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I wish to draw attention to Nama's accounting policies which have attracted little comment but have huge significance for taxpayers as the cost of the banking bale-out rises.

Specifically, Nama has decided to use a methodology which allows it to immediately write off about €40 billion of the €81 billion of loans being purchased from the banks and to ignore related interest, amounting to about €10 billion. This means that, with a stroke of the pen, Nama is forgiving about €50 billion of developer debts and, of course, making it much easier to report an illusionary "profit" when wound up.

Where is the "moral hazard" and justice in this when, based on Nama's creative accounting, every billion euro of discount on the loans being acquired is effectively a billion less to be paid by developers but a billion more to be pumped into the banks (mainly by taxpayers)? Suggestions by Nama that it will pursue debts to the "greatest possible extent" should be taken with a pinch of salt. As they don't even appear in Nama's balance sheet, where is the pressure to collect them?

Nama should be obliged to show the original value of the loans being acquired in its balance sheet and to properly account to taxpayers for bale outs and write offs when all methods of recovery have been exhausted.

Letter published in the Sunday Business Post on 22nd August 2010. For more on this topic, see this Open Letter to Nama's Board and the related blog entry.

Clearly the Minister for Finance's left hand does not know what his right hand is doing. 

On the one hand, he has the National Pension Reserve Fund with €17 billion invested in about 2,900 companies worldwide in addition to €7 billion invested, on his instructions, in the two main banks. Financed mainly by Exchequer borrowings, the Fund has produced a meagre 2.6% annual return since 2001. It now proposes to tilt its portfolio towards riskier investments in the hope of doubling its annual return so as outperform the cost of government debt, currently 5%.

On the other hand, the Minister is investigating the possibility of selling prime State assets to reduce the national debt. Such sales could occur at a low point in the economic cycle and would have to be "priced to go" to deliver profits to investors.

If the Minister joins his hands together, he could direct the Fund to dispose of its overseas investments and lend the proceeds to the Exchequer to generate a risk-free return for the Fund that matches the State's cost of borrowing. Alternatively, the proceeds could be used to make arms-length purchases of suitable State assets or invested in new infrastructural projects in Ireland.

Letter published in the Sunday Business Post on 8th August 2010.

I wish to make the following points about Nama's new business plan:

1. At best, it is a "concept plan" describing operational arrangements, short-term work plan and structures. It may be a plan but it is not a business one.
   
   
2. Considering that it relates to a loan portfolio of €81 billion, it includes no pro-forma projections and its financial forecasts are confined to a simple 4x4 table containing only nine values summarising Nama's activities for three scenarios over the next ten years! 
   
   
3. The plan indicates that Nama will use the amortised cost method of accounting. This ensures that the true extent of the bale out and foregone interest, exceeding €40 billion, will not appear in its accounts.
   
   
4. Nama says that it will take a neutral view on future property prices, will not engage in speculating hoarding and will wind up in just seven-ten years. This points to a short-term, uncommercial approach and to fire sales, negating a key reason for setting up Nama.
   
   
5. Nama's intention to pursue debtors to the "greatest possible extent" really only refers to recovering the cost of acquiring loans from the banks rather than to the much higher nominal value of the loans owed by developers.

In contrast to its own plan, Nama is seeking extremely detailed business plans from its debtors and its recently published quarterly financial report contain dozens of pages of tables. Clearly, Nama's approach is to disclose as little as possible about future prospects and intentions but endless detail after the horse has bolted. This resembles the "everything is fine" strategies of the banks that it is meant to be rescuing.

Letter published in the Sunday Business Post on 11th July 2010.  For a more detailed assessment of Nama's plan, see Nama's New Business Plan. 

If the mooted property tax is value-based, how can taxpayers value properties in a volatile market in the absence of reliable data? For example, my home was worth about €900,000 at the peak; is worth €650,000 by reference to local asking prices; is worth €360,000 based on a multiple (15x) of local rent levels; and valued at €175,000 based on a pre-boom multiple of five times current average earnings.

Leaving valuations aside, how collectible is a property tax given that over 4% of mortgages are more than 90 days in arrears, many more mortgages are interest-only, thousands more are receiving mortgage interest supplements and over 300,000 households are moving into negative equity having possibly paid substantial stamp duty on their purchases?

Letter published in the Irish Times on 28th June 2010.

The Honohan Report said there was a ''moral hazard'' involved in the blanket bank guarantee, ''though this argument does not appear to have been made''.

The chairman of Nama and the Financial Regulator have recently suggested that it would not be possible to assist people with distressed mortgages, due to ''moral hazard''.

So where is the moral hazard for the politicians, administrators, bankers, developers and related professionals who created the financial crisis, but continue to hold positions of power, draw huge pensions, operate insolvent businesses and get massive bailouts, courtesy of taxpayers?

Letter published in the Sunday Business Post on 27th June 2010.

So, a second rate-leader with a first-rate front bench is going to end up with a new second-rate bench. Hardly, a recipe for electoral success.

Letter published in the Irish Times on 19th June 2010.

Recent comments by Nama's Chairman suggest that it is moving the goal posts and is no longer going to do what it was set up to do, namely, to recover as much as possible of the loans transferred to it from the banks.

Instead, it appears that Nama is going to only recover what it is paying for these loans plus its expenses and that it intends to wrap up this process in seven to ten years instead of the original ten to fifteen years.

On this basis, Nama could be writing off, or forgiving, about €30 billion of debts as well as substantial unpaid interest.

Letter published in the Sunday Business Post on 20th June 2010. See also, the Open Letter to Nama's Board which discusses this matter in greater detail.

The headline on page one of last week's Markets stated "€5.5 billion-worth of mortgages now in arrears". This doesn't include the many thousands of mortgage holders with restructured loans or the hundreds of thousands being locked into negative equity amounting to €10-15 billion. Page two of Markets indicates that the Minister for Justice has ruled out a so-called 'Nama for the people' on the grounds that lenders or taxpayers must take the pain if borrowers do not replay their debts.

Contrast this with the treatment of developers and banks. Taxpayers, including those in negative equity, are being forced to assume at least €40 billion of additional debt to pay for their bad loans and decisions. And in a classic case of pass the parcel, Nama will shortly start writing off, effectively forgiving, about €20 billion of developers' debts due their inability to pay. And this takes no account of the massive write-offs directly incurred by the banks.

Where the justice in this when developers can also avail of tax breaks and losses, legal loopholes, ring-fencing, limited liability and expensive advice to duck their debts?

Letter published in the Sunday Business Post on 30th May 2010.

In addition to whistleblower legislation, would it be feasible to alter the guilty requirements for certain types of white-collar crime to a civil rather than the virtually unprovable criminal standard of proof? This should speed up the collection and presentation of evidence and reduce the duration and complexity of trials.

Letter published in the Irish Times on 27th May 2010.

The call by Alan Dukes, director of Anglo Irish Bank, for Nama to be covered by the Freedom of Information Act should also embrace Anglo given that it could account for about half of all loans going into Nama. This should enable taxpayers to find out about Anglo's bondholders, the cost of winding up and its extraordinary lending decisions.

By my reckoning Nama will, unless it is very lucky or tough-minded, have to write off about €11 billion of unpaid interest on top of loan defaults of least €20 billion over the next ten years. Given the scale of these losses, it is essential that Nama's and Anglo's plans and operations be open to maximum public scrutiny.

Letter published in the Sunday Business Post on 16th May 2010.

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.

These three letters from me about Nama and the banking crisis were published in the Sunday Business Post over the three Sundays commencing 18th April 2010:

Updated Cost of Crisis

On 22nd March you published a letter from me indicating that the banking crisis could cost taxpayers up to €35 billion. In the light of recent revelations, my "worst" case estimate has been upped to €47 billion. This is additional to related interest payments, social and economic costs and forfeiture of future investment opportunities.

How is this going to be paid for? Surely, it would be unrealistic to expect the cost to be shouldered by the lower paid who, by definition, are having trouble making ends meet. On this basis, the only realistic answer is a new levy on high earners on the grounds that they can still enjoy boom-time lifestyles and probably don't pay full taxes thanks to untaxed pension contributions and tax allowances arising from the ill-fated building binge. I can think of several memorable names for such a levy!

Lead letter published on 18th April 2010.

Haircuts and Scalping

Much attention has focused on the larger than expected haircut on the €81 billion of bank loans going into Nama. However, this haircut amounts to a scalping for taxpayers as it means that developers will walk away from residual debts of €36 billion if Nama merely breaks even over the next decade.

Accordingly, Nama's mission must be to collect as much of the haircut as possible - every unpaid billion euro is in effect a donation by taxpayers to developers' gambling debts and their incompetent banking pals. This means no sweetheart deals or fire sales, and maximum enforcement no matter how long it takes or difficult it proves.

Lead letter published on 25th April 2010.

Phantom Funds

Your front page headline "Phantom funds make up to 66% of INBS income" (25th April) could just as easily refer to Nama. Buried in the financial projections of Nama's draft business plan is evidence that it expects to roll up about €5 billion of interest in its initial three years and there is no indication that any of these phantom funds or "unrealised interest" will ever be paid. Indeed, I estimate that they could amount to €11 billion over ten years to 2020 and would almost equal the projected interest actually paid by borrowers. The Nama plan is silent on this possible write off.

It is interesting to see how the plan, issued with great flourish and used to justify Nama to the electorate and secure Eurostat approval for off-balance sheet borrowing, has been suddenly downgraded to "illustrative"  before a Joint Oireachtas Committee. Of course, the best approach would be to include Nama in the Freedom of Information Act to facilitate access to details of Nama's plans and operations.

Letter published on 2nd May 2010.

If the Government is powerless to prevent pay increases at the State-owned Anglo Irish Bank, what hope has it of ensuring that the credit policies of the other banks concentrate on helping SMEs rather than bolstering capital bases to benefit owners and bondholders?

Letter published in the Irish Times on 26th March 2010.

Your correspondent Henry Roberts (7th April) makes a good point but has mixed up apples and oranges. The €15.3 billion quoted for California refers to its expected budget deficit for 2010-11 i.e. excess of expenditure over income. The good news is that the €79.3 billion quoted for Ireland relates to our total national debt rather than the budgeted deficit. However, the bad news is that this national debt is about to double thanks to Nama, bank bale outs and ongoing budget deficits.

Letter published in the Irish Times on 8th April 2010.

Rough calculations suggest that, in the "worst" case, the banking crisis could ultimately cost taxpayers about €35 billion based on €10.8 billion expended to date, €14 billion for further bail outs and partial nationalisations, and a provision of €10 billion to cover Nama losses.

This is equivalent to about three years' income tax receipts, or €17,000 - or six months' average earnings - per taxpayer. Related borrowings would peak at about €79 billion with annual interest of about €3.5 billion either borrowed or paid by taxpayers. It takes no account of broader economic and social consequences.

Given the magnitude of the likely losses, it is truly extraordinary that a full public enquiry is not already well underway. Maybe, this because most of those who created, or failed to prevent, the crisis are still in charge.

Lead letter published in the Sunday Business Post on 22nd March 2010.

Some additional comments:

1. In a "best" case scenario, triggered by a miraculous resumption of growth, the foregoing cost (€35 billion) might be reduced by two-thirds thanks to Nama achieving better than break even, repayments by some banks and proceeds of bank share sales.
   
   
2. Based on the average of "best" and "worst" cases, the "most likely" direct cost of the banking crisis could be about €24 billion.

For the record, the key assumptions were as follows:

• €10.8 billion already expended: €3.5 billion to Bank of Ireland and AIB; €3.8 billion to Anglo Irish Bank.
• €13.4 billion for further bale outs etc.: €6 billion for Anglo; €2 billion for Irish Nationwide and €0.4 billion for EBS; €5 billion in new equity to be shared between Bank of Ireland and AIB.
• Provision for Nama losses: €10 billion based on 20% of the €54 billion to be paid for loans from the covered institutions.
• "Best" case provision assumed that all funds (€12.2 billion) to Anglo, Irish Nationwide and EBS are written off; that Nama breaks-even; and that preference and ordinary share investments in AIB and Bank of Ireland are recovered at cost,
• Peak borrowings comprise cash provided to the covered institutions (€24.2 billion) plus the Nama bonds (€54 billion). This takes account of the fact that any share investments made by the National Pension Reserve Fund are effectively funded by borrowings via the NTMA.
• Assumed interest rate on these borrowings is 4.5% (current yield on 10-year Government bonds).

The foregoing estimates exclude any possible losses linked to €10 billion provided by the Central Bank to Anglo Irish Bank under Master Loan Repurchase Agreements last March. This is secured against collateral of €14.5 billion provided by Anglo. For more information, see Outsiders Pay for Insiders Greed by David McWilliams in the Sunday Business Post and Anglo's latest fun in the sun by Dr. Constantin Gurdgiev.

The Government's convoluted, evasive plans for a banking inquiry are a bucket of whitewash and waste of time. They insult the electorate who will bear the cost of the crisis without ever seeing and hearing exactly why and how it happened.

We need is a new type of inquiry which is a mix of tribunal and commission and provides for membership by politicians and others. It should have subpoena/discovery powers, take evidence under oath, make findings, exclude lawyers, be open to public and televised, have an independent chairperson, engage expert support staff, hold private hearings by exception, have power to refer to ODCE/DPP/Gardai and so on.

Letter published in Sunday Business Post on 31st January 2010. For a more detailed discussion on these proposals, see Irish Banking Enquiry.

George Less is a person of enormous integrity who I admired greatly during his time with RTE. In truth, I was very disappointed when he joined Fine Gael as I felt that his RTE role was much more significant than any opportunity that might arise within the party and that he would be compromised by it and the Dail. However, his resignation fully restores my faith in him as a person of great integrity and ability and I hope that he will revert to a key reporting position at RTE.

Letter published in the Irish Times on 9th February 2010.

When a quarter of Iceland's electorate opposed the payment of €3.8 billion to the UK and Dutch governments arising from its banking crisis, its President refused to sign the relevant bill into law and the matter goes to the people in a referendum.

Meantime, our Government rams Nama down the electorate's throat and bails out banks and developers at a cost of at least €20 billion notwithstanding widespread opposition.

Whereas the Icelandic government resigns, our government clings to power in spite of having presided over the entire crisis.

While Iceland hires a high-powered, international investigator to help investigate possible criminal actions by bankers, our government dithers about even holding an enquiry.

Clearly, the Celtic Tiger has turned the Irish electorate into pussycats.

Letter published in the Irish Times on 15th January 2010.

Oft-quoted official statistics about income distributions and income tax are just plain wrong as they treat dual-income married couples as single tax payers, notwithstanding moves towards individualisation. This has the effect of completely ignoring about 400,000 earners and overstating the taxable incomes of their spouses by approximately one-third. Dual-income married couples are highly significant as their average income, based on published Revenue data, was €70,000 as compared with €27,000 for all other tax cases. They accounted for about 36% of all income and 41% of all income tax notwithstanding that they represented only 17% of tax cases.
 
If the incomes of dual-income married couples are divided in the ratio 65/35 then the overall distribution of incomes is radically altered. By my reckoning *, the number with gross incomes under €40,000 in 2008 would increase from 1.48 million tax cases to 2.25 million earners, a jump of 52%, and the number with gross incomes above €40,000 would decline from 0.89 million tax cases to 0.52 million earners. This redistribution has huge implications for plans to bring more low-paid earners into the tax net because they are earning substantially less than suggested by official figures, or for increasing the tax take from high earners who are less numerous than reported.

Letter published in the Sunday Business Post on 3rd January 2010. * See revenue_tax_cases.pdf.

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.

The 2010 budget was extremely one sided as it excluded general tax increases for the high paid who retain existing after-tax incomes and additionally benefit from deflation. At the other end of the spectrum, social welfare recipients and lower-paid public sector workers are experiencing cuts on account of the same deflation.

Letter published in the Irish Times on 10th December 2009.

It is truly extraordinary that the Minister presented a budget detailing cuts of €4 billion but failed to state that he had recently gifted a similar amount to Anglo Irish Bank for absolutely no return and will probably flush a further €4-6 billion down its plug hole. This is on top of €7 billion provided to the main banks and possibly to be followed by billions more during 2010. Nor did he mention Nama's planned overpayment of €7+ billion for property loans and resultant €54 billion increase in national debt. Talk about ignoring elephants in the room.

Letter published in the Sunday Business Post on 20th December 2009.

Is it too much to expect people in public positions to answer questions truthfully without recourse to mental reservations, mature reflection or overnight consideration?

Letter to editor published in the Sunday Business Post on 6th December 2009.

By my reckoning, house builders and landowners made exceptional profits of about €37 billion over the ten years to 2006 as a consequence of inflated house prices. This excludes windfall profits for commercial property and those made by financial institutions, who lent far more than strictly necessary, and other beneficiaries such as brokers, insurance companies, solicitors and auctioneers. Although the Exchequer gained from additional stamp duty and VAT, it also provided tax breaks which were largely unneeded and merely boosted profits.

Having made huge gains and plunged hundreds of thousands of home owners into negative equity, surely it is only fair to look for some payback from the boom's main beneficiaries. Given that the country is confronting a deficit of €20 billion, what would be morally wrong with introducing a special tax to claw back these excessive profits instead of raising taxes, cutting public services and social welfare, and increasing exchequer borrowing?

Letter published in the Sunday Business Post on 29th November 2009.

According to Nama's plan, budgeted interest income for 2010-12 will total €9.5 billion but its cashflow projections only show interest income of €4.5 billion for this period. Presumably, the difference of €5 billion is rolled up. I reckon that rolled up interest could total €10.9 billion over the ten years to 2020. If this is included in the €62 billion of principal repaid by borrowers then the "real" default rate on loans would be 34% rather than 20% indicated in the plan. This would transform Nama's projected surplus into a trading deficit of at least €5 billion and signify that the bank/building crisis is far more serious than implied by Nama's plan.

Given that Nama will be taking over loans amounting to almost half of Ireland's GDP, its business plan should, at a minimum, have included "scenario-based" P&L statements and balance sheet projections as well as cashflow forecasts for the ten years. These would have given a fuller picture and facilitated analyses which might have helped anticipate problems identical to those being experienced by the banks that Nama is seeking to rescue.

Letter to the Editor published in the Sunday Business Post on 22nd November 2009.

Nama's draft business plan projects a profit of €5.5 billion by 2020 even after overpaying €7 billion for loans and incurring expenses of €2.6 billion. Surely, this forecast undermines the need for Nama. In truth, the plan's projections are undoubtedly "very best case" and other scenarios should have been published using lower repayments and interest income, higher defaults etc. These scenarios would explain why the banks are so enthusiastic about passing all their property loans to Nama.

Letter published in the Sunday Business Post on 1st November 2009.

What is the point of the Dail debating the Nama Bill before Nama has undertaken basic research on its prospective loan portfolio and finalised its business plan and strategies? If Nama's draft plan was used to seek €54,000 from investors, it would be rejected out of hand as an extremely poor document. Given that Nama needs to effectively raise an amount which is a million times larger i.e €54,000,000,000, surely no taxpayers' money should be provided until its plan has been fully researched and approved by the Dail. Only at that point would it be appropriate to resume consideration of the Nama Bill. Thoughts of horses, carts and stable doors come to mind.

Letter published in the Sunday Business Post on 8th November 2009.

The Government should introduce a measure for Ireland similar to the Lisbon Treaty's Citizens' Initiative whereby at least a million EU citizens from several member States could request the EU Commission to bring forward proposals on a particular issue.

Based on the Lisbon model, about ten thousand Irish citizens from, say, six counties could oblige the Cabinet or Dail to consider an issue, or the Government to hold a referendum. Apparently, such a proposal was included in a draft of the 1922 Constitution of the Free State. Citizens' initiatives operate in Switzerland, New Zealand, Estonia and the US. A measure along these lines might help bridge the yawning gap between our politicians and the electorate.

Letter published in the Irish Times on 6th October 2009.

Four questions about Nama:

1. Why is the onus on Irish taxpayers to recapitalise the main banks via Nama? These banks could raise substantial capital by selling off non-core investment and insurance activities and holdings in banks in the UK, Poland and the US. 
   
   
2. Why is the Minister preoccupied with the capital requirements of the banks when determining the haircut on loans being transferred to Nama? Surely, this amounts to match-fixing with taxpayers on the losing team.
   
   
3. Will the Minister accept that property values could continue falling for the next few years and might not rise for several years thereafter? This would be a consequence of the overhang created by Nama's portfolio, rising interest rates and ultra-conservative bank lending.
   
   
4. Why doesn't the Government direct the banks to grant share options to mortgage holders experiencing negative equity? This would help compensate them for the failures by the Government, Regulator and banks to exercise judgement and prudential control during the boom which they provoked.

Lead letter published in the Irish Times on 17th September 2009.

A shorter letter from the Ceann Comhairle to the electorate incorporating the words "sorry" and "resign" would have been more appropriate.

Letter published in the Irish Times on 16th September 2009.

The 1911 Census required householders to state the number of front-facing windows in their dwellings.

Instead of asking householders to value their houses in a very uncertain market, the proposed property tax could be based on a windows count.

How about a tax of €100 per front-facing window or one-third of total windows which ever is the greater? It would be very easy for Revenue to check this and evasion by bricking up windows should be evident.

A window tax was used in the UK and France in the 19th century as an alternative to income tax and gave rise to the phrase "daylight robbery".

Letter published in Irish Times on 9th September 2009.

Why is the Government proposing to use Nama to prevent a decline in property prices at a time when Ireland has the second highest cost of living in the EU?

Surely, it should be encouraging lower prices as these would result in cheaper houses, lower shop prices and more competitive commercial and industrial rents. Instead, taxpayers are expected to underwrite a multi-billion punt on Nama to ensure that property prices don't fall and that the country remains uncompetitive.

Lead letter published in the Irish Times on 26th August 2009.

The CSO's recent review of economic and social progress for 2008 incorporates EU-wide comparisons based on GDP (Gross Domestic Product) and GNI (Gross National Income). For Ireland, these measures differ by about 14 percent. In many situations, the lower GNI is the most appropriate measure of Ireland's output as it excludes the huge profits generated by multinationals. However, comparative studies by the EU, OECD, IMF etc. are based on GDPs which for many countries are very close to their GNI values. Consequently, their findings over- or understate Ireland's true performance as illustrated by the following examples derived from the CSO's review and covering the 27 EU states:

• Ireland ranked second place in terms of purchasing power per person based on GDP but fell to fifth place based on GNI.
• For capital investment, Ireland jumped from 16th place based on GDP to a much more favourable 8th position based on GNI.
• Social protection expenditure based on GDP placed Ireland in 20th place. This improved to 15th based on GNI.
• For public expenditure on education, Ireland ranked 15th based on GDP but rose to a commendable 7th place for GNI.
• Ireland's ranking for public health expenditure jumped from 17th place when related to GDP to an above-average 11th place for GNI.

Surely, domestic and international studies should assess Ireland's performance based on GNI as well as GDP, even if only in footnotes. For example, the projected exchequer deficit for 2009 is 10.8 percent of GDP and extraordinarily high by international standards. If based on GNI, it rises to 12.7 percent and points to an even more serious position.

Letter published in the Sunday Business Post on 13th September 2009. The five examples were edited out for space reasons. 

Calls for a review of the minimum wage should be placed in context.

According to the 2007 National Employment Survey 14 percent of all employees in the State had hourly earnings below €10 while a similar percentage had earnings above €40 per hour.

When account is taken of hours worked, employees earning less than €250 a week account for only 4 percent of the national wage bill as compared with a 13.5 percent share for those earning over €1,500 a week. A ten percent reduction in wages for all 233,000 employees earning less than €250 a week would reduce the national payroll by 0.4 percent whereas a similar reduction for the 233,000 highest paid employees would reduce the national payroll by eight times as much.

For maximum impact, any campaign to improve national wage competitiveness should start with high-paid employees, directors and self-employed rather than the lowest paid. To show leadership, our politicians should take substantial reductions in salaries which, even after minor tweaking, are still amongst the highest in the world.

Letter published in the Sunday Business Post on 16th August 2009. 

In discussing the need for strong oversight of Nama, Noel Whelan (1st August) mentioned that the draft legislation provides for a special Oireachtas committee to oversee Nama in addition to the Public Accounts Committee.

I wonder how effective these committees will be given that the draft legislation contains clauses (50 and 51) which preclude the Chief Executive Officer and the Chairperson of the board of Nama from (a) questioning or expressing an opinion on the merits of any policy of the Government or a Minister or on the merits of the objectives of such a policy or (b) producing a specified document in which the Chief Executive Officer or the Chairperson questions or expresses an opinion on the merits of any such policy or such objectives.

Surely, these "gagging clauses" will preclude key officials from speaking openly on fundamental issues and effectively nobble comprehensive scrutiny of Nama.

Letter published in Irish Times on 4th August 2009.

Mr X (April 16th) is shocked that so many innumerates are advocating nationalisation of the banks. The real innumerates are the bankers and policy makers who ignored long-term trends. The Government's approach to the banking system is the financial equivalent of half-pregnancy as it involve nationalisation of bad loans and continuing privatisation of good loans. Even at this late stage, it should go the whole hog and nationalise the main banks. Reasons for not doing so, such as the need for transparency, coming from a totally opaque Government are pure hogwash.

Nationalisation would remove uncertainty, simplify matters, restore confidence and ensure that state funding is used to boost the economy rather than bale out bank shareholders. It would be much less risky as it would eliminate the need to price impossible-to-value impaired loans. These could cost taxpayers tens of billions if transferred at the wrong price to Nama in addition to billions of interest payable on bonds used to purchase the dodgy loans at the outset. The idea of applying a levy on the banks to offset any shortfalls is more hogwash as it will be simply passed on to customers.

Published in the Irish Times on 18th April 2009.

Your editorial (16th March) about Oireachtas reform stated that the question is not whether there should be cuts, but how deep cuts should go.

For starters, the Minister of Finance should announce an immediate reduction of about one-third in the salaries, pensions and other perks enjoyed by politicians and across the upper reaches of the public service. This might seem Draconian, but it would only deflate a big bubble and bring things into line with other comparable countries with which Ireland is expected to compete.

If the Government makes such an announcement on or before budget day, it will send the clearest possible signal to the electorate and international observers that it understands the seriousness of the situation and is leading by example.

If it fails to do so, there is every chance that it will not secure the electorate's support for the budget measures. In these circumstances, it is possible that even more painful medicine will be imposed unilaterally by the ECB or IMF as a precondition of a financial bailout.

Letter published in Irish Times on 23rd March 2009.

Last year the Minister for Finance advanced the 2009 budget by three months as the Government's main response to the emerging economic crisis. He indicated in his budget speech that the economy would decline by less than one per cent and unemployment would average 7.3 per cent in 2009.

If these figures justified an early budget, surely the expected 6+ per cent decline in the economy for 2009 and an actual unemployment rate of 7.7 per cent for last December justify immediate budgetary action rather than a fifteen month gap to the next budget.

Much play has been made by the Government that top earners pay the most tax and that huge numbers don't pay any tax. According to Revenue's Statistical Report for 2007, 661,000 tax cases had gross incomes of less than €15,000 a year and, as might be expected, paid minimal taxes totalling €14 million on gross incomes of €4,744 million.

If, ignoring the social consequences, their effective tax rate of 0.3% could be increased by 10% to 10.3%, an additional €474 million would be raised. At the other end of the spectrum, 81,000 people had gross incomes in excess of €100,000 a year and paid taxes totalling €4,353 million on gross incomes of €16,065 million. If their effective tax rate of 27% increased by the same 10% to 37%, a total of €1,606 million could be raised.

Surely, it is unnecessary to wait for the Commission on Taxation's report to see that, in this time of crisis, tax rates should be increased as soon as possible for those with the highest after-tax incomes.

Letter published in the Irish Times on 4th March 2009.

Last Monday, the Irish Times contained full-page advertisements from AIB and ICTU. The contrast between the two could not be greater.

The former comprised patronising guff about commitment (mentioned five times) which was undoubtedly generated by an advertising agency. The ICTU contribution was a measured document which addressed many of the problems confronting the state. Although far from perfect, it was close to being the type of comprehensive plan that the Government should have produced months ago.

The bank's advert stated that it is regulated by the Financial Regulator. Thankfully, the ICTU advert contained no such statement.

Letter published in the Irish Times on 20th February 2009.

The following proposals are aimed at those in leadership positions and the higher paid. While small in number, they are hugely important for setting example, restoring fairness to the tax system and contributing to the national finances and competitiveness.

1. Salaries, pensions and expenses of ministers, TDs and senators should be reduced by, at least, one-third and instead of being pegged to overblown civil service scales, their salaries should be linked to those of politicians in other states of comparable size and status, and having similar parliamentary sitting days.
   
   
2. Salary scales of senior administers and professionals across the public sector should also be benchmarked against opposite numbers in other comparable countries and linked to the average industrial wage. In the interests of fairness, the proposed pension levy should be restructured as was done for the income levy.
   
   
3. As applies in the US, exceptional salaries in the private sector should be funded by shareholders rather than subsidised by taxpayers. Accordingly, any elements of total salary, bonus and pension contribution exceeding €200,000 should cease to be deductable for corporation tax purposes.
   
   
4. The conditions applicable to non-residency for tax purposes should be reviewed so that non-residency means exactly what it says or tax exiles pay up like every other citizen. For starters, tax should be changed on worldwide incomes of tax exiles pro-rate to days (or part of) spent in the state.
   
   
5. Having been introduced to encourage greater participation in the work force, tax individualisation should be phased out to help distribute scarce jobs across more households. Dual-income households with high mortgages that voluntarily become single-income should get special tax credits or be able to extend the term of their mortgages.
   
   
6. A new tax rate of 48% should be applied to the 60,000 tax payers with incomes above €100,000 a year. The annual yield would be about €800 million, and could be higher if allowances for "top-hat" pensions, investments etc. are reduced. If applied immediately for the next five years, these changes could cover about a quarter of the projected €16 billion shortfall.

Letter published in the Irish Times on 10th February 2009.

The Minister for Finance has stated that the €5.5 billion package for the banks is a good deal for the taxpayer. In reality, the return to the Exchequer is derisory given the risks involved, the cost of borrowing the funds for the package, and the fact that the proposed preference shares are neither convertible nor cumulative and have no priority over ordinary shares in the event of a liquidation.

In addition, the government has agreed to act as funder of last resort for the two main banks if their private fund-raising is unsuccessful and, most extraordinarily, it has offered Anglo Irish a blank cheque by agreeing "to make further capital available if required so that it remains a sound and viable institution". If this bank is sound and viable why does it need €1.5 billion of State funding and why is its share price sinking like a stone and valuing the entire bank at a mere fraction of this support?

All this largess comes on top of several hundred billion of guarantees which have increased interest costs for the state's own funding needs.

Surely, it is completely unacceptable for the very same people - ministers and bankers - who created the crisis to also negotiate the solution using "our" money. Where are the sanctions to ensure that their reckless behaviour is not repeated and why should the taxpayer shoulder all the risk and none of the rewards?

 Letter published in the Irish Times on 29th December 2008.

Here are some suggestions for the Minister for Finance to consider when he is obliged by circumstances to present a supplementary budget early in the new year in response to the disastrous economic downturn which is still gathering momentum.

They should be implemented in the context of a realistic, attainable five-year plan for which the support of the social partners and opposition should be sought. Given that these are unlikely to acquiesce even though they offer no alternatives other than to strut, whine and oppose, the government should, for once, show real leadership and forge ahead on the grounds that there is no alternative and early action is crucial. Most people will accept pain provided it is seen to be fairly distributed and there is hope at the end of the tunnel. The alternative is much higher unemployment, cutbacks, emigration and extreme hardship which will take a decade to unwind.

As those who gained most from the Celtic Tiger should pay the most, the income levy percentages should be extended on a sliding scale from 0% for the lowest paid up to, say, 10% for those on the highest incomes. Alternatively, a new higher tax rate should be introduced for those earning more than, say, double the average industrial wage.

Given that payroll costs account for half of all public sector expenditure where salary rates are well ahead of equivalents in the private sector and internationally, the Government should roll back the first benchmarking exercise and plead "inability to pay" other than to the lowest earners under the new national wage agreement. It should only recommence payment of increases once major reforms have been confirmed by An Bord Slash.

Taxpayers can no longer be asked to subside "gold plated" pensions for politicians and public servants when the value of their own pensions (if they have one) is dropping through the floor. The Government should establish a realistically funded contributory pension scheme in lieu of the present prohibitively expensive and inequitable "pay-as-you-go" arrangement. As a stop gap, full PRSI should be applied across the public sector and, in recognition that PRSI is income tax in all but name, earnings limits should be removed for all workers in the private sector.

The foregoing measures will arrest the catastrophic deterioration in public finances and enable the new standard VAT rate of 21.5% to be reduced substantially. This will help the lower paid as well as assisting tourism and curtailing cross-border shopping.

Finally, the Dail should immediately start sitting for four full days every week for at least forty weeks a year. To ensure genuine debate and better decision making, backbenchers should be pressurised by constituents to exercise greater freedom of expression in Dail debates, and voting linked to constituents' needs rather than party loyalties should become the norm rather than the exception.

Lead letter published by Irish Times on 8th December 2008.

Our public representatives in Leinster House should get their own house in order before throwing stones about expenses and wasting money.

TDs enjoy some of the highest salaries in the world for sitting in the Dail for less time than opposite numbers in most other countries. These assemblies which operate for under two days a weeks are grossly over manned and hopelessly inefficient and ineffective due to archaic procedures and conventions.

TDs enjoy excellent allowances and related perks which are not necessarily taxed or even vouched for. On top of that, they have extraordinary pension deals and are free to employ relatives at the taxpayers' expense. They throw patronage around like confetti by creating non-jobs for many Minsters of State and Committee chairpersons and appointing friends and camp followers to the boards of hundreds of quanoes which are often used to shield them from accountability.

If our representatives were paid on the basis of results, they would now be hugely indebted to the taxpayer.

Maybe, they would reflect on their own value-for-money during the forthcoming six-week Dail recess.

This letter was published in the Irish Times on 28th November 2008. 

Has the Government learnt nothing from Eircom's experience in the hands of private equity investors and venture capitalists? It now seems to be wrapping up some of the Irish banks to facilitate a new game of pass the parcel using another key national resource.

Why doesn't the Government simply create a special investment vehicle to borrow the funds needs to recapitalise the banks via high-coupon preference shares and then do a public floatation of this vehicle to repay these borrowings?

This would allow the banks stay in, largely, Irish hands, give the Government a say over credit policies and ensure that banking strategies are aligned with the national interest rather than dictated by the short termism of unregulated Wall Street funds which played a lead role in creating the current international crisis.

This letter was published in the Irish Times on 22nd November 2008.

Having provided guarantees to the banks on very favourable terms, the Government must follow these up with equity injections, as is being done in many other countries, in order to underpin our fragile banking system, re-enforce its guarantees and participate in the upswing which will ultimately occur.

While this will impact on Exchequer borrowing, massively dilute existing shareholders and shred the reputations of many high-flyers, it is surely more prudent to inject new equity before problems arise rather than as the "the last option" favoured by the Minister for Finance.

If, God forbid, an Irish bank was to default on any significant scale, it is hard to see how the other banks could respond without jeopardising their own stability with disastrous national consequences.

To mangle a phrase often attributed to banks, the Government should lend them umbrellas before it rains and take them back once the sun starts shining.

This letter was published in the Sunday Business Post on 2nd November 2008.

The value of the proposed bale out in the US is equivalent to US$2,000 per US citizen. The Irish bale out could be worth up to €125,000 per man, woman and child. If US citizens won't accept their bale out, why should we accept something a hundred times larger?

The Government's action is nothing more or less than a huge reward, underwritten by taxpayers, to banks for foolish lending, to the Regulator for failing to regulate, and to its beloved construction industry.

It does absolutely nothing to address the underling problems which the banks, government and construction industry jointly created over the last five years by building, selling and financing grossly over-priced houses and commercial property.

This is the AIB and ICI rescue repeating itself. Where are the restrictions on bankers remuneration? Where are the equity stakes? Why should Irish taxpayers guarantee to bale out a bank that stupidly financed an overpriced property development in Dublin, London or Germany or made billions by conspiring with house builders to lock hundreds of thousands of young purchasers in huge mortgages for the rest of their working lives?

Irish households are amongst the most heavily borrowed in the world and, instead of helping them, the Government gives guarantees worth a multiple of the Irish economy's annual output to the Irish banks.  This, on top of the hammering that households can expect in the forthcoming budget.

Lead letter published in the Irish Times on 1st October 2008.

Five years ago you published a letter from me about house prices (28th October 2003) which stated that "rising interest rates could move many recent and future buyers with large mortgages into negative equity and expose their lenders to defaulting loans. It could also mean that many houses acquired as investments might be offered for sale to lock in gains or to cut losses. This would further depress prices. Can nothing be done to prevent this calamitous event from happening?".

Clearly, very little was done. If a mere letter writer could foresee this crisis, why didn't the Government?

The best thing the Government can do now to assist the beleaguered building industry is absolutely nothing! House prices should be allowed continue their rapid descent to a point where people and lenders become confident that they have finally reached a reasonable and sustainable level.

There should be no dig outs or artificial schemes as these will merely defer decisions by those who would wish to purchase a quarter of a million houses over the next five years. The return of affordable housing for all would be real shot in the arm for society and the economy.

To consolidate this, the Government must introduce much-discussed controls on the price of building land and, in conjunction with the Central Bank, implement measures which curtail inflationary lending for house purchases.

Letter published in the Irish Times on 10th September 2008.

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.

Here are three proposals which could help negotiations on a new national wage agreement, claw back some of the excesses of the Celtic Tiger, improve equity within society, generate additional funds for the Exchequer, and enhance national competitiveness:

1. Apply wage increases under the next agreement on a sliding scale, for example, 3% p.a. on the first €30,000, 2% on the next thirty and 1% on the balance. As wage increases, in the absence of growth, are mainly intended to compensate for basic cost increases, there is no case for automatically offering the same proportional increases to those already enjoying high incomes. 
2. Either introduce an additional tax rate (say 45%) for those earning over, say, €100,000 or ensure that those on the 41% rate actually pay tax at that rate on their incremental earnings by scaling back allowances for "top-hat" pensions, investments etc. It is inequitable that someone earning €60,000 a year pays tax at 41% while a person earning five times more can pay tax at a lower effective rate.
3. Drop the standard VAT rate to, say, 18%. This would reduce the cost of living and help redress the imbalance between low direct taxes (which benefit the better off) and indirect taxes which fall most heavily on the less well off.

The figures are illustrative but basic analysis would identify the ideal combination to achieve all the aforementioned objectives.

Lead letter published in the Irish Times on 28th June 2008.

Dr X's call for a pay freeze (4th May7 2008) is unlikely to secure much support in the talks on a new national wage agreement on account of our high inflation etc. However, here are three proposals which taken together could enhance national competitiveness, protect living standards, claw back some excesses of the Celtic Tiger, improve equity within society and generate additional funds for the Exchequer:

1. Wage increases under the next wage agreement should be applied on a sliding scale e.g. 3% p.a. on the first €30,000, 2% on the next thirty and 1% on the balance. As wage increases are mainly intended to compensate for basic cost increases, there is no case for automatically offering the same proportional increases to those already enjoying high incomes. 
   
   
2. Either introduce an additional higher tax rate (say 45%) for those earning over, say, €100,000 or ensure that those on the 41% rate actually pay tax at that rate on their incremental earnings by scaling back allowances for "top-hat" pensions, investments etc. It is anomalous that someone earning €60,000 a year pays tax at 41% while a person earning five times more can pay tax at a much lower effective rate.
   
   
3. Lower the standard VAT rate to, say, 19%. This would reduce the cost of living and help redress the imbalance between low direct taxes (which benefit the better off) and indirect taxes which fall most heavily on the less well off.

Figures are illustrative but basic financial modelling would identify the ideal combination to meet all the aforementioned objectives which, presumably, are reasonable and desirable.

Lead letter published in the Sunday Business Post on 11th May 2008.

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.

One of the most troubling things about the Taoiseach's resignation has been the headlines in the international media which used words like resignation, scandal, payments, allegations in various combinations. This damage to our reputation must be urgently addressed by the incoming Taoiseach along the following lines:

1. Take the long overdue Ethics Bill in the current Dail session.
2. Introduce legislation to protect all whistle blowers in lieu of the current patchwork sectoral approach.
3. Roll back changes and charges relating to Freedom of Information and broaden its coverage.
4. Give more powers to Dail committees to conduct investigations along the lines of the Public Accounts Committee.
5. Establish a Dail Committee to confirm all significant Government appointments to State boards etc.
6. Preclude Ministers from signing non-essential orders or making appointments once an election has been called.
7. Clear up all the obvious flaws governing donations to politicians before and during elections.
8. Follow up on the Standards in Public Office Commission's recommendations.
9. Require that the accounts of political parties be audited and placed in the public domain.
   

These measures would kick start the process of restoring the electorate's confidence in the political system and politicians.

Letter published in the Irish Times on 5th April 2008. 

Following their recent donations, is there any chance that our philanthropic tax exiles will start donating to the Collector-General instead of using Pay As You Wish to salve their consciences and garner publicity?

Letter published in the Irish Times on 27th March 2008.

On Friday's Morning Ireland Senator Mansergh compared the Taoiseach's appearance at Mahon to an aircraft in turbulence coming in to safely land. Others would view it as a catastrophic crash landing happening in (very) slow motion.

In the light of their sustained attacks on Mahon, it is clear that Fianna Fail and its ministers are making a major error of political judgement and, as always, have placed their party ahead of the country. It is also evident that the Greens and PDs have no courage or convictions and lack any moral standard.

In the light of this, how can the electorate trust the Government's judgement on other matters such as the Lisbon Treaty or their competence to manage our slowing economy?

Letter published in the Irish Times on 23rd Febraury 2008.

The recent reports on benchmarking and higher remuneration in the public sector have raised basic issues about equity and fairness.

First, the Benchmarking Body used a 12% provision while the Higher Remuneration Body used 15% when assessing the value of pensions. These averages have greatly distorted assessments. For example, the percentage applicable to a lowly paid clerical officer would be very different to that for a Garda who can retire at 50 on full pension, or to the Director General of a government department.

Second, Benchmarking II produced evidence that public sector employees were paid a salary premium (averaging 8-10%) on a comparable basis to private sector employees while working fewer hours back in 2003. This was prior to Benchmarking I payments. If account is taken of the resultant benchmark payments (averaging 9%), the additional value of pensions (12%+) and shorter hours worked and longer holidays (say, 10% difference), then the current pay premium for public sector employees could be as high as 40%. The benchmarking report was silent on this and only said that "public sector salaries compare well with the private sector". It would have been useful to have indicated 'how well'.

Third, the cost of Benchmarking I is often quoted in terms of a cost per year. It should be borne in mind that this cost recurs and increases each year and that the cost of Benchmarking I could exceed �6 billion to date. As indicated above, it is doubtful whether Benchmarking I should have been paid in the first instance and there is little to suggest it resulted in any worthwhile improvements in services.

Fourth, it was erroneous for the Higher Remuneration and Benchmarking bodies to confine themselves to comparisons between the domestic private and public sectors. Account should also have been taken of public sector pay patterns in other similar countries where it would be easy to make directly relevant comparisons. This might have helped ensure that, in the interests of international competitiveness, our Taoiseach, TDs and top managers and professionals in the public sector are paid salaries appropriate to a country with a population of four million people.

Subject to the foregoing, Benchmarking II comes across as a far more transparent assessment than it predecessor. It would be a pity if its approach to establishing relativities and comparisons was rejected simply because it did not deliver for the public sector on this occasion.

Lead letter published in the Sunday Business Post on 27th January 2008.

In the context of providing Irish aid to Africa, your correspondent Mr X (Friday 14th) queried whether Ireland would have make better use of the billions received from the EU if this had been administered by EU-appointed managers rather than by our own Government.

For many people, the answer would have been a definite yes. The time delays might have been shorter, the cost overruns lower and the herd of white elephants smaller.

Letter published in the Irish Times on 19th December 2007.

Instead of tinkering with stamp duty, the Government, as advocated by your correspondent Mr X (3rd December 2007 and July 2006), should immediately implement the Kenny report to limit profits on building land. It should also dig up the All Party Committee on the Constitution's progress report on private property which, no doubt, it will find buried under a tent in Galway.

The magnitude of profits made by the building industry are mind blowing. Over the ten years to end 2006, 608,000 new houses were completed and average annual prices increased by 199% from €102,000 to €306,000. On this basis, the cumulative value of new house sales over the decade was €131 billion.

During this same period, building costs increased by 61%. If land and other costs and profits had only risen in line with building costs over the decade then the average price of a house would have hit €164,000 in 2006 and the cumulative value of sales over the ten years would have been just €86 billion, a difference of €45 billion. After allowing for VAT of €8 billion, the residual difference of €37 billion is largely attributable to profits for land owners and builders.

On this basis, about one-third of future mortgage repayments by house buyers will be used to pay for these extraordinary profits. It should not be ignored that financial institutions have also profited as they have lent far more than strictly necessary. Likewise, the exchequer, through stamp duty, and a raft of service providers including brokers, insurance companies, solicitors and auctioneers have benefited from this windfall.

In addition to being burdened by excessive borrowings, many recent purchasers have had to purchase lower grade accommodation, live in less accessible locations, work harder and longer, and demand higher earning to pay their inflated mortgages. This has disrupted communities, reduced leisure time and living standards, and impacted on national competitiveness and long term growth prospects.

It is ironic that having sought a reduction in stamp duty on the grounds that it would stimulate the market, builders have ignored the fact that dropping overblown prices would have a much more significant impact on demand.

Lead letter published in the Irish Times on 7th December 2007.

As is evident from your letters' page, opposition to co-locating private with public hospitals refuses to go away.

It was clear before the general election that key ministers had no idea about the cost of co-location. Furthermore, the Minister for Finance, who should know better, seemed to equate its cost with the the level of tax foregone. Conveniently, he ignored the ongoing costs that will arise due to duplication of activities and resources, the operation of two separate management systems on the same site and, most critically the premium needed to cover future profits of the developers of the co-located hospitals.

In the long run, these items will be far more significant than the initial tax breaks. In addition, private health insurance subscribers will face substantial additional premiums and, at the same time, public hospitals will encounter substantial reductions in revenue to be funded by taxpayers. This is classic "lose-lose" rather than "win-win".

The Government's mandate has been to fix the health service - not to break it by allowing the private sector to selectively cherry-pick profitable niches. Valuable time and MANY LIVES have been lost as a consequence of the single-minded pursuit of this ideologically-driven approach and the opportunity to develop a single-tier, public system could be lost for at least a generation.

Instead of pursuing privatisation by stealth and hiding behind task forces and reports, the Government should, even at this late stage, ditch this warped PD ideology and start tackling the very real and obvious issues linked to management, staffing and resources. If this had been done much earlier in the ten-year life of this government, we could have reached, by now, a situation where the end of waiting lists would be in sight and the need for private heath insurance as a method of queue jumping would have diminished.

Letter published in the Irish Times on 24th November 2007.

I disagree that cabinet members should wear L-plates as they seem very competent at parking issues, doing U-turns, overtaking everybody, reversing positions, using airbags, driving in bus lanes, straddling dual carriageways, using fog lights, blowing the horn and driving on both left/right sides.

Admittedly, they are not so good at route planning, driving straight, obeying red lights, negotiating roundabouts, handling slippery conditions, making clear signals and emergency stops.

Letter published in the Irish Times on 22nd November 2007.

It is clear from the reaction to the recent Report by the Review Body on Higher Remuneration that its approach of comparing public sector salaries with the private sector is inadequate. Why should Irish Secretaries General be paid more than their equivalents in almost every other country? If TD salaries are very high by international standards and linked to those of Principal Officers, what does this say about salaries at middle levels in the Irish public sector?  Buried in the Review Body's report is mention of a recent survey, covering 13 countries, that indicated that the remuneration of office holders in all the countries is WELL BELOW (my emphasis) below that of jobs of comparable weight in the private sector. Why should Ireland be so different?

It will be interesting to see if the current review by the OECD of the Irish public sector will include salary comparisons when it benchmarks the Irish public sector against other comparable countries. If it doesn't do this, how can it hope to assess effectiveness and performance given that pay and pensions account for the bulk of public expenditure.

Aside from Review Body awards and benchmarking, the main driver of politician and public sector pay has been the various national agreements which appear to mainly benefit the public sector. Because these agreements provide percentage increases across the board, workers at the lower end of the scale only receive small monetary increases and the gap between top and bottom salaries gets wider on an exponential basis. Is it any wonder that, notwithstanding the smallness of the State, our political and administrative leaders are, thanks to these percentage increases, amongst the best paid in the world?

For the future, the Review Body must be instructed by the Government to take account of comparable public sector salaries in other EU countries and national agreements should make provision for percentage increases to be applied on a sliding scale so that the lowest paid get the largest percentage increases.

Lead letter published in the Irish Times on 7th November 2008.

How can a prospective salary of €310,000 for the Taoiseach be justified when the UK's Prime Minister only earns €270,000 (€187,611) and the US President gets €281,700 ($400,000) ? Is it any wonder that Ireland is losing its competitiveness and public sector costs are surging when people at the top so blatantly ignore the need for pay restraint.

Letter published in the Irish Times on 30th October 2007.

Cliff Taylor's item about "Balancing the Books" (Sunday, 7th October) indicates that the Government will need to borrow about �1.5 billion this year to finance day-to-day expenditure. This is almost equivalent to the amount to be invested this year in the National Pension Reserve Fund and begs some basic issues about the Fund's operation and direction:

1. What is the economic justification for borrowing money simply to invest in overseas equities to fund future pensions? As recent market volatility has shown, this is a "good times" strategy that would be completely unsustainable in the event of any serious international or national slowdown or rise in inflation.
2. Surely a better return could be secured for the nation if these borrowings were invested in much-needed local infrastructure, or used to displace profit-seeking private funds going into private-public partnerships, or used to bring forward projects which could encounter above-average inflation?
3. The Fund is currently worth about 21 billion euro and will continue to grow rapidly as profits are generated and 1% of GNP is invested each year. As every taxpayer and consumer will have contributed to the Fund, what guarantees can be given that payments will be equitably distributed and not skewed towards increasingly unsustainable and unfunded 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 indicates that public service pension costs will reach 3.7% by mid-century while social welfare pensions payable to 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 Ministers will not treat the NPRF as a massive "slush fund" to support vested interests as done regularly in the past. The classic examples being decentralisation, benchmarking and the distribution of National Lottery funds.

Letter published in the Sunday Business Post on 21st October 2007.

Following the German Ambassador's remarks about salary levels for senior civil servants and consultants, is there any chance of the Review Body on Higher Remuneration in the Public Sector benchmarking Irish salaries against comparable jobs in other countries? The grounds being that if our salary levels at the top are not comparable, there is little prospect of the economy as a whole being competitive.

Letter publsihed in the Irish Times on 24th September 2007.

Why should Aer Lingus be expected to adhere to the Government's National Spatial Policy when the Government's own decentralisation plans have ignored it?

Letter published in the Sunday Business POst on 26th August 2007.

Two major Irish banks have recently suggested that interest rates in the euro zone could peak before the end of this year at 4.25%. How much credence can be given to this when no one can possibly foretell what will happen to Iraq, German economy, oil prices, US dollar, Russian gas supplies and so on? Furthermore, interest rate trends does not suggest any peaking of euro rates as might be the case for US rates. Do these banks know something the rest of us don't know or do they just have thicker brass necks or bigger crystal balls?

Letter published in the Sunday Business Post on 29th July 2007. 

Only weeks after stuffing the electorate with promises of lower taxes and better services, the Taoiseach tells us (7th June) that we are entering a period of challenging economic conditions and that it is important to focus on restoring and renewing competitiveness across all dimensions. Isn't it really strange that this is the second occasion that conditions have deteriorated immediately following an election?

In fact, absolutely nothing has altered during the past month to justify this about face. However, if the Taoiseach believes what he says then he could lead by example and slash the inflated salaries of ministers/TDs who are amongst the best paid in the World. He should then shake up the public sector to bring it into line with performance and pay norms in the private sector and ensure that lump sum wage increases rather than socially-device percentage increases are applied in future national wage agreements.

Unless measures along these lines are taken to restore our increasingly unbalanced, uncompetitiveness, overpriced and overborrowed economy, we will see a continuing deterioration. Action now would be less painful than the appalling prospect of having to abandon the euro for a floating Irish pound in order to recover the levers of economic management. This would improve competitiveness but at the expense of even higher prices and interest rates.

Letter published in the Irish Times on 13th June 2007. 

Mr X quoted EU statistics (Letters, 5th June) to suggest that Ireland has become more equitable since Bertie Ahern came to power. He indicated that the gap between the incomes of the top 20% of the population and bottom 20% declined from 5.1 times to 5.0 between 1995 and 2005, an improvement of 2%.

It is a pity he did not look more closely into the figures as he would have found that EU countries improved their overall score over the same period from 5.1 to 4.8, a 6% improvement; Ireland's score improved by 12% from 5.1 in 1995 to 4.5 in 2001 and deteriorated by 11% to 5.0 over the subsequent four years; and Ireland had the tenth widest gap between rich and poor out of 28 countries in 2005.

Ireland's score would need to fall to 4 to match the equalities in most Northern Europe states. At the current rate of progress, this will take a hundred years.

Letter published in the Irish Times on 7th June 2007.

In his opinion piece on behalf of the Irish Wind Energy Association, Paddy Teahon (2nd April) suggests that Ireland has one of the best wind resources in the world and that wind is the only creditable option to achieve the one-third renewable target. He highlights the main challenges confronting his industry including uncertain policies, moratoriums and planning restrictions. However, he completely fails to mention the greatest challenge of all - uncertain supply of wind. At time of writing, wind is supplying just 13 MW out of a total demand of 3,885 MW, that is 0.33% of demand. Is the wind industry whistling in the wind or in the dark?

Letter published in the Irish Times on 6th April 2007.

By any standard, NTR has already been well-remunerated for its investments in the M50 West-Link toll bridges. The southbound bridge which opened in 2003 at a cost of �23 million places the proposed payment of �600 million to NTR in context.

Assuming that this bridge handles half the West- Link traffic, NTR's return would be about 13 times the initial investment even before past revenues and future inflation are taken into account.  How can this be justified?

It is noteworthy that negotiations on tolls for the second bridge took place after the huge surge in traffic during 1996-7 so it wasn't as if traffic and profit projections were being made in a vacuum as was the case for the first bridge.

Furthermore, the buyback appears to have been negotiated around toll revenues rather than NTR's projected net profits which would be substantially lower.

This deal - and all prior agreements with NTR - should be thoroughly investigated by the Comptroller and Auditor General and the Committee of Public Accounts before one brass cent is paid over.

As part of these investigations, the barriers must be lifted on a trial basis to establish the level of disruption caused by tolling delays and to check whether NTR is providing tolling facilities that are adequate for the current levels of traffic as per its operating agreements.

Letter published in the Sunday Business Post on 4th March 2007.

Three questions for Budget week:

1. Why should someone earning €50,000 pay tax at 42% on incremental income while an earner of €250,000 might pay only 20% on all income and personal capital gains? 
   
   
2. Why give investment tax breaks directly to individuals when companies are the natural vehicles for making investments?
   
   
3. Why tinker with tax credits for PAYE workers when those with the highest earnings, and therefore the greatest capacity to pay tax, can avail of massive allowances to escape taxes?

The logical answer is to reduce the current top rate and apply it without exception. A new top rate of, say, 35% on income and personal capital gains could give same return to the Exchequer as the present inequitable regime. If people wish to make investments, let them make them through companies where they can avail of allowances and a tax rate of 12.5 per cent. Done this way, all distributions and gains from companies could then be taxed in the normal way, without further relief, at a reduced top rate.

Surely, the top tax rate should apply equally to all taxpayers.

Lead letter was published in the Irish Times on 5th December 2006.

With the Aer Lingus floatation en route, it would be interesting to consider an Initial Public Offering for Ireland plc. Notwithstanding a strong historic performance, I reckon that it would be considered a poor investment on the grounds that it is heavily over-borrowed, poorly managed, losing competitveneness, over-priced and over-dependent on a few sectors. In addition, large sections of its work force is very inefficient, dissatisfied, riddled with inequities and its shareholders may well depose its long-serving top management team at the next AGM.

Broadcast on RTE's Today with Pat Kenny on 14th September 2006.

The recently approved Towards 2016 agreement is, like its predecessors, unbalanced and inequitable. Based on data abstracted from the recently published National Employment Survey, total national earnings amounted to approximately €42 billion in 2003. On this basis, the 10% increase under Towards 2016 would be worth €4.2 billion and, if distributed equally, would equate to €2,900 a year per worker.

Because increases are applied on a percentage basis, workers at the lower end of the scale receive much smaller monetary increases. This means that the 233,000 workers earning less than €250 a week are likely to share about €256 million whereas the 145,000 workers earning more than €1,000 a week will share about €1,100 million. On this basis, the 10% of the highest paid workers will secure about a quarter of the total increase and the 16% of lowest paid will get just 6%. Furthermore, the extra 0.5% negotiated for low paid could cost about €25 million and amount to considerable less than one percent of the total value of the agreement.

What is so disconcerting about national agreements is the cumulative effect of awarding percentage increases across the board. This only serves to widen the gap and perpetuate inequities. Is it any wonder that, notwithstanding the size of the State, our political and administrative leaders are, thanks to these increases, amongst the best paid in the world? Towards 2016 should be viewed as a national disgrace rather than a national agreement. If the State can afford a wage increase of €4.2 billion, why can't it be distributed more fairly?

Letter published in the Sunday Business Post on 17th September 2006.

Given that electoral boundaries may need to be revised in the light of the preliminary Census results, we should go the whole hog and have a referendum to reduce the total number of TDs.

The Dail sits for less than a hundred days a year and TDs are paid around €100,000 plus expenses of about the same amount. On this basis, a TD directly costs about €2,000 per sitting day presuming 100% attendance. If actual attendance time in the chamber is about 20%, then the cost shoots up to €10,000 per attendance day. It would be far better for democracy if the Dail were to sit for, say, 160 days a year with fewer TDs and with revamped procedures so that all TDs could have meaningful legislative roles as mandated by the electorate. By way of comparison, UK MPs are paid about the same as TDs notwithstanding that MPs have much larger effective constituencies and their Parliament meets for many more days a year and for proportionately more hours than the Dail.

All candidates in the forthcoming general election should be asked by voters to undertake, if elected, to ensure that the new Dail sits for four full days a week and forty weeks a year. If this commitment cannot be given, they do not deserve to be elected as part-time legislators.

Letter to the Sunday Business Post published on 13th August 2006.