Belfast Telegraph

Friday 25 July 2014

Income research just doesn't seem to add up

Enda Kenny's government has been criticised

Size matters. There is all the political and policy difference in the world if it is 44% or 10% of people with young children who would be better off not working.

But it is not everything. The unprecedented row over the costs of working raises important issues, irrespective of the number. They include costs in the economy, social welfare policy and how public debate is conducted.

On a day when the troika's latest progress report surfaced, it even has a bearing on the fears that, even though we are two-thirds of the way there, Ireland may not succeed in its programme to fix the public finances. As to the numbers row, the situation became, if anything, more confused last night. The Economic and Social Research Institute (ESRI) issued a statement saying that a revision by an un-named expert "referee" had come up with the 10% estimate. Prof Richard Tol said he knew nothing about it and no one had given him any reason why his research was flawed.

Even if it is 10%, the devil would be in the detail. How much extra disposable income do the 34% in between get from working? Finding out is not simple.

Dr Tol had to take one set of data on incomes, and another on benefits, and try to match similar people from each to figure out how they would be affected by working or not working.

The data collected is in line with EU and UN statistical methods. One cannot complain about that but it does mean that conclusions, even in a final paper, would be best estimates, rather than precise numbers.

Reducing them by three-quarters, to 10% could only mean that something was wrong with the sums.

Statisticians regularly argue about methodology, never mind the conclusions. The big question is why the arguments could not take place in an open, reasoned manner.

Part of the reason may be the character of Richard Tol himself. He made no secret of his frustration at the lack of public research or evidence behind most of Enda Kenny's government's decisions. His Dutch bluntness did not help. He was also blunt in his views on the ESRI, from whom he parted on bad terms, accusing it of a lack of transparency and independence. The institute is not a "government think-tank," but the Government is by far its biggest customer for research. Yet the problem goes deep. Irish governments do not take kindly to public pronouncements which cause them political difficulty. The important issues raised by the paper risk being buried in a welter of accusations, denials and recriminations.

Even after the austerity Budgets, net taxes (allowing for universal payments like child benefit) are among the smallest. So disposable income remains among the highest in the EU, and it is going to have to fall to fix the budget deficits.

Dr Tol may or may not have got his sums right, but he was correct to address the question. If the ESRI thinks he was wrong, it now has a duty to supply the answers.

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