JIM POWER: Evidence of recovery is compelling
There are still many out there who either refuse to admit that a compelling recovery is under way in the economy or simply do not believe it. The fact is that the evidence is there for all to see and is being added to on a weekly basis.
For those who have believed, mainly for politically motivated reasons, that the economy would never recover unless a left-wing government came in and changed everything, these must be difficult times. For the rest of us, they are relatively good times.
Over the past week, three further pieces of compelling evidence of recovery have been presented. The latest figures from the Society of the Irish Motor Industry show that new car registrations in February were up 25% on the same month last year. In the first two months of the year, registrations were 29% ahead of last year. From an economic and business perspective, it is more revealing that registrations of light commercial vehicles are running 61% ahead of last year. This is a real sign of a recovery in business confidence and is consistent with the strong pick-up in business investment last year.
These vehicle sales reflect greater levels of confidence, but also make a significant contribution to tax revenues and employment. The exchequer returns for the first two months of the year are also reassuring. The total tax take for the first two months is running €925m or almost 16% ahead of last year. More importantly it is running €345m ahead of target. All of the significant tax headings, including income tax, Vat, corporation tax, and excise are growing strongly and ahead of target.
While it is far too early to draw any conclusions, it is clear that the increasingly broad economic recovery is making an important contribution to government revenues.
Current expenditure on social protection is running €238m behind last year. The income tax take and the social protection improvements reflect the recovery in the labour market more than anything else. It is estimated that for every person who is taken off the live register and goes into employment, there is a saving of close to €21,000 for the State coffers. The latest data on the live register back up this point.
The number of people signing on declined by 4,300 to reach a seasonally adjusted level of 355,600 in February, and the unemployment rate has fallen to 10.1% of the labour force. This represents a decline of 73,500 over the past two years.
The quarterly national household survey a few weeks ago showed that the number of people in employment has increased by 90,000 over the past couple of years, with every segment of the private sector, bar one, showing positive employment gains over the past year.
From a Government perspective, these should be relatively good times, but opinion polls and anecdotal evidence would suggest this not is the case. There is still a lot of negativity out there directed at the Government and claims that the rewards of the economic recovery are not being reaped. The reality is that the recovery is not yet making a meaningful contribution to the money in workers’ pockets, but this is starting to change.
The latest data show that earnings are starting to grow, and, when combined with the personal tax changes made in the last budget and those to come next October, the recovery should start to have a more meaningful impact.
The other big issue for many people is the quality of public services. I was chided recently for mentioning crumbling public services, but I stand over this assertion. The delivery of proper, high-quality education is under serious pressure; the quality of road surfaces and road signage is pretty awful; crime rates and personal safety are massive issues for many people; and exposure to the health service is a total nightmare for many. Only a charlatan would deny the crumbling nature of our public services.
It is only when the economic recovery starts to be reflected in the pocket and when public services start to improve to acceptable levels, that the Government will start to reap the rewards of the generally good job it is doing in still challenging circumstances.
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