Nat O'Connor: One of the effects of the financial crisis is that it is forcing us to deal with very big numbers. We now regularly hear or read about vast sums of money being discussed, whether it is in terms of money required to maintain the banking system, proposed cuts in public spending or lost tax revenue. There is a danger that through the repetition of these big numbers we are becoming immune to their impact, similarly to how we can become inured to violence on television.
Without getting into what policies the Irish Government should or shouldn’t pursue, I would like to simply clarify what a billion euro means in real terms, in Ireland, today. I think we need a clearer picture in order to understand the enormity of the situation and the potential impact of the wide variety of policies that are being proposed.
I am going to give three brief examples to illustrate what a billion euro means and I would welcome feedback on which bits are most useful.
1/
One way to look at what a billion euro means is to see it in terms of the Government’s income and spending. The end-June 2009 Exchequer returns estimates the state’s annual revenue at €34.4 billion and its annual expenditure at €47.4 billion (divided between €40.5 billion current expenditure and €6.9 billion capital expenditure).
In these terms, one billion euro is roughly equivalent to 3% of Government revenue or 2% of its expenditure.
More specifically, one billion is more than the Government will raise in revenue from stamp duty (€980m), it is over a quarter of likely revenue from corporation tax (€3.7bn) and it is nearly 9% of VAT receipts (€11.4bn). In other words, no matter what way you look at it, one billion euro represents a sizable chunk of Ireland’s annual revenue.
Similarly, in expenditure terms, one billion euro is nearly twice the total voted expenditure of the Department of Arts, Sport and Tourism (€535m), it is more than the budget of the Department of Defence (€988m) and it is over 9% of the budget of the Department of Social and Family Affairs (€10.9bn), which is one of the three major spending Departments. So, one billion euro obviously buys a lot of what the Irish state spends money on every year.
2/
Another way to look at a billion euro is to divide it out among the Irish population. Based on Census 2006, a billion euro represents €236 for every man, woman and child in Ireland. If we restrict the population to those aged 15-64, a billion euro represents €344 per person. And perhaps more realistically, it represents €680 for every household in the country (including single person households as well as couples and households with children or other dependents). In other words, every time the Irish Government wants to spend a billion euro, this is how much money on average it needs to raise in revenue from the taxpayer.
Although, of course, it must be remembered that the Government does not only generate revenue directly from private households, but also from businesses through corporation tax, VAT, etc and from other sources.
3/
A billion euro can also be seen in terms of the distribution of wealth in Ireland.
It is equivalent to the annual earnings of 33,433 persons on the 2006 average industrial wage. And to put this number in perspective in turn: that’s about as many people who were at work in Galway City in 2006 (34,023).
A billion euro is also the equivalent to the income of 84,104 persons living on the 2007 poverty threshold of €11,890 per year.
In other words, you could employ a lot of people for a billion euro or move a great number of people out of poverty.
In contrast, one billion euro is only 1% of the €100 billion asset base (excluding residential property) of the top 1% of the Irish population in 2007, according Bank of Ireland’s Wealth of the Nation report. That is to say, a billion euro taken from the top 1% of the population would mean that this group owned 33.7% of Ireland’s wealth instead of 34%.
Dr Nat O'Connor @natpolicy
Nat O’Connor is lecturer in social policy in UCD’s School of Social Policy, Social Work and Social Justice and part-time policy specialist at Age Action Ireland. Previously Director of TASC, Nat also led the research team in Dublin’s Homeless Agency.
He has taught politics and social policy since 1999. He has a PhD in Political Science from Trinity College Dublin and a MA in Political Science and Social Policy from the University of Dundee. He is a Fellow of the Higher Education Academy (UK), a member of the National Economic and Social Council (NESC) and chairperson of the Irish Social Policy Association (ISPA). You can find him on LinkedIn (natoconnor) and TwitterX @natpolicy
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