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Government's "Rainy Day" Fund

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In addition to allocating €750 million from the Ireland Strategic Investment Fund to help fund builders, the Minister for Finance has signalled that at least €1.5 billion will be transferred to a 'rainy day' fund next year.

Does he not realise that the 'rainy day' has already arrived in the form of major housing, health and transport investment crises?

Letter published in the Irish Times on 12th October 2017.

Water and Electricity Meters

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Would swapping all our under-used water meters for smart electricity meters be a shocking idea?

Letter published in the Irish Times on 23rd September 2017.

Funding Solution to Housing Crisis

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As pointed out by Harry McGee ("Government's silver bullets for housing crisis have been blanks", Analysis, August 15th), successive housing ministers have singularly failed to address the housing crisis.

By only tinkering at the edges, ministers may have ignored an enormous funding resource sitting in plan view.

This is the uncommitted €5.3 billion sitting in the Ireland Strategic Investment Fund's Discretionary Portfolio and invested since 2014 in low-yielding international assets.

In the same way that the then-minister for finance directed the ISIF's predecessor, the National Pension Reserve Fund, to invest €21 billion in the failing  banks, so also could the current Minister for Finance set up new institutions to prudently invest the ISIF's massive surplus funds in major initiatives for housing in addition to health and other urgent infrastructure.

For example, a €3 billion development fund to finance social and affordable housing on public- and NAMA-owned land could easily carry an equivalent amount of debt.

This would facilitate the construction of up to thirty thousand public-owned homes for rent or sale and would be infinitely more productive than the short-term, stuttering tactics adopted to date.

Given the scale and urgency of the housing crisis, accelerated provision of these homes should outweigh every institutional, political or ideological impediment.

Letter published in the Irish Times on 16th August 2017.

Water Meters Down the Drain

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In the light of the Drogheda water supply failure, it is worthwhile marking the water meter debacle by estimating its cost and placing this in context. 

The total cost could hit €714 million covering meters (€574 million), conservation grant (€90 million) and related administration for billing, grants and refunds (say €50 million). This 'sunk cost' equates to 13 per cent of Irish Water's capital expenditure plan for 2014-21 and ignores the recurring benefits that would have accrued if the same amount had been invested in productive leak-prevention or supply-security projects.

The €714 million can be compared with about €200 million expended on the HSE's PPARS computer system and €54 million lost on e-voting machines, to name just two recent financially-challenged projects,

Letter published in the Irish Times on 26th July 2017,

Economic & Health Statistics

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Introduction by the CSO of a modified version of Gross National Income (GNI) to minimise distortions caused by multinational activities should have a profound impact on planning and performance measurement in Ireland.

The CSO estimates that modified GNI for 2016 was only about 69 percent of Gross Domestic Product (GDP). On this basis, the ratio of government debt to modified GNI was an unsustainable 106 percent in 2016 as compared with a more moderate 73 percent based on GDP.

Drilling down into the economy using modified GNI reveals many other unfavourable ratios. For example, according to the OECD, the ratio of Ireland's health expenditure to GDP was 7.8 percent in 2016 and we ranked 24th highest of 35 countries.

If modified GNI is used instead of GDP, this ratio jumps to 11.4 percent and our cost ranking rises to third place behind the US and Switzerland and ahead of highly regarded German, Swedish and French services.

As anyone who uses our health service knows, this ranking makes little sense and  begs fundamental questions about the sector's costs, efficiency, case mix and underlying demographics.

Letter published in the Irish Times on 18th July 2017.

Dept of Finance and Nama

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The Department of Finance's recent strategy statement indicates that it aims to increase employment, ensure sound finances, raise living standards, address the international debt and restructure the banks. In reality, it will do nothing of the sort as the document also indicates that the Department's role is simply to provide "independent, impartial and well informed advice" (and about time too). This mixing of altruistic goals and practical actions permeates the document.

For example, on Nama it states that the Department will "insist on the highest standards of transparency in the operation of NAMA, on reduction in the costs associated with the operation of NAMA, and that decision-making in NAMA does not delay the restoration of the Irish property market".  Sounds impressive but why didn't it simply state that it will extend Freedom of Information to Nama, cut outrageous fees paid by Nama and stop it trying to rig the market.

Letter published in the Irish Times on 12th May 2012.

Over the past year, I have expressed deep concern about Nama's accounting methods to Nama's chairman and board, EU Commissioners and the Minister for Finance in a series of letters - see Nama and Creative Accounting for details.

My complaint is that Nama is using an accounting method which effectively "buries" the losses incurred (aka the "discount") on loans acquired from the covered banks.

The furore over the recent "discovery" of €3.6 billion in the national accounts is nothing compared with the "disappearance", I reckon, of about €50 billion (i.e. €50,000,000,000) within Nama's accounts. I understand that the Comptroller and Auditor General is considering the inclusion of this "loss" in Nama's accounts in some shape or fashion.

Against this background, I wrote to the C&AG on 1st November and suggested that, in the interest of openness and transparency, his office should consider producing "shadow" pro-forma annual accounts for Nama showing its acquired loans at par value and indicating the full extent of loan and interest write downs/offs. Here is a copy of my letter to the Comptroller and Auditor General

This proposal would help identify the full extent of the developers' bailout and losses incurred by the covered banks during the bubble years.

Nama's "forgive and forget" approach can be contrasted to the Government's treatment of mortgage holders who through unemployment etc. cannot meet repayments - see Debt Forgiveness Discrimination.

Update:

Having reviewed the full transcript of a meeting of the Dail's Public Accounts Committee with Nama and the C&AG on 26th October 2011, I have written directly to the PAC drawing attention to my letter to the C&AG and related correspondence. This was published at the PAC's meeting on 1st December and forwarded to the Department of Finance and Nama for comment.

National Solidarity Bond

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Solidarity with who? Arguably, every cent raised by the National Solidarity Bond will be needed to bale out reckless banks and greedy developers rather than improve the infrastructure.

Letter published in the Irish Times on 1st May 2010.

Ministerial Pay

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Having sat on it for three months, the Government slipped out the latest report by the Review Body on Higher Remuneration in the Public Sector in the wake of the budget. Its approach was to compare Irish salaries with those in Germany, UK, Austria, Netherlands, Belgium and Finland.

It found that the Taoiseach's and ministers' salaries were the second highest and that salaries of Secretary Generals were the highest. Even after adjusting for pensions, tax and purchasing power, Irish salaries were still well ahead for most countries. In comparison with Finland (population 5.4 million), the Taoiseach's salary was 33% higher than his opposite number, ministers were 20% ahead and secretary generals were 52% higher. On this basis, Ireland's administration has a long way to go to become competitive and the cuts announced in the budget were merely a first step.

With the Dail in hibernation, ou highly-paid Government should note that the Finnish Parliament sits in non-election years for about 150 days a year as compared with just 90+ for the Dail.

Letter published in the Irish Times on 29th December 2009.

Facing Reality

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Nothing illustrates the Government's weak-kneed approach to the crisis more clearly than the fact that on the same day that President Obama demanded that US companies receiving bailouts should limit executive salaries to US$500,000, our Taoiseach who earns more than President Obama merely urged top executives in banks covered by tax payers' guarantees to take 25 per cent salary cuts. Arguably, a maximum salary of about €200,000 would be appropriate for Irish bank executives when account is taken of their size relative to their US counterparts

Pension Fund Strategies

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The National Pension Reserve Fund has lost about €3 billion (15% of value) over the past four quarters as a consequence of the international credit crisis.

In these circumstances, it makes no sense for the Exchequer to continue borrowing about €1.6 billion a year from abroad for the Fund to continue to making risky overseas investments while cutting back on domestic investment and turning to expensive Private-Public Partnerships and massive tax breaks to progress critical national projects.

This nonsense is compounded by the fact that the Fund must achieve a return on its investments in excess of the cost of borrowing "to wash its face". It is noteworthy that the NPRF is one of the few funds in the world not financed by oil and commodity revenue surpluses. Has the government forgotten the rules about never borrowing money to buy shares or investing what you cannot afford?

Surely it makes more sense for borrowings earmarked for the Fund to be redirected immediately to finance much-needed, major infrastructural projects now instead of being used to make overseas investments for pensions payable decades hence. This could be done simply by legislating a "contributions holiday", say, for three-years to free up about €5 billion.

This would enable critical projects to be progressed more quickly and kept in public ownership. For example, the eight co-located hospitals which will cost the taxpayer a fortune and further fragment our two-tier health service could be progressed in public ownership using a fraction of these liberated funds.

By 2025, the NPRF could be valued €80 billion at current prices (€150 billion at 2025 prices). Given that every taxpayer and consumer will have contributed to the Fund, what guarantees can be offered that payments out of the Fund after 2025 will be equitably distributed and not skewed towards increasingly unsustainable, unfunded "gold-plated" pensions for politicians and the public sector at the expense of much more numerous, poorly pensioned citizens in the private sector?

For example, the NPRF has indicated that public service pension costs will reach 3.7% of GDP by mid-century while social welfare pensions for a far larger number of people will only rise to 10.1%. 

As contributors to the Fund, we should be given absolute assurances that future governments will not treat the Fund as a massive "slush fund" to support vested interests as done with decentralisation, benchmarking etc.

Lead letter published in Irish Times on 26th July 2008.

Funds for Infrastructure

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I wish to link Minister Dempsey claim that the Exchequer doesn't have a "red cent" for a much needed hospital in the north east to Richard Curran's report (6th April) that the National Pension Reserve Fund is the 15th largest sovereign investment fund and one of the few funds not financed by rising oil and commodity revenues.

The National Pension Reserve Fund secures 1% of GNP each year to help fund pensions after 2025. Valued at €21.3 billion at end 2007, it lost 1.8% of its value in the final quarter of 2007 and probably lost a multiple of this in the most recent quarter. More discerningly, the Fund, as recently as December 2007, was increasing its investments in volatile emerging markets, property and overseas private equity from 7% to 21% of the Fund's overall value by end 2009.

All this begs the question as to why the Government is borrowing well over a billion euro a year specifically for the Fund to make risky overseas investments and, at the same time, deploying expensive Private-Public Partnerships and massive tax breaks to help finance critical national projects. This is analogous to a heavily-mortgaged householder borrowing further money to invest in risky overseas shares for pension purposes while using a reduced salary to pay a premium price for essential roof work on top of an ongoing annual toll to the contractor.

This makes absolutely no financial or economic sense. Surely it would be better to legislate a "contributions holiday" for the Fund and divert future payments €1.6 billion a year of "red cents") towards much-needed, major infrastructural projects that could be progressed more quickly and kept in public ownership where they ultimately belong.

This letter was published in the Sunday Business Post on 13th April 2008.

Reforming the HSE

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When plans for the the HSE were formally announced by Ministers Martin and McCreevy in June 2003 they proposed to rationalise agencies, manage the health service as a national entity, reform the hospitals sector, improve policy development and oversight, ensure quality and effectiveness of care, devolve responsibility, and improve the planning and delivery of service.

Five years later, the Fitzgerald report on issues arising from the Review of Breast Radiology Services at the Midland Hospital profiled a dysfunctional management structure and concluded that "fundamentally the problems arose from systemic weaknesses of governance, management, and communication for dealing with critical situations ...".

It cannot be claimed that there were no external warnings about structural problems in the HSE. In a review of senior posts after the HSE's establishment in 2005, the Review Body on Higher Remuneration found "that there was a lack of clarity at this stage about the future content of jobs. We are aware also of proposed alterations to the current structure which may result in changes in elements of the roles being exercised at present with implications for the extent of management responsibilities and other factors which are central to any evaluation of the jobs".

When revisiting the matter in its September 2007 report, the Review Body stated that "there is still some lack of clarity about the precise direction and reporting relationships of some of the jobs we examined and this made it difficult to evaluate them. We concluded that there is still an element of evolution about some of the management posts. At this stage in the development of the HSE we would have expected to find a clearer and more stable organisation structure. We would urge the management of the HSE to address this issue as a matter of urgency".

With the Minister, Department and HSE all wringing their hands with concern and simultaneously washing their hands of real responsibility and appearing to lack the will or authority to make long overdue root and branch changes, it is easy to see why the HSE is having problems.

Aside from rereading the Prospectus and Brennan reports which set out roadmaps for the HSE, they would do well to also check out Machiavelli on implementing change and Jack Welsh on delayering and lean management.

Partnerships and Pensions

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The article "Why public-private partnerships work" (2nd March 2008, Sunday Business Post) included a picture captioned  "West-Link Toll bridge: an example of a successful public-private partnership in action". Successful for  who? Certainly not for the users of the M50 who, for years, have paid through the nose to queue at the toll or for the taxpayer who has been obliged to pay hundreds of millions to terminate the partnership.

Continuing use of PPPs and provision of massive tax breaks to developers, especially in the health service, are very hard to justify when the Government is borrowing well over a billion euro a year to invest in the National Pension Reserve Fund for onward investment in thousands of overseas companies and funds. This fund, valued at €21.3 billion at end 2007, lost 1.8% in the last quarter of 2007 and has probably lost a multiple of that in the current quarter. 

Perhaps more disconcerting is the fact that as recently as December last, the NPRF was increasing its investments in emerging markets, property and private equity from 7% of the fund's overall value to 23% by end 2009. No doubt these declining markets will recover but, in the meantime, we will have given the NPRF billions of borrowed money for risky investments and simultaneously provided huge tax breaks to developers and handed over critical public infrastructure to PPPs. Why?

Harney and Health

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Your correspondent Dr X (Tuesday 6th March) asked how private health subscribers would secure private treatment if proposals to limit consultants' output to 20% of their clinical output are implemented. The answer is that a large proportion of these subscribers will opt out of this insurance if and when national waiting lists are reduced and the health service reverts to one-tier based on need rather than capacity to pay. With reduced economies of scale, risk equalisation and medical inflation, the cost of private insurance would become prohibitive and cease to offer any queue jumping benefits to the majority of subscribers.

This begs the question as to why the Government is failing to treat waiting lists with the same urgency as the introduction of tax-subsidied private hospitals and reform of the private heath insurance which accounts for only a small fraction of heath expenditure. Instead of breaking the VHI into a series of competing companies, the Government should absorb this State-owned organisation into the Social Insurance Fund, adjust health contributions and purse a single-tier, publicly-owned  and -operated health system for the great majority of citizens.

LUAS - Really Breaking Even?

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Richard Curran's report on Luas (25th June 2006) indicated that the Railway Procurement Agency (RPA) had not been directed by government to recover its capital expenditure and non-operating costs. It quotes the RPA as saying that "no toll road in the world for example has recovered its capital costs". Has the RPA never heard of the East and West Links and is the National Roads Authority not endeavouring to do exactly that with its tolls? Imagine, ESB constructing a power station and only charging for the cost of fuel and local labour, or Aer Lingus ignoring the cost of aircraft when setting ticket prices. I suppose that this approach is only to be expected given Minister Seamus Brennan's suggested on Prime Time that Luas was "planned on the back of an envelope".

Letter published by the Sunday Business Post on 2nd July 2006.

Accounting for Tax Breaks

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The announcement (12th October) that €315 million of tax has been forfeited as a result of the holiday homes scheme raises basic questions. Given that this scheme has been operating for almost ten years, why has the tax loss been calculated only now and why was no monitoring done to routinely confirm its relevance and benefits?

The foregoing loss relates to just one scheme. There are dozens of others costing billions every year. For example, tax relief on pensions is one of the few that are assessed and cost €1.9 billion for the short tax year of 2001. In contrast, PAYE allowances, about which there is so much fuss at budget time and which require enormous resources to apply, were just €478 million for the same period.

Are all these tax schemes equitable and necessary and, more to the point, why is their cost largely unknown?  In the absence of this basic information, how can they be sustained? Surely, this "black hole" must rank alongside benchmarking, decentralisation and infrastructural cost overruns as clear evidence of imprudent, or incompetent, management of the State's finances. Aside from the Controller and Auditor General, is anyone counting and does anyone care ?

Privatising Healthcare

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Why is the State offering extraordinary returns to investors in the health sector when it can easily raise the finance at less than 3% per annum? How can the Government justify subsidies of up to 47% by way of tax breaks to investors in hospitals *AND* then, on top of that, having to make annual payments to these investors to cover rents, fees, dividends, interest and profits? It is nonsense for investors to suggest that the State would gain from the resultant PAYE and VAT as it would be getting these if it financed the hospitals in the first instance.

In relation to the proposed replacement of Crumlin children's hospital, you quoted the Minister for Health (Wednesday 7th September) as saying that she would investigate innovative ways to get the hospital in place quickly and that there is a lot of interest in the provision of healthcare facilities. Is this Harneyspeak for the provision of tax incentives to investors to build and operate the new hospital with all its implications for costs, prices, standards, ethics and access?

It is time for our socially-conscious Taoiseach and opposition parties to put a stop to this creeping privatisation which is unwanted and unnecessary. If replacement of Crumlin is so urgent, why were public funds not released years ago as sought by the Pollack Report, New Crumlin Hospital Group and many others.

Co-located Hospitals

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May I add my voice to concerns about evolving health sector strategies.

Why is the State offering extraordinary returns to investors in the health sector when it can easily raise the finance at less than 3% per annum? How can the Government justify subsidies of up to 47% by way of tax breaks to investors in hospitals and, on top, having to make annual payments to these investors to cover rents, fees, dividends, interest and profits? It is nonsense for investors to suggest that the State would gain from the resultant PAYE and VAT as it would be getting these if it financed the hospitals in the first instance.

By any standards, Ireland already have an inequitable two-tier health system and the Minister of Health's current policies will result in a fragmented and highly discriminatory three-tier system. What is really needed is an uncomplicated single-tier system where care is based on need rather than capacity to pay. The Government has no mandate to develop a "for profit"  health service and opposition parties should, ahead of the next election, pledge to roll back all measures aimed at  privatising key health services. They could also usefully address the need to convert the VHI into the a form of compulsory health insurance for all and let a much diminished private insurance industry concentrate on the private healthcare sector.

The Minister's plan to transfer beds from public to private hospitals is akin to re-arranging deck chairs on the Titanic except that in this case they are being moved from steerage up to first-class. This measure is being presented as progress but it is, in reality, privatising and cherry-picking by the side door.

Instead of pursuing this zero-sum game, the Minister of Health, her department and HSE should review why  Ireland's health spend (as a % of Gross National Income) has risen above the EU average notwithstanding that the proportion of our population aged 65+ is only two-thirds the EU average. Is this because we are more prone to sickness and accidents than our EU counterparts (e.g. drink- and traffic-related), or because we get bad value from existing services (overpayment and underperformance), or because resources are mismanaged (too many administrators and offices and too few doctors and beds)? Findings and needs, not ideologies, should govern strategies aimed increasing rather than reducing equity.

This letter was published in the Irish Times on 24th August 2005.

The Cost of Infrastructure

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Why is the State offering extraordinary returns to investors in infrastructure when it can raise finance at about 3% per annum? How can the Government justify subsidies of up to 47% by way of tax breaks to investors without securing some immediate ownership rights and, in some cases, being obliged to also pay ongoing surcharges to cover rents, fees, dividends and profits for the very same investors? It is nonsense to suggest that the State would gain from the resultant PAYE and VAT paid as it would be getting these if it financed the investment. 

At a time of steady economic growth and unprecedented low interest rates, most property-related tax incentives are completely unnecessary other than for the purpose of competing with other such schemes. Virtually no schemes were adequately costed at the outset and, even after years of operation, their costs and benefits are only now coming under investigation. A classic example of handing out large amounts of tax payers money and failing to apply any management and control.

These tax schemes are a throw back to the days of double-digit inflation, interest and unemployment rates and have no role today given the buoyancy of Exchequer returns and low public sector borrowing.  Surely, the simplest solution is to abandon all schemes so as to level the playing pitch for all investment types and stop further hemorrhaging of tax payers money. Only in truly exceptional cases should schemes be revived after full investigation. If needs be, funds could be secured by diverting some of the billion euro a year paid to the National Pensions Reserve Fund for investment in overseas infrastructure and industries. However, cynics may say that this is untouchable as it  is primarily designed to help finance the unsustainable pensions of public servants and politicians.

Benchmarking

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Fintan O'Toole omitted to mention benchmarking as a possible addition to his list of public sector "white elephants". It is costing over a billion euro a year and rising in line with future wage increases - about €13 billion over the next ten years. Introduced ahead of the last general election, no evidence has ever been published to justify benchmarking other than a series of innocuous, post-award, self-serving reports. For the same expenditure, we could have employed about ten percent more gardai, teachers, health workers and so on.

Given that there is talk of a new round of benchmarking appearing ahead of the next election, surely there is an urgent need for an independent, transparent review of the basis and benefits achieved to date.

Letter published in the Irish Times on 12th March 2005.

Toll Roads

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Judging by their silence, motorists don't give a hoot about the recent increases in the East and West Link tolls. If they made enough noise, I'm sure that they could force a roll-back of the recent increases along with commitments to limit future price rises and measures to ease the congestion.

This instance of highway mugging begs the question as to why the Government and NRA are pursuing plans to toll further roads notwithstanding that Public Private Partnership funding is minor in the context of the total investment in infrastructure; that toll operations represent additional cost burdens; that the State can raise finance on better terms than any private operator; and that profits must be generated to remunerate the private partner.

Surely, it is time for the Government, NRA and NTR to recognise that they are killing their "golden goose" in the same way that Eircom's floatation and subsequent history have constrained any future privatisations.

Letter published in the Sunday Business Post on 23rd January 2005.

Decentralisation

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The Government's plan for decentralisation is clearly unplanned, unwanted and unneeded and should be exposed for what it really is, namely, a short-sighted, self-serving, vote-getting stroke. It is comparable with the discredited Punchestown 'investment' except that it is on an infinitely larger scale involving hundreds of millions instead of just €15m and is backed by the entire Cabinet rather than just two ministers.

While a small number of people may benefit - most obviously the TD's in the targeted locations - the resultant fragmentation, dislocation and disruption of (so-called) central government runs contrary to the national interest. Notwithstanding this, premises are being sourced and commitments made using tax-payers money. I assume that the intention is to spend as much as possible in order to create a fait accompli notwithstanding that this tactic failed spectacularly in the case of the e-voting debacle.

Letter published in the Sunday Business Post on 25th July 2004.

Face Reality

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Things have reached a stage that we as a nation need to take stock and start facing some home truths about our State, its management and direction:

  • We have a booming economy for which everyone takes credit for but which is based largely on inappropriate cheap credit rates ordained from outside the State.
  • We have completely inadequate services in health, law and order and for the disadvantaged and deprived but unending promises of improvement that are rarely delivered.
  • We have a strong foreign industry base thanks to transfer pricing, generous tax rates and light regulation but stagnating indigenous industry due to escalating costs and lack of development.
  • We have a service sector that is manifestly over-pricing in many areas which blames everyone but its own greed for causing the high prices.
  • We have a Government  that is unwilling to raise taxes to improve services but very willing to give tax breaks to wealthy tax payers and impose stealth taxes.
  • We have a public sector that accepts politically-inspired benchmarking awards but offers little in return other than interest in further similar awards.
  • We have an administration that expends enormous sums on capital projects but is incapable of managing them on budget and time without selling major rights to private interests.
  • We have a national pension fund which sucks up 1% of national wealth every year to invest throughout the world but is unwilling to make any significant investments in Ireland.
  • We have a political philosophy which seeks to impose greater use of our historic language in Ireland and the EU but fails to adequately protect our heritage, constitution and nationhood.
  • We have a Cabinet that is unable to make timely decisions on key issues - airport terminal, health service reform, housing, traffic and social equality - but very fast to decide on unimportant matters like post codes, decentralisation and e-voting.
  • We have politicians who transfer hundreds of millions of tax receipts to lawyers to probe corruption and wrongdoing but who are unable to accept their responsibilities and often pay scant regard to the truth and ethics.
  • We have a legislature which generates noise and spin but operates for less than half the year and, even then, is very poorly attended and regularly ignored by its proponents.
  • We have an "establishment" which pursues a liberal economic agenda but fails to appreciate that the economy is only one element of a strong, satisfied State.

Investment Double-Speak

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The Tanaiste wants to give tax cuts to Irish investors to encourage investment in local hospitals rather than in overseas property. If investment in hospitals and other infrastructual projects is so urgently needed that tax breaks and tolls are required to support it, what is the justification for the State investing over a billion euro a year of tax revenues in overseas businesses via the National Pension Reserve Fund?

Punchestown

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Is the Public Accounts Committee a mouse or a lion? Certainly, it seems to have been very mouse-like when allocating "blame" for the Punchestown Equestrian Centre. Surely, Ministers McGreevy and Walsh should have been assigned responsibility instead of passing the buck to their departments.

The ease with which €15 million of taxpayers' money was secured without due diligence, value for money assessment or matching funding can be contrasted with the Department of Enterprise, Trade & Empoyment's programme for Community Enterprise Centres launched in 1999 with funding of €17 million. To date, €13 million has been allocated on a matched funds basis to over forty new enterprise centres which will assist the creation of hundreds of new businesses and thousands of jobs. These centres were selected on a competitive basis from about 140 applications representing, I assume, all constituencies.

Letter published in the Irish Time on 1st April 2004.

Luas

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Yesterday's headline to the article about Luas - Studies show that Luas makes economic sense - made me see red (ink) as it made no reference to the expectation that the capital cost of Luas could exceed €750m - equivalent to about twelve times Dublin Bus's annual subsidy.

A few basic assumptions can be used to illustrate the economic nonsense of Luas. Let us assume that it carries about 30,000 passengers a day (versus 500,000 for Dublin Bus and 90,000 for the DART); that interest and depreciation rates each run at 4% a year; that the invested capital is repaid over 25 years; and that a fare of about €1.50 per trip covers all operating and related costs etc. On this basis, the real cost of a Luas ticket is about €8.60, over five times the proposed fare! How does this make economic sense (except to the tiny minority that will use the service)? On this basis, it would be cheaper to give free taxi and bus vouchers to all prospective LUAS users for decades to come.

Once again, our policy makers have lost the plot. No amount of spinning, huffing and puffing will ever justify Luas. As a massive "white elephant", Luas should have been scrapped. The funds could have been used to provide more buses and a larger subsidy to Dublin Bus to benefit of ALL commuters in Dublin instead of just a tiny minority.

Red Cow Roundabout

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So the Mad Cow Roundabout, formerly known as the Red Cow Roundabout, looks set to become the Dead Cow Roundabout while it is being rebuilt. If tolls are introduced, it could then become the Cash Cow Roundabout  to complement its very profitable sister at the West Link. Might this become another case of motorists paying through the nose and being milked at the same time.

This is all a roundabout way of asking why private funding is being considered for the rebuild at a time when the Exchequer is awash with funds for such "essentials" as benchmarking and the National Pension Reserve Fund.

Letter published in the Irish Times on 20th November 2003.

Dublin's Traffic Mess

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Congratulations to the Director of Traffic at Dublin Corporation for bolting the stable door by telling the Kenmare Economics Conference last weekend that buses are still the solution to Dublin's traffic problems.

Why wasn't this view fully considered before the "powers that be" decided to invest €650 million (and counting) in LUAS? If we add the current debacle over the DART's weekend closures (investment of €170 million plus), the height of the Port Tunnel (€450 million) and the on/off debate about a Metro (several billion), one must wonder whether anybody has a clue as to what should be done about Dublin's traffic.

Surely the time is long, long past for the establishment of a single authority to assume total responsibility for all aspects of traffic and public transport in Greater Dublin.  This body might be set up on an ad hoc basis but progressively it should acquire real powers. In the long run, it is unlikely to be effective unless it controls (or, at least, supervises) Dublin Bus, LUAS and DART and has a significant say about traffic and related matters with the four local authorities and other interests which together and separately are making such an utter mess of Dublin's traffic .

National Pension Reserve Fund

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I have three queries about the National Pension Reserve Fund which has been set up by the Minister of Finance to help funds social welfare and public sector pensions post 2025. In the light of the State's deteriorating finances, they are extremely pertinent as they impact on every taxpayer and consumer in the State both now and decades to come. 

1. How can further investment in this internationally focused Fund be justified when the State is running a current account deficit and urgently needs funds for infrastructural investment?

Effectively, the State is borrowing money to invest in the Fund. The setting aside of one percent of GNP a year might sound relatively small but it amounts to about a billion euro a year and equates to ONE-TENTH of all income tax to be collected in the current year. If payments into the Fund were to be suspended, we would either pay less income tax (or experience lower tax increases) or the State would need to borrow less.

Currently, the Fund is worth about eight billion euro before allowing for losses incurred in the recent stock market downturns. The short-term performance of the Fund is very dependant on a recovery of world economies and peace in the Middle East. In effect, the Fund is gambling on these two matters and any further investment could amount to "bottom fishing". Given our difficult and uncertain economic prospects, the question of continued payments into the Fund should be reviewed even if a notional "killing" could be made if and when stock markets should ever recover to last year's levels.

2. Given that the purpose of the Fund is to accumulate reserves to contribute to future pensions for social welfare recipients and public servants, what is the planned split?

The Fund was set up to help fund social welfare and public sector pensions post 2025 on the basis that our aging population will have great difficulty in meeting its pension liabilities at that time. The Fund's legislation provides for periodic assessments of  the projected profile of Exchequer outlays on social welfare and public sector pensions. 

I don't know what these outlays will be in the future. As a guide, projected expenditure for 2002 on non-contributory social welfare pensions is about half a billion euro and further billion euro is being spent on public sector pensions. In addition, two and a half billion plus euros will be paid out by the contributory Social Insurance Fund for old age, retirement and widows pensions.

It would be desirable to clarify at this stage whether the Pensions Fund will only help finance non-contributory social welfare and public sector pensions or whether it will also support the self-funded Social Insurance Fund. If it does not, then the prime purpose of the Fund would appear to be to boost public sector pensions.

3. How equitable will the planned split be bearing in mind the mix of contributors?

Presently, social welfare pensions are, more or less, subsistence-level pensions. In contrast public sector pensions are much more beneficial as, in the main, they offer guaranteed benefits.

For many years, there has been a debate about the true actuarial cost of providing guaranteed benefits to public servants. As I understand the situation, it would be virtually impossible to purchase these benefits in the open market especially as they are linked to prevailing wage levels and not simply to cost-of-living increases.

In recent years, we have seen a reduction in the availability of defined-benefit pensions schemes in the private sector in favour of defined-contribution schemes. This is partly due to the falls in stock markets but it is also related to the fact that funding a defined-benefit pension scheme is very, very expensive. To compound the problem, defined-contribution schemes have been hammered by the decline in the stock market.  In contrast, public sector pensions are, in the main, financed from Exchequer revenues (i.e. taxpayers) and they do not have to contend with "real world" volatility and uncertainty. Finally, it should also be bourne in mind that a substantial proportion of people  working in the private sector have no pension schemes of any description but are obliged to help fund very attractive public sector pensions.

Allowing for the fact that ALL taxpayers and consumers are contributing to the Fund, how can we be certain that the Fund will not end up funding exceptional pensions for a minority of the contributors while the vast majority of contributors stand to derive very limited benefits? Surely, it should be ordained that all sectors should benefit from the Fund in line with their contributions.

Dublin's Traffic

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Congratulations to Dublin City Council on their tactic of creating the controversial new road signs. This has been an excellent smoke screen and distraction from the underlying issue, namely, that traffic in Dublin is atrocious and can only deteriorate further as time passes. Like jam tomorrow, it will never get better as we are playing catch up for too many years of neglect. Forcing extra traffic onto the canal roads or into Gardner Street is like re-arranging deck chairs on the proverbial Titanic.

Where is the grand plan for Dublin's traffic?  The two major projects underway at the moment, the Port Tunnel and Luas, have a combined capital cost of about €1,000,000,000 (yes, nine noughts) before taking account of their ongoing operating costs. At best, they will be useful localised solutions notwithstanding that some observers suggest that  the Tunnel may be too low and Luas may be only as effective as a few  additional Quality Bus Corridors. One way or another, this massive expenditure fails to address the wider traffic problems in Dublin.

Where are the real solutions that have been talked about for years - park and ride, integrated ticketing, liberalised bus system, decentralisation, interchanges, flexible rolling stock and so on?  Above all, where is the central and accountable authority to take on all the vested interests and to plan and manage ALL aspects of Greater Dublin's traffic on an integrated basis?

Lead letter in the Irish Independent on 29th August 2002.

Luas

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Maybe the colour of the Luas trams should be white and the Sandyford Luas line should finish at Stadium Ireland where a zoo could be established for white elephants, pet projects and wild ventures.

I think that  the proposed investment in these inflexible trams and their highly specialised (and temporary) and unsightly infrastructure should have been spent on additional buses, better bus services and subsidised bus fares pending the development of a metro-based solution.

The €430 million allocated in the National Development Plan for just three Luas lines contrasts sharply with the €220 million to be invested in the bus network for all of Dublin.  In 1999, the cost of running Dublin Bus was €113 million and its subsidy was only €13 million. For the money being invested in Luas, the proposed investment in buses could have been doubled and the balance of €210 million used to provide bigger subsidies and better services for many, many years to come. Is it too late for reason to prevail?

Croke Park & Stadium Ireland

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Let's see if I understand the €60++ million offer of our money to the GAA. It appears to have been offered to ensure that "foreign games" would not be played at Croke Park (thereby strengthening case for Stadium Ireland) and on the understanding that some key GAA matches would be played at the folly. In effect, does this mean that the payment is designed to ensure that Croke Park will be underutilised?

Just how far are our politicians willing to go to support an ego trip which could cost a billion or so by the time it is build. How will its annual financial costs of, say, €60 million be met? That amount equates to a "Croke Park" donation for every year to infinity! Surely, this money could be better used - to reduce the national debt, improve the infrastructure, assist the underprivileged and so on.

Letter published in Irish Times 24th April 2001. This was my very first letter to be published. 

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