviously, the figure of 26% is unprecedented and significantly stronger than the previous estimate of 7.8%, but it is important to note that is due to exceptional factors. It highlights the complexity and difficulty in interpreting the macroeconomic data in Ireland. The figures reflect a number of factors, including the impact of relocation of entire plcs to Ireland. This would have significantly boosted investment and net exports. Net exports contributed 18% to the 2015 growth figure. Contract manufacturing played a role in the figures. This occurs where an Irish-based company with another manufacturing unit abroad manufactures and sells products to other countries from that unit but is still based in Ireland.”

“While the headline figures can be exaggerated in an Irish context and will obviously be the subject of intense scrutiny, other indicators such as the level of consumer spending, the rise in the level of employment and the continuous drop in unemployment trends, as well as taxation receipts, confirm that there is a strong recovery rooted in the domestic economy in Ireland.”

“That domestic demand – spending by Irish businesses and Irish people – is also growing strongly. It is an opportunity arising from the many sacrifices made during the years.”

“The figures predate the decision in Britain in the referendum. Obviously, there has been a sharp depreciation of sterling since that decision and a deterioration in the outlook for the UK economy. While it is an unprecedented figure, the fact is, based on growth projections in real terms, the growth levels seen in 2015 were both a one-off and exceptional in nature. We cannot make policy on that basis, but the CSO takes into account in compiling its figures issues such as aircraft leasing and manufacturing here by companies that have units abroad.”

“As noted in the summer economic statement which was debated in the Dáil some time ago, the Department of Finance will prepare a full macroeconomic projection in advance of the budget in October. It will include updated estimates of economic growth, the public finances and whatever fiscal space is available to the Minister for Public Expenditure and Reform, Deputy Paschal Donohoe, taking account of developments up to that time, including the latest CSO numbers and the decision in the United Kingdom.”

Ceann Comhairle Seán Ó Fearghaíl: “The Taoiseach’s time is up.”

Micheál Martin: The Taoiseach did not answer the question, which was whether he would commission the CSO to design a proper, accurate way of calculating the real size of the economy.”

“Professor John FitzGerald, formally of the ESRI, has attempted to do this as an individual. It is shocking that the Department of Finance and the Taoiseach’s Department did not work years ago to create a proper model to calculate the size of the economy.”

The figures are not unprecedented. They are false in terms of what is happening on the ground and the reality in the economy. The CSO says it is including – not taking account of – the impact of aircraft leasing, corporate inversions and contract manufacturing, but none of this impacts on real jobs and investment in the economy, as the thousands of people who are struggling realise. It is not good enough that no one in official Ireland has attempted to address this by coming up with an accurate home-grown model that takes all of this into account, strips it out and gives us a proper figure.”

Ó Fearghaíl: “Thank you, Deputy Martin.”

Martin: “It is essential that this be done, in terms of how we plan our budgets and economy but also in terms of our international reputation. Unfortunately, the international world looks at this with some degree of ridicule and disbelief. There was a time when we would haughtily go around the place questioning the Chinese or the Russians for their economic statistics. Can we really go abroad and hold our heads up high…”

Ó Fearghaíl: “You have made your point, thank you.”

Martin: “…about Irish official statistics? No one in their right mind believes Irish official statistics. This cuts to the heart of our credibility in terms of presenting economic data. This is a serious issue which needs urgent addressing by the Taoiseach’s Department, the CSO and other related State entities.”

Kenny: “It is true to say the CSO is quite independent in how it does its analysis, but it does take these factors into account. Changes have occurred, such as the transition of entire public limited companies to Ireland and the transfer of a significant amount of intellectual property, contract manufacturing and the scale of aircraft leasing.”

The Deputy is right in terms of these figures boosting GDP. There is no proportionate increase in employment. These are figures which are compiled accurately by the CSO and they take into account those changes that have taken place in the international economy.”

“The Deputy is aware of the changes made by the Government in terms of complying with base erosion and profit shifting, BEPS, and the OECD in terms of having got rid of the double Irish concept. The issues of aircraft leasing, contract manufacturing, intellectual property moving onshore here and the transition of entire public limited companies has boosted these figures.”

Ó Fearghaíl: “Thank you, Taoiseach.”

Kenny:The Department of Finance will set out its projections later in the year, but it will also base its policy on a more normal growth rate, such as has been predicted by the Department, of in the region of 3.5% to 4%. I agree that an extraordinary elevation of 26% based on some of these factors and others, such as the depreciation of sterling, do not impact in reality on big numbers in terms of employment…”

Ó Fearghaíl: “Thank you, Taoiseach. The time is up.”

Kenny: “…but it is important that on the underlying issues the growth in jobs and consumer spend and the drop in unemployment is where the real value of the economy is and the projections will be based on 3.5% to 4%.”

There you go now.

Previously: Meanwhile, In Davos

Meanwhile…

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Jason Kelleher, of Irish Political Maps, tweetz:

Part of something larger I’m working on, but here’s the combined Fine Gael-Fianna Fáil vote in 2016…

Transcript via Oireachtas.ie

Irish Political Maps

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29 thoughts on “Leprechaun Economics Explained

  1. Fact Checker

    GDP statistics are compiled the same way in every country even if economies are very different. The same way that the rules of soccer are the same all over the world.

    The CSO cannot make up a new definition of GDP no more than a referee on the coast of Mayo cannot decide to ban high balls simply because it is very windy.

    The CSO (we presume) are compiling this data according to international standards.

    The issue is that GDP compiled this way is simply not a very good proxy for what most of us regard as economic activity. It is important that SOMEONE comes up with some kind of sensible measure of aggregate Irish economic activity that does not hinge on the legal arrangements of large multinationals.

  2. MoyestWithExcitement

    Basically, FG can shove talk of their “recovery” and economic achievements up their collective hoop.

  3. Panty Christ

    Just a point on aircraft leasing, Ireland has been at the top of the pile in that department for decades, why only know is it being used to explain away an oddity in GDP?

    1. dav

      This must be one of the 1st times they have declared the profit that they are moving through the tax haven that is ireland. I wonder if fg are still going to fight the eu on apple paying tax? fg, of course, are on apples side. good serfs

      1. Rugbyfan

        dav will be happy when we are all back living in cardboard shacks with beans and toast as our main meal.

  4. Eoin

    Parading a one off ALLEGED 26% increase in annual turnover as 26% GDP growth is totally disingenuous. Everything this government seems to do just backfires and ends up opening more and more peoples eyes to the lies.

    1. MoyestWithExcitement

      +1 Again, we were literally an international laughing stock thanks to this. If this doesn’t prove FG are a bunch of incompetent, economically illiterate gombeens, I don’t know what will. ‘Hey, look at these big numbers on this page. Hey you, Tesco cashier and you, plumber; look at these numbers. Your circumstances haven’t improved and probably gotten worse but this sheet of paper has big numbers so you should vote for us because we improved the country without improving the lives of the people actually in it.”

      1. Owen C

        Corporation taxes were 2.3bn higher than expected in 2015. That is a direct result of the issues causing the 26% increase in GDP. If the exchequer gets 2.3bn in extra income, for use for investment and social welfare and healthcare and education etc etc etc, and the blow back is some people laughing at us for a few days, I’m pretty comfortable with that situation.

  5. Mulder

    Well Ireland is indeed making a type of progress.
    Years ago ye used to have the trickle down economics model.
    Then had the voo-doo economics model.
    Now we have the new revamped 21st century version, the Leprechaun economics.

  6. 15 cents

    every transcript of dail debates features “the taoiseach didnt answer the question”

Comments are closed.

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