By Sean O'Connor

My last few pieces on this blog (here and here) have focused on the distribution of Ireland’s sports capital grant funding over the period 2002-2015. We’ve examined the breakdown in terms of inequality; nationally, regionally and also amongst different types of sports. Today’s piece will delve further into the distribution of capital grants, utilising the share amongst the deciles to highlight how much income is received by the bottom, as well as top ten percent.

Deciles are a simple way to measure income inequality within a country. Simply put they can be utilised to examine how much of total income in a country/region is earned by those in the lowest wage earning groups and those in the highest wage earning bracket. The deciles split the population into equal groups of ten and look at the share of income within each group. To begin Figure 1 provides the breakdown of the deciles over the entire period.

Figure 1 indicates clubs who received grants of €6,000 or less would be grouped into the lowest decile, whereas clubs who received grants in excess of €150,000 would be in the top. Given the total number of clubs who received funding during the period was 7,615; each group or decile consists of circa 761 recipients or sports clubs. Interestingly from examining Figure 1 the bottom 761 clubs who received grants of less than €6,000 over the period, accounted for 0.5% of the total cumulative share of awards given out. Conversely, the top ten percent of recipients accounted for 41% of the total value of grants awarded over the period. In other words, in total, 761 sports organisations received circa €231,000,000 worth of funding between them, or on average €312,022 per recipient. Figure 1 would point to the fact much of funding distributed over the period is concentrated in a number of large grants given to a small number of clubs. Given this, it’s also worthwhile to examine how this distribution alters from year to year. Therefore, Table 1 examines the distribution amongst the deciles from each period.

Table 1 presents information of the distribution of sports capital grants per year and across deciles. The row signified by N refers to the number of grants given out to individual clubs during the period, while the row marked value refers to the total amount funding given in that year. So in 2002, 837 individual grants were given out with a total value of €75,400,000. Interestingly, the cumulative share of grants for the bottom ten percent of clubs never once reached one percent. Contrast this to the top ten percent of clubs who in any given year received close to two thirds of the available funding. In particular years this distribution was even more extreme. For instance, in 2003 circa 61 clubs received 42% of the overall funding available (€51,900,000), whereas in 2008 68 clubs took over half the funding available in that particular year, while the top 1% in 2008 took 18.55%. It’s also interesting to look at share of funding of the top ten percent across different counties. Figure 2 plots this for each county over the entire period.

The red line in Figure 2 denotes the share of grants received by the top ten percent of recipients nationally over the period, whereas each blue bar highlights the share of the top ten percent within each county over the period. We notice five counties are above the national average over the period in terms of the share of grants received by the top ten percent of clubs. These regions are Waterford, Offaly, Limerick, Dublin and Cork, with the impact being most pronounced in Limerick. While such an analysis sheds further light on the distribution of Irish sports capital grants, a follow up piece on this blog will provide a breakdown of the distribution of grants across the deciles for a number of different sporting codes. 

by Kathy Stout

In previous posts John Considine has extensively examined the allocation of the Irish Sports Capital Grant (here, here, here, here and here). This post examines the allocation, between 2009 and 2014, for one such county; Wexford.

Wexford’s sports capital payments are an example of a matching grant which is where the relevant governmental department matches funds contributed by the applicant. In this scenario of 100% of the funding, the state pays for 70%, the other 30% by the sporting institution. Wexford did not engage in any major development projects so is below the average level of payments per county from 2009 to 2014. One of the main observations found is despite the GAA receiving the highest number of payments, football associations were allocated the highest amount of funding per sport due to their ability to give more to the matching grant scheme from the profits they make.

Table 1 below provides information on the annual grant provided to the county and the annual percentage change in allocation. The striking drop in funding is explained in part by its correspondence with the Irish fiscal crisis,as the economy had contracted from $273.7bn in 2008 to $233.5bn in 2009 with a further drop to $218.4bn in 2011.

Another explanation for this initial drop is the restriction on grant applications in 2008. After this year applications for grants by sporting institutions were not accepted, however payments were still being made for the following years based on previous applications. In Wexford’s case the majority of these had been paid in 2009, accounting for the considerable decrease in 2010. 

​Whilst the average payment size does see a drop from 2009 to 2010, there is substantial variation over the following years showing that it is the number of payments made, and not the average payment size, which makes the most impact on the overall yearly amounts paid out. The average payment in 2012 is €41,736, relatively speaking not far from the 2009 figure of €48,554.26 however the difference of eleven payments in 2012 versus thirty-eight in 2009 explain the difference in total funding. It is apparent from the data that GAA and football clubs receive the largest grants (for the most part), due to their ability to contribute more money to the grant to be matched, and sports with lower levels of engagement (and profitability in general) such as rowing, gymnastics, swimming, and athletics receive the smallest sized grants. Figure 1 below illustrates the dominance of GAA and football in terms of the number of grants awards. 

As you might expect, the greater number of grants directed towards GAA and football translates into greater payments to these sports (Figure 2). The GAA received 38% of the number of payments approved and 36% of the total monetary funds paid out. In comparison, football payments accounted for 25% of the number of payments allocated but gained 34% of the total monetary value. This indicates that while there were less football grants, on average they were of a larger value.

What is also evident is football clubs were in the position to contribute more to the grant scheme in this time showing that within Wexford, this is the most profitable sport.

Kathy Stout is a final year Bachelor of Arts student. She is a recipient of a University College Cork Quercus Academic Scholarships and is currently Auditor of the UCC Economics Society.

by Declan Jordan

By John Considine

In 2008 I published a paper with a number of colleagues in Economic Affairs.  The paper was titled 'Irish National Lottery Sports Capital Grant Allocations 1999-2007: Natural Experiments on Political Influence'.  The paper examined what happened to the geographical distribution of sports capital grants when there was ministerial change.  The two ministerial changes examine were (i) a change in the Minister for Sport and (ii) a change in the Minister for Finance.  The paper claimed there was evidence of political bias in the funding.  Jane Suiter and Eoin O'Malley used a more sophisticated statistical approach on the 2002-2007 grants and found similar results (see previous blog post here).  This post outlines the evidence from our Economic Affairs paper and adds another natural experiment with 2012 data.

Sport grant applications for National Lottery funding are sorted and assessed by county.  There are 26 counties in the Republic of Ireland.  The counties can be seen in the map opposite.  Those in the Republic of Ireland are in dark green.  At the time of our 2008 publication the counties of interest were Donegal and Kerry in respect of the Minister for Sport and Kildare and Offaly for the Ministers for Finance.  Donegal and Kerry are located on the western side of the country whereas Kildare and Offaly are located in the midland/east of the country.

Table 1 shows what happened when there was a change in the Minister for Sport.  While the Minister for Sport came from Donegal, that county had the highest per person ranking of the 26 counties.  When he was replaced by a Minister from Kerry then Kerry jumped to the number 1 spot and Donegal slipped to 23rd out of the 26 counties.

Our second "natural experiment" looked at what happened when the Minister for Finance changed.  Our results in Table 2 below show that while the Minister was from Kildare then Kildare received the second highest per person allocation of sports capital grants.  When this minister left office, Kildare dropped to 26th (or last).  The Minister for Finance for the 2005-7 grant allocations was from Offaly.  This county had previously been 20th in the ranking.  It jumped to 4th while its native son was in Finance.

As economists these results seemed to suggest to us that the behaviour of politicians might be rational and self-interested.  There was no moral outrage in the paper.  It seemed to us that the incentives were such that the outcome was fairly predictable.

The National Lottery was started in 1986.  It was only in its infancy when politicians complained about the use of National Lottery funds.  In 1988 Mary Harney (Progressive Democrats) claimed that "Fianna Fail have engaged in the most despicable exercise in gombeen politics ever seen in this country in the way they have handled the allocations from the national lottery" (here).  A couple of year later the Progressive Democrats were in government with Fianna Fail.  Now it was the turn of Alan Shatter (Fine Gael) to remind Mary Harney and her Progressive Democrat colleagues of her previous words (here).  He finished with a flourish saying "The horse of political patronage will once again be ridden and the Minister, Deputy Flynn, like the Lone Ranger of old, will gallop off into the sunset with his faithful Tonto, Deputy Harney, the Minister of State, galloping along beside him".  It would seem that Fianna Fail was the force corrupting all who came in contact with them.  Tables 1 and 2 above might support that view as all four Ministers were from that political stable.

In 2012 Alan Shatter's political party was the largest party in a coalition government between Fine Gael and Labour.  Alan Shatter himself was Minister for Justice.  Sport was being catered for by the Department of Transport, Tourism and Sport.  One of the junior ministers in the Department was responsible for allocating the sports capital grants.  The Minister come from Mayo.  This gives us our third natural experiment.  It is presented in Table 3.  The data is that produced by the Department during 2012.  Galway and Mayo are listed as having received €132 for the 1998-2011 period so Mayo is 15th or 16th (joint 15th).

Maybe in future rounds, a rule limiting the dispersion of per person county allocations will be formalised.  It should apply to ALL sports capital grants and not some or most of them.  It should not be the case that it will apply to 85% of the grants.  It should apply to 100%.  The omens are promising.  Last Sunday, speaking on RTE's The Week in Politics, the Minister for Transport, Tourism and Sport, Leo Varadkar, said "... also we need cultural change. You know too much in Ireland, and its not just a Garda issue, we still have a culture of doing favours, the nod and the wink, use of discretion, those type of things.  And we need now, over the next ten or twenty years, to move to a rules based society so that this kind of stuff doesn't happen anymore.  And it is not just about the Gardai it is about politics in general ..".  Let's not wait for 10 or 20 years.  The Minister would set a good example by starting in his own department and ensuring that there is limited Ministerial discretion on the allocation of ALL sports capital grants.

By John Considine

A Parliamentary Affairs article by Jane Suiter and Eoin O'Malley, available through the "advanced access", has some interesting findings about the allocation of sports grants in Ireland.  Suiter & O'Malley examine various explanations of how government expenditure on sports and education is geographically allocated.  They point out that the literature suggests that expenditure might be directed towards the government's core supporters, towards swing constitutencies, or it could be determined by the decision making rule.  They test these alternatives using Irish data.

They note that in the Irish political system "the minister, has clear and predictable incentives for targeting spending".  They also note that in The 2007 Irish Candidate Study "sports clubs and schools are the top two areas that legislators themselves believe it is worth claiming credit for".  Given Ireland Proportional Representation - Single Transferable Vote system, one might expect the government expenditure to be related to the geographic location of the deciding minister(s).

Suiter & O'Malley run three models to test if expenditure might be directed towards the government's core supporters, towards swing constitutencies, or if it is determined by the decision making rule.  The results of their tests are presented in the table below (Table 4).  The third model tests their suggestion that the decision rule is the most important.  They say their "results are both positive and highly significant and the model shows that constitutencies of the decision-making ministers do significantly better than other constituencies".  It seems the sports grants go to the constituency of the Minister for Sport and the Minister for Finance.

By John Considine

The release of the Anglo Irish Bank tapes in the summer of 2013 revealed the bank’s strategy for securing public funding (here).  Anglo executives decided to look for €7bn even though they knew they would probably need more. Their strategy was revealed in the following quote from the tapes "... that number is seven (€7bn) but the reality is that actually we need more than that. But you know the strategy here is that you pull them in, you get them to write a big cheque ... and they have to support their money.”

Do those seeking to attract mega sports events take the same strategic approach or is it optimism bias that causes them to consistently understate the cost of the project?  It is difficult to say whether the answer is optimism bias or strategic claims.  However, there is little doubt that there is consistent understatement of the costs.  This point is illustrated in a working paper from Said Business School by Bent Flyvbjerg and Allison Stewart (here).  Their paper examined every Olympic Games since 1960 and it shows that every (yes, every) single games ran over budget.   The average cost overrun is 324% in nominal terms and it is 179% when inflation is removed.

Flyvbjerg & Stewart throw much cold water on the claims that London 2012 came in on budget.  This is a point taken up by Financial Times journalist John Kay.  Kay traces the evolution of the cost estimates that were commissioned by the Department of Culture, Media and Sport.  It started in 2002 with Arup estimating the costs at £1.8bn. A year later PwC estimated the costs at £3.1bn requiring a public subsidy of £1.3bn.  The bid submitted to the International Olympic Committee in 2005 put the costs at £4.2bn.  By 2007 the costs had risen to £6.5bn.
 
Irish sports people should not be surprised by the findings of Flyvbjerg & Stewart.  In October 2000 the Taoiseach (Prime Minister), Bertie Ahern, presented a €293m figure to the Dail (parliament) on the total costs of building a National Stadium in Abbotstown.  In January 2001, he apologies to the Dail for omitting another €68m in costs.  In February 2002 the consultants HPR estimated the cost of the project at €890m.  The stadium was not built.

The Punchestown Equestrian Event Centre was built.  In 1999 the original proposal sought 100% public funding for a €6.9m Centre.   In June of 2000 a revised proposal was submitted for €12.78m.  The proposal was approved.  A further €1.5m was approved in late 2001 – bringing the issue to the attention of the Public Accounts Committee.

Why the consistent underestimate of costs to the public purse?  There is probably a bit of optimism bias and a bit of strategic behaviour.

When it comes to major sporting events then the least we should look for is a full and transparent explanation of how the costs of the sporting events are estimated. If not we are likely to get underestimates like the €7bn provided by Anglo Irish Bank.  And, lest we forget, the Anglo executive claimed (here) he pulled that €7bn figure "out of his arse”.

By John Eakins

In 2010 Indecon published a report which looked at the contribution that sport makes to the Irish economy. One aspect of their report is the estimate of €1,885.6 million that they placed on the amount of money that Irish households spent on sport and sport-related goods and services in 2008. This was equivalent to 2% of the overall value of consumer spending in the economy at the time. In this blog I will provide an updated estimate of the economic value of sports related purchases using a similar methodology.

Indecon used the Household Budget Survey (HBS) as the basis of their figures and  that will be my start point too. The HBS provides information on the average weekly amount spent by Irish households on a large variety of commodities.  Isolating the sports related categories and simply aggregating across all households will therefore provide an approximation for the total annual spend.  To aggregate I use data from the recent Census (2011) which gives a figure for the number of private households in the state equal to 1,654,208.

Eight categories of sports relating spending were analysed and the calculations displayed in table 1 below. All values were taken from the 2009/10 HBS except for the ‘Sports/Leisure Wear’ value. This value had to be projected forward from the 2004/05 HBS as no distinct corresponding category existed in the 2009/10 survey. To find this value it was assumed that the share of ‘Sports/Leisure Wear’ spending in total clothing and footwear in 2004/05 remained the same in 2009/10.

As can be seen from the table €1097.6 million is estimated to have been spent by Irish households on the eight sports related categories in 2009/10. This corresponds to 1.33% of personal consumption in those years (taking an average of personal consumption in 2009 and 2010) and 0.69% of GDP in those years (again taking an average of GDP in 2009 and 2010).

It is possible to project forward to get a value for say 2012 but this requires making certain simplifying assumptions. In particular one can use the change in the consumer price index for each of the categories above to estimate weekly average expenditure per household in 2012. Thus we are assuming a price change only and quantity purchased has remained the same (which is debatable for many of the goods above although any changes in quantities purchased between 2009 and 2012 should not be too significant). Table 2 displays these calculations.

So in 2012 €995.56 is estimated to have been spent by Irish households on the eight sports related categories which
corresponds to 1.20% of personal consumption and 0.61% of GDP in that year.  This represents a fall on the 2009/10
figures although in our calculations the primary reason for this has been decreases on the prices associated with these goods.

The values are also much lower than the €1,885.6 million estimate providing by Indecon. Even the 2009/10 estimate is almost 60% below this figure. One of the reasons for this is that Indecon adopted a much broader definition of sports related purchases and included a proportion of the money that households spent on items such as travel, books & newspapers, TV licence and subscriptions and school & university fees. It is also the case that Indecon produced their estimates at the peak of the economic boom. A proper comparison with the Indecon results would require further research but in ignoring these secondary effects, the estimates from this blog are probably a little on the downside. However, even allowing for these secondary effects, it is clear that the recent recession has had a negative effect on sports purchases and this blog has provided a first attempt at quantifying that effect.

By John Eakins

This is the fifth post in the sequence on Irish household sport expenditure.  In this post the households are classified by social status of head of house.

Figure 5 tabulates median expenditures against the social status of the HOH. The patterns illustrated in Figure 5 appear to support the assertion that income is a greater determinant of spending on spectating than participation. With the exception of some outliers (i.e. unskilled, own account and farmers), there appears to be a downward trend in median spending from ‘higher’ social status groups (i.e. employers and managers) to the ‘lower’ social status groups (i.e. semi-skilled). This pattern is not as evident in the sport participation numbers.

By John Eakins

This is the fourth is a series of daily posts on Irish household sports expenditure.  Previous posts examined household sports expenditure where the expenditure was classified by location (here), gender of head (here), and age of head (here).  Today I examine the sports expenditure by family composition.

Figure 4 shows that sports participation purchases are on average higher for households with 3 or more children present and households with single adults and children and the ‘all other households’ category (which represents households with 3 or more adults and possibly children). In contrast the spending on sports spectating is quite variable across the different categories of family composition. As highlighted in my previous blog (here), it is probably the case that spectating cost are driven more by income than by the composition of the family.

Each of this week's posts uses the median level of expenditure for both sports spectating and sports participation and across selected qualitative variables. Caution should be exercised when making inferences as the numbers in  some categories can be small, however some patterns of spending behaviour can be observed.

By John Eakins

In a previous blog entry (here), I looked at the change in Irish household expenditures on two sports related items, admission charges for spectator sports and expenditures related to sports participation (excluding subscriptions).  From the analysis of the numbers, it appears that spending toward spectator sports has been harder hit by the fall in household consumption over the 2004/05 to 2009/10 period. In contrast, spending on participation sports, even in volume terms, increased over the period.

Starting today, I will look at five other decompositions of 2009/10 Irish household expenditure on sport.  This blog post will be one of five posts running from today (Tuesday) to Saturday.  The focus of this post is the Urban-Rural divide.  Figure 1 shows that there is greater levels of spending on sports spectating and sports participation by households from urban areas. This is not surprising given the proximity and ease of access that urban dwellers would have to sports events and sports facilities.