Tuesday, November 25, 2008

Absolute vs Percentage - put it in context

I have been thinking about writing a piece on this for quite some time but two events I read about in the news have spurred me on to write it without delay.
People need to realise there is a difference between a absolute number and a percentage. Without being able to put either the absolute, or percentage figure into context they are effectively meaningless.

Take example one. Absolute figure without percentage for context
The Irish agency "FAS" who are involved in training, reskilling and job creation in Ireland, were lambasted in the media for spending circa €600k on "travel and entertainment". Firstly, like it or not, that is the way business is done, building relationships with organisations is an expensive activity, business class flights, fancy restaurants the whole nine yards, as unattractive as that may be its the reality of the situation. SECONDLY, Fas's budget is €1billion. In percentage terms €600k is equal to... wait for it... 0.06% of the overall budget (odd they don't quote that figure in the media)... get over it.

Example 2. Percentage without the absolute for context
Another story that really grinded my gears was the "groundbreaking news" that the UK VAT rate will be reduced by a whopping 2%. The UK media, and seemingly government seem to think that by reducing VAT by 2% this will get people spending in the same reckless way which they used to pre-financial crisis. This is just stupid, and people are obviously not thinking of this in context.
"Plasma screen T.V. - previously £999, now starting from as low as £979"
"Bottle of Champagne - previously £60, now £58.80"
... useless.


Barra said...

yeh i more stuff on the radio today about looking further into FAS expenditure. hopefully the hookers they get for their corporate parties arn't on the receipt. haha just kidding, at the very least they were strippers.

Manuel said...

Yeah but Ed, as for the second point, people aren't really talking about tvs and the like. You have to pay VAT on everything, including groceries, and seeing as how when people go out for their weekly shopping they buy in excess of say....50 items, and it's a pound or two off from before, that really adds up, I'll take it any day. Percentage vs absolute number, one item is a small percentage of the total number of things bought so to say you save two pounds on champagne is omitting the fact that people purchase a lot. Imagine your total expenditure for a year and give yourself back 2%, happy days

ed said...

2% is such a piddling amount its not worth talking about, the reality of it is the English govt want people to start buying stuff they way they used to, 2% I will bet you will do squat.

Fine mr X personal expenditure £25,000 now only 24,500, thats a whole £1.37 a day saving, fantastic.

Macka said...

from experience living by my lonesome I've gotta say Manuelo has a pointo. It does add up. Even in your example there Ed $500 is almost a months rent. If I could save that thanks to a VAT cut, sweet.

as regards this scheme encouraging spending, I'd imagine you're right, it'll probably change nothing. Its still a more constructive step than slapping taxes on everything though. At least it could encourage spending

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