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Fighting White-Collar Crime

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The Government's latest proposals for fighting white-collar crime don't go half far enough given the scale and complexity of the problem and singular failure of the current system to efficiently investigate and successfully prosecute cases.

For example, the measures fail to facilitate class actions and champerty; to make reckless lending a crime; or to extend the statute of limitations.

In addition, they could have permitted rewards to 'bona fide' whistleblowers, granted immunity to 'first confessors', allowed plea bargaining, placed onus of proof on defendants and made perjury a crime.

More far reaching measures could have included a white-collar criminal court, extending the use of the civil standard of proof and providing for punitive damages at corporate and individual levels.

Letter published in the Irish Times on 4th November 2017.

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.

Who are the "squeezed middle"?

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In view of current interest in the "squeezed middle" ahead of  the 2018 budget, it has been enlightening to identify this group using taxable income statistics generated by Revenue and published by the CSO.

Based on 2015 data, there were 2.3 million tax cases including jointly assessed married couples and civil partners. They had an average taxable income of €36,800  per annum before deducting normal tax credits.

Because some very high incomes shewed this average, a much lower income of €25,700 corresponded to the true middle where half of all tax cases earned less than this value and half earned more.

Going deeper, if tax cases are divided into three equal ranges, corresponding to lower, middle and higher incomes, the middle range in 2015 was €15,600 to €36,000 per annum. Alternatively, if the cases are divided into five equal ranges each comprising 20 percent of cases, the middle range narrowed to between €20,000 and €31,200 per annum.

This analysis suggests that, even allowing for wage inflation since end 2015, most  middle-income tax cases are well below the current €33,800 threshold for the higher 40 percent tax rate.

On this basis a budget increase in this threshold wouldn't benefit most middle-income cases unless the definition of "squeezed middle" is interpreted to also include upper-middle cases with annual incomes ranging from €31,200 up to €52,500.

Letter published in the Irish Times on 7th 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.

Nama and the housing crisis

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The Taoiseach is committing a cardinal management error by planning to repurpose Nama as its primary vehicle for social and affordable house building as structure should follow strategy and role definition rather than precede it. 

A new national agency which could absorb relevant Nama resources would start with a clear focus and without any legacy baggage.. It should act as principal and directly engage contractors to build houses on public-owned land in the larger urban centres and,optionally, play a coordinating role in relation to major schemes in other areas. 

This approach would result in lower costs and more affordable houses than could be achieved by a restructured Nama which simply and expensively co-ordinates profit-seeking developers.

As previously suggested ("Addressing the housing crisis" , Letters 16rh August), it could be part funded by some of the €5.3 billion surplus cash resting within the Ireland Strategic Investment Fund alongside external investment and debt structured to surmount likely EU concerns about breaching national debt limits.

Even with funding in place, it will take time to mobilise resources, undertake design work, issue and place tenders. As the Central Bank has indicated, a major building programme could strain resources and this would further delay progress. To address this and respond appropriately to the crisis, the agency should, for major projects, actively seek participation from well-resourced, major overseas construction firms with appropriate safeguards on labour conditions, quality etc.

Finally, a clear indication from the Government to "the market" that it intends, as is its right, to directly supply large numbers of affordable homes should  cause landowners, speculators and landlords engaged in hoarding or gouging to rethink their greedy plans. And to reinforce this message, it should also signal that it will invoke Clause 2 of Article 43 of the Constitution in relation to private property where the common good, social justice and national housing emergency demand this.

Lead letter in the Irish Times on 21st September 2017.

Spin Doctor's Dictionary

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"Elevate"should be added to the ever-growing dictionary used by spin doctors alongside "mature reflection", "fake news", "alternative facts", "mental reservation", "scapegoating", "forgetfulness", "systemic error" and "post-truth".

Letter published in Irish Times on 20th 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.

Straight-forward Solution to Housing Crisis

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With the recent discovery of 26 percent extra economic growth in 2015 and taking account of EU restrictions on national debt, it should be possible for the State to directly fund a massive building programme for social housing  instead of relying on an expensive combination of rent subsidies, public-private partnerships, leasing, off-balance-sheet mechanisms and other devices as per the Rebuilding Ireland report.

Lead letter published in the Irish Times on 21st July 2016.

Lessons for Politicians from Brexit

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Here are some lessons for our politicians from Brexit:

  • Watch for the law of unexpected consequences.
  • Never ask the electorate a question unless you know the answer.
  • Be careful what you wish for as it might happen.
  • The higher you rise the further the fall.
  • Keep an eye on left field and who's behind you.
  • Unfulfilled promises can bite you.
  • Politicial careers usually end in failure.

Letter published in the Irish Times on 28th June 2016.

Outcome of GE16

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The election outcome has been a great boost for democracy, as it has finally broken the two-party stranglehold, with the result that the Dail could become much more relevant and effective.

Letter published in the Irish Times on 2nd March 2016.

Quantitative Easing for All - Release 2.0

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David McWilliams mentioned (15th November) that advisers to UK Labour leader Jeremy Corbyn and US presidential candidate Bernie Sanders had suggested at Kilkenomics that the ECB should switch its massive quantitative easing programme from buying financial assets to gifting cash directly to citizens.

If the ECB adopted this suggestion, about €60 billion of 'free' money could be distributed each month till late 2016 to all EU citizens at minimal cost via tax and social welfare credits. A tax-free gift of €1,400 per person would quickly transform Dr Draghi's problem into one of moderating growth and curtailing inflation.

Letter published in the Sunday Business Post on 22nd November 2015.

Quantitative Easing for All

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The ECB's commencement of quantitative easing will result in it spending over a trillion euro acquiring financial assets held by institutions at the rate of 60 billion euro a month until late 2016. This carries huge risk as most euro economies lack the growth and confidence needed to pull this funding from the newly cash-rich institutions into the marketplace. The danger is that the ECB's initiative will merely inflate asset values mainly to the benefit of the already wealthy.

Surely, it would be much more effective for the ECB to simply gift €3,200 directly to every euro zone citizen over the coming months. We could be much more confident that this windfall would be spent quickly and directly spur much needed growth and inflation. 

Letter published in the Irish Times on 16th March 2015.

GDP versus GNP

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So, having used GDP as a key economic index throughout the boom, the ESRI appears to have switched to GNP because multinational profits are faltering.

Does that mean that, to be consistent, we should also use Debt/GNP (currently 151%) rather than Debt/GDP (124%)  as a key index and do we start measuring per capita prosperity using GNP (€29,600) rather than GDP (€36,900) ?

Letter published in the Irish Times on 19th December 2013.

Lies, Lies and Statistics

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Respondents to the Ipsos MRBI poll (30th November) suggested that a person would need to have an income of €153,000 a year to be in the top 10 percent of the population whereas graphics in your paper suggested that, based on Revenue data, the correct figure is €75,000. 

You are both wrong as the Revenue statistics relate to tax cases which treat dual-income married couples as single cases. If we assume that incomes in these cases are split 66/34 then only about 6 percent of the population have incomes in excess of €75,000. Incidently, on the same basis, almost 16 percent have incomes below €10,000 a year.

In responding to the question as to whether welfare recipients, public servants or politicians receive most from the public purse, respondents guessed politicians whereas your graphics indicate that the correct answer is welfare recipients at €20 billion as compared with only €102 million for politicians. On a per capita basis, the respondents were absolutely correct.

Letter published in the Irish Times on 3rd December 2913.

Budget 2014 - Sharing the Pain?

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The budget indicated that national debt/GDP will remain north of an unsustainable hundred per cent for the foreseeable future. As a consequence, about half of all income tax will be used, possibly for rest of this decade, to meet interest charges on this debt notwithstanding an imminent exit from the bailout.

Against this background, there was no indication in the budget that any new sacrifices are being made by one of the best paid and pensioned cabinets in the world or by their overpaid advisers, senior public servants and wealthy supporters. Where are the moderate salaries, reasonable pensions and equitable taxation that might be reasonably expected as part of an austerity programme which, after several years, continues to be inflicted by the few on the majority?

Letter published in the Irish Times on 21st October 2013.

Budget 2014 - Income Tax Rates

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The IMF's latest Fiscal Monitor Report (10th October) has implied that Ireland's top marginal tax rate (55 per cent) could be raised to almost 70 per cent while still maximising the potential return for the exchequer. This appears to blow a hole in the argument constantly being made by some lobby groups for lower taxes for high earners.

The real problem in Ireland is that top rates kick in at extraordinarily low income levels, This should be addressed without increasing the overall tax take and, if the IMF is correct, without encountering the law of diminishing returns by raising marginal rates for high earners.

Giving more discretionary income to mid-income tax payers would be far more beneficial to national morale and the domestic economy than lowering marginal tax rates for very high earners who, as it stands, benefit from much more moderate effective tax rates on the totality of their incomes.

Letter published in the Irish Times on 12th October 2013.

Saving the Seanad

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So, we have learnt that the actual saving to be made by abolishing the Seanad might be only half the €20 million claimed by the government. In the light of this, the total vote in favour of abolishing the Seanad could also be halved given the huge importance attributed by government to their estimate of potential savings.

The realisable annual saving amounts to less than ten percent of the cost of running Leinster House and to an almost invisible 0.02% of total annual State expenditure. Holding a referendum to secure these minor savings is hardly significant in the current scheme of things, so I assume that there are other more pressing reasons which may not have been fully disclosed to the electorate.

Letter published in the Irish Times on 28th September 2013.

Untaxing Exiles

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Proposals for extra tax breaks for tax exiles must rank as the leading contender for this year's silly season story. 

A Government-backed Forum on Philanthropy has suggested that 400 Irish tax exiles might invest €15 million each over ten years in return for being able to live in Ireland for six months in every year while simultaneously claiming to be tax exiles and paying minimal tax elsewhere.

This aspiration is a bit rich given that only a handful of wealthy exiles have bothered to pay the recently introduced domicile levy based on their worldwide income and wealth. In my naivety, I had always assumed that philanthropy was linked to donating rather than tax breaks.

Instead of loosening requirements and becoming a tax haven for rich exiles, Irish tax rules should lean towards US laws where exile means absolute rather than part-time exile.  The proposed PAYC (Pay-As-You-Choose) should be replaced by PAYE on worldwide incomes, or face forfeiture of all rights to citizenship, residence and even occasional visits.

Letter published in the Sunday Business Post on 28th July 2013.

See & Hear No Evil

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The search for the Anglo tapes whistleblower reminds us that the only person convicted in connection with the Beef Tribunal was a whistleblowing journalist.

The Minister of Finance has reportedly complained, in relation to the tapes, that the media should stop "mucking around in garda business".  Surely, politicians are the parties most guilty of "mucking around" for having failed to set up a robust and comprehensive public inquiry into the most damaging event in the State's history.

They also appear to have failed to provide adequate resources to the Fraud Squad, Director of Public Prosecutions and Office of Corporate Enforcement to complete rapid and extensive investigations into events that have left citizens footing a bill for at least €64 billion.

Lead letter in the Sunday Business Post on 14th July 2013.

Inquire and Take Action

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Through greed, incompetence and negligence a few hundred people have set this country back decades in economic and social terms, and have sullied its international reputation. In the few cases where "sanctions" have been applied, they have amounted to big pensions and fat payoffs instead of sanctions and reparation.

Notwithstanding the magnitude and duration of the crisis, we still have no clear plans for a proper public banking inquiry. As in other countries, a comprehensive, lawyer-free and apolitical inquiry could expose systemic failures and serve as a pathfinder for possible prosecutions. To progress this, last years's referendum on Oireachtas inquiries should be rerun in lieu of the planned Seanad referendum.

Because white collar crime can be extremely difficult to prove due to its complexity, wriggle room and "memory lapses", civil actions, as an alternative to criminal prosecutions, could be initiated against the key individuals against whom adverse inquiry findings are made. This route could reduce the burden of proof, speed up collection and presentation of evidence and reduce the duration and complexity of legal actions.

Letter published in the Irish Times on 27th June 2013.

SOS - Save Our Seanad

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The Taoiseach woke up one morning and proclaimed that he would abolish the Seanad to the complete surprise of everyone, including his party colleagues. He and Eamon Gilmore have no mandate whatsoever to proceed with this as they will find out in the referendum.

The Dail is in far more urgent need of reform than the Seanad. So too is our entire system of local government. Abolition of the Seanad will not save a claimed €20 million a year as a cost of €10 million was indicated by Oireachtas officials last year. Even €20 million is a trivial amount if it helps prevent the erosion of democracy.

The Taoiseach has stated that 'Ireland had too many politicians for its size', so let him cut the number of costly and numerous TDs and speed up rationalisation of local government.

Instead of abolition, give the Seanad a real role in the political process as has been proposed by some Seanad members; introduce a list-based electoral system based on vocational, regional, emigrant and Northern Ireland constituencies to elect all members; and ban the use of the whip so that the senators can operate with complete independence.

Letter published in Irish Times on 7th June 2013.

Future of the Seanad

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The Taoiseach's decision to proceed with a referendum on abolishing the Seanad in four months time leaves little time for discussion on this hugely significant proposal either inside or outside Leinster House.

With the political holidays looming and many other more pressing economic and social matters to be addressed, it is hard to believe that his timetable can be adhered to. However, if he does proceed then the likelihood of rejection must be very high given that voters  have clearly demonstrated in past referendums that they want to be fully informed on all issues and options and don't like being taken for granted or fools.

Letter published in the Irish Times on Friday, 17th May 2013.

April and Austerity

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April has been a bad month for the proponents of austerity. Did we really have to wait till April 2013 for the Government and troika to wake up and realise that severe austerity ultimately curtails growth?

  • Early in the month, Ashoka Mody, the IMF's former mission chief to Ireland, stated that reliance on austerity for Ireland was counterproductive and that failure to tackle Irish bank bondholders was a mistake.

  • In midmonth, an academic paper by two eminent US economists Reinhar and Rogoff used to justify austerity measures was found to contain fundamental errors which undermined their proposition that high governmental borrowings (as in Ireland) are necessarily connected to minimal economic growth.

  • On the eve of last weekend's G20 meeting in Washington, EU commissioner Olli Rehn indicated that the euro zone will slow its budgetary belt-tightening because the troika's austerity programmes were having a greater-than-expected impact on growth.

  • On Monday the president of the European Commisssion conceded that austerity wasn't a sustainable policy in the absence of social and political support

Published in Irish Times Readers Comments on 4th May 2013.

Quick Banking Inquiry

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Will we ever see a report on the Irish banks like the UK's recent parliamentary report on HBOS?  Its  chapter headings read like a thriller - "The best board I ever sat on", "The price of failure", "Conclusion - a manual for bad banking".
 
I don't think the establishment has the stomach for a "full blooded" inquiry which would make the DIRT inquiry look like a picnic. As an alternative, our politicians could get a copy of the HBOS report and simply do a quick search/replace of names, places and dates as I suspect that the findings and conclusions could be left unchanged.

Letter published in the Irish Times on 15th April 2013.

Hypocrisy of Banks

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Reports that AIB is planning to sell a €200 million loan portfolio beg the question as to why taxpayer-owned and foreign-owned banks are selling huge blocks of loans at discounts as high as 70 per cent and crystallising losses amounting to billions while resisting any similar broad-based write-downs of seriously distressed home mortgages. 

These discounts are additional to the €40 billion taxpayer-funded losses realised when developer loans transferred to Nama at a huge discount. Surely, to be consistent and fair, the covered banks should be required to offer write-downs to all very distressed mortgage holders especially given that they have already been fully funded by taxpayers to do so?

Letter published in the Sunday Business Post on 31st March 2013.

Pension Fund Theft?

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There is nothing extraordinary about the proposed Cypriot levy on apparently untouchable deposits. The Irish Government led the way by imposing a 0.6 percent annual levy on similarly untouchable private pension funds. It expects to gather €1.8 billion from this underhand action which provoked minimal opposition or protests unlike developments in Cyprus.

Of course, no similar penalty applied to public sector pensions amidst recent ministerial claims that constitutional property rights preclude the slashing of outrageous pensions being paid to former politicians, mandarins and bankers.

Lead letter published in the Irish Times on 21st March 2013. This follow up letter was published on 27th March 2013.

William J XXX (26th March) stated that I was factually incorrect when quoting me as saying  (21st March) that "no penalty applied to public sector pensions". I actually wrote "no similar penalty" in the context of the Government's raid on private sector pension funds. This is factually correct. 

He goes on to write about public sector pensions being  dependent on employee contributions but ignores the fact that these pensions, particularly at higher levels, are largely financed by private sector taxpayers who could never aspire to secure such attractive pension benefits for themselves.

Exiting the Bailout?

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Notwithstanding years of austerity, Ireland still has some of the most over-borrowed public and private sectors in the developed world and, according to Christine Legarde (IMF managing director), has only completed two-thirds of the current bailout programme. Against this backdrop. there is no way that Ireland will be able to break free from the troika for years to come.

Over the next year or so, we might have to contend with Croke Park chaos, dissent over the property tax, another savage budget just as people are seeing how sneaky the last one was, slow economic growth, large street protests, further Dail defections, local election upsets, foreclosures/evictions, further bank restructuring, surging emigration and other unexpected nasties.

They will all feed into the next Dail elections which could well result in a trouncing of the governing parties and the formation of a very weak, rainbow government. In the absence of strong and decisive national leadership, the troika is likely to demand a continuing supervisory role notwithstanding that its motives and agenda would not be in our national interest.

Letter published in the Sunday Business Post on 17th March 2013.

Horses and Health

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If food labelling fails to disclose ingredients, how can the nutritional information be accurate?

Letter published in the Irish Times on 9th February 2013.

Don't Pay the Promissory Notes

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Professor Morgan Kelly, writing about the Anglo bailout in 2008, suggested that "the money might as well be piled up in St Stephen's Green and incinerated". Well, unless a write-off deal on the promissory notes is struck, that is exactly what will start happening in March, albeit at a different location, when €3.1 billion of "real cash" is passed to the Central Bank where it will disappear in a puff of electronic smoke.

Any deal that replaces notes with bonds is unacceptable as it simply pushes this senseless burning of Irish taxpayers onto another generation. Instead, a full write off must be sought and secured on the grounds that the cost of the bailout of Anglo should not be foisted on blameless Iriish taxpayers,

A write off is entirely within the gift of EU central bankers and, while it might result in a temporary loss of face, no loss of cash would be incurred. In fact, the full €30 billion will be effectively written off irrespective as to whether notes are paid or not.

The Government should stop spinning and whining about unfairness. Instead, it should start playing hardball and show more backbone even at this late stage.

Burning €30,000,000,000 of taxpayers money for no return whatsoever makes no sense and is extortion given that the State is bankrupt.

What exactly would the ECB do if the notes are not paid? Pull the rug from under the Irish economy or just make the "best boy in the class" sit on the bold step for a while?

Lead letter in the Sunday Business Post on 3rd February 2013.

OMG, WTF, LOL

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OMG, what has become of the paper of record?

On Tuesday last Fintan O'Toole and Frank McDonald (Opinion and World News, December 11th) both used the term WTF in their articles. Do you plan to explain what WTF means to uninitiated readers? LOL.

Letter published in the Irish Times on 17th December 2012.

Budget for 2013

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Tables compiled by the Dept of Finance showing the impact of the budget on various incomes say it all. Here is an extract for a married couple with a house, without children and paying full PRSI:

  • On a gross income of €45,000, the reduction in income will be €422 a year (1.2% of gross).

  • On a gross income of €175,000, the reduction in income will be €872 a year (0.9% of gross)

So, for someone earning four times more, the impact of the budget is only doubled. Inequity is even greater for people further down the income scale. How can this budget be viewed as fair?

Letter published in the Irish Times on 7th December 2012.

Why Pay Taxes and Debts?

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Would some kind reader explain why I shouldn't follow the example of the so called 'good and great' and avoid paying my debts and taxes by hiding my wealth, falsifying documentation or emigrating to a tax or bankruptcy haven?

Letter published in the Sunday Business Post on 17th June 2012.

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.

Constitution and Fiscal Compact

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The constitutional amendment for the Lisbon Treaty made numerous references to our membership of the EU. It also referred to the EU's authority to pass laws alongside other competent bodies under the Lisbon and related treaties.

The proposed amendment for the Fiscal Compact makes no mention of EU or prior treaties and indicates that  unspecified "bodies competent" can pass laws or measures for Ireland. This begs questions as to whether the Fiscal Compact should be viewed as an EU or international  treaty and whether these bodies competent might be same ones that are driving the EU into a depression by insisting that austerity is the only way forward.

It is extraordinary that Ireland eventually agreed to the Lisbon Treaty in a second referendum partly because we were promised a permanent Irish Commissioner. Yet today, the entire Commission seems to have been pushed aside by banking and political forces and we are being urged in the current referendum to deliver key aspects of our Constitution and lawmaking not to the EU but into the hands of an international treaty led by so called bodies competent where our influence is likely to be minimal by comparison with the Commission.

Letter published in the Irish Times on 10th May 2012.

See also:

In the event of a Yes vote [in the forthcoming referendum on the Fiscal Compact], the Government would be entitled to proceed with ratification of the ESM treaty as this would reflect the democratic will of the majority of voters.

However, in the event of a No result, Ireland would be cut off from ESM funding because of a condition within the Fiscal Compact. Whilst Ireland doesn't have a veto on the Fiscal Compact, the Government could easily defer ratification of the critical ESM treaty over which Ireland would have a blocking vote if supported by other States who together contribute at least 8.5% of the ESM's capital. This would force the EU and ECB to offer meaningful proposals to ease Ireland's unfair and unsustainable bank debt burden which, to date, has been effectively ignored by them.

Arguably, this could lead to a second referendum on the Fiscal Compact which might also lead to ratification of the ESM treaty.

Letter published in the Irish Times on 2nd May 2012.

Mahon Tribunal

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At the same time that the Mahon Tribunal was hearing evidence about corruption and wrong doing, about a 100 people - politicians, bankers, senior administrators and developers - were engaged, directly or indirectly, in stoking a crisis that has brought the country to the edge of bankruptcy. But, instead of being subjects of a major public enquiry and sanctions, these people have secured huge pensions, payoffs and bailouts.

At the very same time that the Mahon Report was published, the Central Statistics Office reported that our national economy (i.e. GNP) has declined by 14.8 percent over the past four years. This points to a continuing deep depression, rather than a mere recession - or even a recovery as some vested interests, here and abroad, would like to spin.

Nothing can change until everything has been changed.

Letter published in the Sunday Business Post on 1st April 2012.

Follow either Greece or Iceland

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Greece has now signed up for a second bailout accompanied by massive haircuts for bondholders, Given that its projected Debt/GDP ratio might decline - with luck - from 160 percent to 129 percent by 2020, a third bailout or even deeper crisis seems inevitable.

Many commentators expect that Ireland, in the absence of a general economic upturn, will also require a second bailout given that our Debt/GNP ratio, which excludes multi-national profits, currently exceeds140 percent.

It is high time to start thinking outside the box and to do a deal with the Devil, i.e. get the more realistic and enlightened IMF to underwrite fully any possible second bailout, instead of relying on the restrictive European Stability Mechanism.

On the foot of this, new terms should be imposed on bondholders and promissory notes, thereby easing the task of sorting out the self-inflicted domestic deficit.

Based on Iceland's rapid recovery from its crisis, we could transform that derogatory phrase -  "The difference between Iceland and Ireland is one letter and six months" - into something much more positive. The alternative seems to be death by a thousand cuts, like Greece, with no certainty of recovery.

Letter published in the Sunday Business Post on 5th March 2012.

Referendum on European treaty

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For me, a decision to vote yes in the forthcoming referendum will hinge on the willingness of the EU and ECB to assume responsibility for the cost of bailing out Anglo. I appreciate that if Ireland votes No, we will be denied access to the restrictive European Stability Mechanism in the highly likely event that a second bailout  is needed.

To address this, the country should turn directly to the more realistic and enlightened IMF and, with its support, impose tough new conditions on the promissory notes and get on with the task of sorting out the self-inflicted domestic deficit.

Letter published in the Irish Times on Friday 3rd March 2012.

Paying Bondholders and Bankruptcy

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Congratulations are due to the National Treasury Management Agency for creating a diversionary bond swap on the very day that it extracts €1.25 billion from our pockets to repay bonds in a defunct bank.

Any chance that Ireland could avail of the new bankruptcy proposals given that it has an unsustainable level of debt and clearly falls into the "can't pay" category?

Letter published in the Irish Times on 27th January 2012.

Taoiseach at Davos

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Given that we haven't yet had a proper enquiry into the banking crisis, I am not surprised that the Taoiseach resorted to blaming "people" at Davos, reinforcing the image of the Irish as feckless and greedy.

Instead, he should have  been upfront and honest by singling out sections of the establishment and business "elite" including ministers, public administrators, bankers, developers and foreign lenders as the greedy incompetents who "went mad"  and failed the "people". However, this would have probably gone down like a lead balloon with the Davos "elite".

Letter published in the Sunday Business Post on 5th February 2012.

Don't Pay Anglo Bondholders

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I wish to protest at the planned redemption at par value of a €1.25 billion bond on 25th January by Irish Bank Resolution Corporation, formerly Anglo, Given that this unsecured, unguaranteed bond traded at less 60 percent of par within the past year, why is the Government redeeming this bond at par notwithstanding that the issuing bank is insolvent and being liquidated?

The proposed payment is equivalent to the salaries of 5,000 extra nurses for five years; or one-third of the cuts and tax increases in the 2012 budget: or the full cost of TWO new national children's hospital. Instead, the money will be used to reimburse anonymous bondholders who provided funds at the peak of the boom to a bank which operated as a virtual casino.

Irish taxpayers are entitled to expect the Government to stand up for their rights and to either refuse to redeem the bond or to pay on the back of an explicit quid pro quo from the ECB if the latter wishes to avoid contagion. To this end, I call for an unwhipped Dail debate where isms, ologies, outdated manifestos and failed policies are, for once, put aside in the national interest and where the bond redemption and related economic and social policies are reviewed in an open, honest way.

It will be patently obvious to any TDs who held clinics during the Dail recess that current policies are failing and that redemption of the bond will simply add costly fuel to a fire which is currently smoldering but could easily get out of control.

Letter published in the Irish Times on 10th January 2012.

See also Another Letter to TDs about Anglo Bonds.

Budget for 2012

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Given that the Minister for Finance has claimed on numerous occasions that all the low hanging fruit has been picked, why doesn't he start plucking some of the ripe, plump fruit off the highest branches? He could also give the tree a good shake and make substantial saving by cutting off dead branches and pruning back at all levels.

For example, he could introduce a third tax band for salaries above €100,000, apply a salary limit of €150,000 across the entire public sector and limit pensions in the sector to half that. Such measures would be much fairer than increasing VAT, introducing new stealth taxes and cutting key services and capital expenditure. Given that the country is effectively bankrupt, force majeure should take precedence over legitimate expectations or entitlements and it makes no sense to increase borrowings and pay additional interest simply to allow those at the top of the tree to over-ripen.

Letter published in the Irish Times on 22nd November 2011. A somewhat similar letter was published in the Sunday Business Post on 13th November 2011.

Ministerial Pensions are a Gravy Train

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Former ministers will receive annual pensions averaging €81,000 and costing €8.8 million a year. This could amount to €80 million over the next decade and must be funded by new borrowings and additional taxation to cover interest charges and eventual repayments.

In accepting these pensions, do these former ministers not realise that the State is effectively bankrupt thanks, in some cases, to their mismanagement and incompetence?

Letter published in the Irish Times on 11th November 2011.

White Collar Crime and Inquiries

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Following on from John McManus's piece (12th September) would someone explain why civil actions cannot  be initiated against the key individuals that grossly mismanaged the economy, the banks and their borrowings over the past decade? This legal route would speed up the collection and presentation of evidence and reduce the duration and complexity of any possible trials.

It is worth noting that the Quinn family has gone to court claiming grounds for suing Anglo for alleged negligence, breach of duty and intentional and/or negligent infliction of economic damage and, separately, that the High Court has ruled that the chief executive and director of a leading bank (NIB) was grossly negligent and that his conduct had fallen below the required standard and constituted a fundamental failure of governance.

Surely, grounds for pursuing politicians, regulators, senior civil servants, bank directors and major property developers might include possible breach of trust, dereliction of duty, failure to manage, incompetence, negligence, fraudulent or reckless trading, dodgy tax activities, misrepresentation, failure to disclose, lying, falsifying documentation, breach of fiduciary duty, abdication of duty of care and so on.

Maybe, passing the referendum on Dail committees will (at last) facilitate the establishment of a proper investigation, with the assistance of whistleblowers, into what went wrong and who were primarily responsible and thus opening up the scope for civil actions.

Letter published in the Irish Times on 16th September 2011.

Debt Forgiveness Descrimination

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The Minister for State for Finance Brian Hayes has said that writing off €6 billion of debt for tens of thousands mortgagees is unrealistic.  If so, how can his Government justify Nama writing off tens of billions of debt incurred by a thousand or so speculators?

Letter published in Irish Times on 23rd August 2011.

Nominating a President

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I am minded to spoil my vote in the presidential election by writing "David Norris" on the ballot paper as a protest against the domination of the nomination process by politicians. If enough voters do the same, the pressure will be on for a referendum to alter article 12.4.2 of the Constitution to allow the electorate to directly nominate candidates by collecting, say, fifty thousand signatures of support. The same referendum should also propose a five-year term.

Letter published in the Irish Times on 5th August 2011.

Household and Property Tax

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It is not too late to convert the household charge into a window tax. Using a three-bed semi with eight windows as the benchmark, the rate would be €12.50 per window. This would be more equitable than the proposed flat charge, easy to assess and check and very transparent.

Letter published in the Irish Times on 2nd August 2011.

Judges' Pay and the Constitution

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The memorandum from the judiciary on judges' pay states on its first page that  "Article 68 of the 1922 Constitution provided that the remuneration of judges may not be diminished during their continuance in office". On the second page, it quotes Article 35.5 of the current Constitution as stating that "the remuneration of a judge shall not be reduced during his continuance in office."

To my non-legal mind, the atorney general's advice to the Government about reducing the remuneration of judges as a class was wrong. Maybe, he was mistakenly reading the 1922 Constitution which talked about "judges" and "their" when he offered that advice rather than the current  Constitution which referred to "a judge" and "his".

Letter published in the Irish Times on 13th July 2011.

Default is Inevitable unless ..

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The EU has forecast that Ireland's Debt/GDP percent will reach 118% next year. This is viewed in most official circles as just about 'manageable' presuming favourable growth rates and adherence to current bailout terms.

However, it ignores the fact that, unlike most other EU states, there is a large divergence between Ireland's GDP and GNP as the former includes the enormous profits of multinationals which are taken overseas and don't really touch the local economy.

If GNP is used instead of GDP, Ireland's forecast Debt/GNP percent for 2012 shoots up to about 144%. Even if account is taken of Irish corporation profits tax paid by multinationals, the ratio hits 139%. This is off the scale and puts Ireland on a par with beleaguered Greece.

An Irish default is almost inevitable unless the EU, IMF and ECB apply much more flexible and realistic bailout terms.

Letter published in the Sunday Business Post on 29th May 2011.

Approach to Bailout is a Disaster

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What part of "disastrous" or "catastrophic" do the Irish Government, EU, ECB and IMF not understand in terms of their approach to Ireland's financial problems? 

Ireland is fighting to retain its Sovereignty against the world's largest financial forces. If Ireland involuntarily defaults the resultant contagion will certainly undermine the euro and EU, and could progressively turn the world's economies into a nuclear wasteland.

Any offer of a minor reduction in the interest rate should be rejected out of hand. Instead, the Government should demand a reduction in the bailout interest to a nominal rate (say, 1%), a payment reschedule spread over decades and an immediate write down of outstanding bank bonds by about 50%. In return, it must adhere to the bailout terms and agree for purely political reasons to a temporary levy of, say, 3% on top of the sacred corporate tax rate.

Letter published in the Sunday Business Post on 15th May 2011. See also Letter to TDs: Take Firm Action or We Default.

Pension Levy Hits a Soft Target

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Now that Irish private sector pension funds can be raided, why do bondholders of busted banks and gold plated public sector pensions remain out of reach? Is it simply because we are softer targets than German, French and Irish public sector pensioners?

Letter published in the Irish Times on 13th May 2011.

Nyberg Report

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The Nyberg Report contained sections entitled The Herd, The Silent Observers and The Enablers. I look forward to a sequel dealing with The Developers, The Politicians, The Professionals, The Spinners, The Cronies, The Eurocrats, The Chancers and The Suckers. Should be a best seller.

Letter published in the Sunday Business Post on 1st May 2011.

Fairness in Health

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As one of the best-paid Ministers of Health in the world, Mary Harney's take-it-or-leave-it offer to funding for Thalidomide sufferers as reported by Susan Mitchell (19th December) is extraordinary. Her offer of €62,500 lump sum plus an annual €,680 per survivor contrasts with her own prospective retirement package(based on those quoted for Ahern and Dempsey) of over €300,000 paid in first year in addition to an annual pension in excess of €120,000.

Letter published in the Sunday Business Post on 2nd January 2011. This letter was not tended to be a "dig" at Mary Harney but rather to illustrate (a) the extreme inequity in Irish society and (b) the extent to which our politicians are divorced from their constituents and have feathered their own nests.

IMF/ECB/EU Bailout

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If any new EU treaties are planned for the next decade, it is increasingly likely they will be blocked by Irish referenda and there will be no reruns to reverse decisions.

Our debt crisis cannot be solved by increasing debt, and a deep recession cannot be reversed by reducing economic activity.

And can we stop talking about a €85 billion rescue package as €17.5 billion is our own money and up to €35 billion could end up being used to "rescue" major continental banks and the ECB.

Letter published in the Sunday Business Post on 12th December 2010.

Default Expected

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According to the Government, the combined annual average interest rate (for the proposed bale package supported by the IMF/EU/ECB) will be of the order of 5.8% per annum. If we exclude the State's contribution of €17.5 billion which is interest-free then the average interest rate on the borrowed €67.5 billion rises to 7.3%.

If correct***, this rate assumes an even chance of Ireland defaulting on the loans. When is the point of the bale out if there is such a high risk of failure?

Letter published in the Irish Times on 30th November 2010.

*** This was subsequently found to be incorrect, the 5.8% rate applies only to the €67.5 billion. However, this rate includes a risk premium of about 3%.

Reject IMF Baleout of Banks

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The EU is foisting a massive loan (€50+ bn) on Ireland in order to rescue the ECB and major banks which irresponsibly lent to Irish bubble banks. This will only worsen Ireland's position as the principal could amount to about one-third of our GDP and the interest burden could equate to about one-quarter of all income tax receipts. This, on top of everything else, is unsustainable.

The bale out should be rejected. Instead, Ireland must introduce a bank resolution scheme by copying the UK version and secure ECB support to negotiate a deal with bondholders. Meantime, Ireland will pursue a four-year plan to reduce the deficit.  In this way, pain would be shared by all participants and because the Irish banking crisis is exceptional, contagion should be contained.

Letter published in the Sunday Business Post on 21st November 2010.

How to Resolve the Crisis

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The Government should invoke force majeure and immediately introduce legislation to halve the salaries and pensions of all highly-paid people in the public sector and dispense with all special entitlements.

It should signal that it will aggressively contest any attempts to frustrate these actions. They must be fully implemented before the budget to ensure that, unlike previous budget announcements on pay and pension cuts for ministers and senior civil servants, they will not be watered down or reneged on. Such a move, backed by the Opposition, would demonstrate leadership to citizens and financial markets.

From this high moral ground, the government should then negotiate pain-sharing with bondholders alongside the introduction of a bank resolution scheme; nationalise both main banks; pull back on Croke Park Agreement; finalise the four-year plan; secure support for the 2011 budget; and hold a general election. All these things could be done by next spring when Ireland could re-enter the bond market with a much stronger investment case and brighter future.

Lead letter published in the Sunday Business Post on 14th November 2010.

Say Cheese

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The big cheeses say 'hard cheese'. They must be crackers if they think people will swallow this.

Letter published in the Irish Times on 6th November 2010.

Moral Hazard with Justice

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Many international commentators including the Wall Street Journal, New York Times, Financial Times and Economist have queried the pain being inflicted on Irish taxpayers arising from the banking crisis. They had anticipated that taxpayers would be at the end of the pain queue after shareholders, management, borrowers and lenders.

Instead, they have been pushed to the front of the queue immediately after bank shareholders. At the same time, managements continue to enjoy huge salaries and pensions, borrowers get massive bale-outs thanks to taxpayer-supported Nama, and lenders are secured by guarantees underwritten by taxpayers.

Where is the "moral hazard" and justice in this?

Where are the public enquiries into the destruction of over €50 billion of wealth?

Where are the apologies and offers of restitution from the still wealthy borrowers hiding behind limited liability and sloppy documentation?

Where is the political leadership that puts citizens ahead of cronies and sound strategies ahead of self-serving spin?

Where are the prosecutions for blatantly fraudulent, reckless business activities?

Letter published in the Sunday Business Post on 10th October 2010. 

National Debt

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A table in Cliff Taylor's piece (22nd August) indicates that €32 billion will be needed to service the national debt over the five years to 2014. This amount which will rise due to additional bank bale outs amounts to a full year's tax revenue.

How can it possibly be paid without massive political, economic and social consequences?

Letter published in the Sunday Business Post on 29th August 2010.

Name for Dublin's Wheel

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How about "The Spinning Wheel" to reflect the fact that our politicians are always spinning and going around in circles?

Letter published in the Irish Times on 25th August 2010. Other suggestions included:

  • Ireland's Eye
  • Whirly Gig
  • Dublin Money-Spinner
  • Wheel of Fortune
  • The Wheeler Dealer
  • Roulette
  • Dublin Eye Soar
  • The Turning Point
  • Wheel-a-Wheel-Abhaile
  • Eye of the Tiger (RIP)
  • Dub Hub
  • Eye'll Go On
  • Pointless

Nama Accounting Methods

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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.

Nama Business Plan - 1

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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

Property Tax and House Prices

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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.

Moral Hazard

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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.

Fine Gael Leadership

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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.

Nama's Mission Creep ?

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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.

Nama is Bailout for Builders

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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.

Fighting White-Collar Crime

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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.

Nama and Freedom of Information

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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.

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.

Nama and the Banking Crisis

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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.

Banking Crisis Comments

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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.

Cost of Banking Crisis

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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.

 

Irish Banking Enquiry - 2

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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 Lee's Resignation

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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.

Celtic Tiger pussycats

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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.

Distribution of Incomes

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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.

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.

Budget 2010

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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.

Mental Reservations and Mature Reflection

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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.

Paying for the Boom

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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.

Nama and Rolled Up Interest

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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 - Horses, Carts and Stable Doors

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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.

Lisbon Referendum & Citizens' Initiative

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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.

Questions about Nama

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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.

Say Sorry & Resign

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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.

Window Tax instead of Property Tax?

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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.

Role of Nama

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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.

Measuring the Economy

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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. 

Minimum Wage

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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. 

Nama

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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.

Why Nationalise?

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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.

Sharing Economic Pain

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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.

Economy & Taxation

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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.

Banks & Ictu Advertisements

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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.

Proposals on Crisis

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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.

Banking Package

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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.

Supplementary Budget

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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.

Waste in FAS & Dail

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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. 

Future of the Banks

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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.

Banking Crisis

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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.

Guarantees for Banks

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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.

House Prices

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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.

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.

Responding to Recession

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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.

Next National Wage Agreement

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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.

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.

Restoring Confidence in Politics

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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. 

Philanthropic tax exiles

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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.

Trust the Government?

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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.

Benchmarking II

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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.

Competence of Government

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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.

Stamp Duty and Building Profits

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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.

Co-located Hospitals and the Health Service

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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.

No L-Plates for the Cabinet

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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.

Review Body and Public Pay

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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.

Taoiseach's Salary

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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.

Paying for Pensions

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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.

Benchmarking and the Ambassador

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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.

Decentralisation - Two Rules

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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.

Peak Interest Rates ???

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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. 

Taoiseach and the Economy

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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. 

For Richer or Poorer

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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.

When the Wind Doesn't Blow

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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.

M50 takes its Toll

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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.

Reducing the Top Tax Rate

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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.

If Ireland was Privatised

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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.

Towards 2016 - Towards Greater Inequity

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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.

Fewer TDs - Better Dail

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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.

Aer Lingus Privatisation

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While each of these reservations about the proposed privatisation of Aer Lingus may not be "deal breakers", their combination suggests that privatisation is a step too far:

    1. The amount to be raised via the IPO is "small beer" in the context of the airline's total needs and surplus funds at the disposal of the Exchequer
    2. The cost of the IPO and related ongoing costs will erode the IPO proceeds and future profits.
    3. Key benefits of the investment programme might be achievable without privatisation.
    4. The market-related strengths that Aer Lingus might bring to new, capital-intensive, long-haul routes are very limited.
    5. The investment programme is excessive given the airline's financial base and any disruption to profits could undermine the business.
    6. To maintain its stake post-privatisation, the Government would need to re-invest which defeats a key reason for privatising.
    7. The initial market capitalisation may not be sustainable given its likely premium to shareholders' funds, cyclic nature of the airline business and (apparent) intention not to pay dividends.
    8. If dividends should be paid, the cumulative outflow over time would reduce profit retentions and undermine the airline's  capacity to borrow and expand.
    9. If the airline industry should go "pear-shaped" for any reason, Aer Lingus might need State assistance,  irrespective as to whether it is in public or private ownership or what the EU says, for national strategic reasons.
    10. If the State's stake is diluted, it will be powerless to ensure that Aer Lingus is not subject to assets stripping or a hostile takeover.
    11. The proposed deal with the trade unions is too expensive and would restrict future profitability and flexibility.
    12. Can the proponents of privatisation guarantee that the eircom experience (stock market ping-pong, under-investment and general belligerence) will not recur with Aer Lingus.

Letter published in the Sunday Business POst on 9th July 2006. 

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.

Tax, Property & Tribunals

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A few themes have emerged in recent days.

Firstly, the failure of the Government to address findings of the Oireachas report on private property and land prices as eloquently explained by James Pike (27th June). In effect, the Government has presided over a housing land grab by speculators which has contributed hugely to the surge in house prices and has resulted in an additional debt burden on hundreds of thousands of voters for decades to come. It is not too late for the Government to take concrete action on this before the next election. However, if it only becomes an election promise, nobody will believe it.

Secondly, the axiom that the more people earn the more taxes they pay clearly does not apply to Ireland. Instead, millionaire earners can hide behind Government-inspired tax shelters and avoid tax while Sean Citizen pays the full whack. To add insult to injury, Sean has to compete in the housing market with investors whose purchases are being part-funded by his taxes. From a national viewpoint, this  taxpayer-subsidised property bonanza has enabled many investors to use their tax-relieved gains to leverage massive investments abroad which bring absolutely no benefit back to the nation. Why should someone earning €50,000 pay tax at 42% while an earner of €250,000 might only pay at 20% on income and capital gains? Surely, a top rate of tax should do what it says on the tin. If all personal tax allowances are eliminated, a new top rate of, say, 35% on income and capital might give the same return to the Exchequer as the present inequitable regime. If individuals wish to make investments, let them do it through companies where the tax rate is only 12.5% and let the distributions be taxed at the standard rate.

Thirdly, the tribunals trundle along on a wave of perjury and forgetfulness. In any other civilised country, the full weight of the law would be thrown at these issues and instead of "slaps on the wrist" we'd see guilty people making "perp walks" and enjoying State-funded hospitality. If the authorities lack resources and expertise, they could seek support from the prosecuting teams used in recent high-profile financial trials in the US. Where is the anti-corruption agency promised years ago by the Taoiseach and where is the long overdue legislation to protect whistle blowers? Probably being dusted off as election promises (again).

What is common to these themes is a complete failure of Government to govern fairly. Instead, it has pursued a policy of making the wealthy richer and ignored the fact that, as Fianna Fail backbenchers are belatedly discovering, the rich account for few votes.

Lead letter was published in the Irish Times on 30th June 2006.

Privatisation of Hospitals

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Following Susan Mitchells' article (11th June) about plans for eleven co-located private hospitals, it is clear, but not surprising, that the Government has learnt nothing from the ongoing decentalisation debacle. While decentalisation could be disruptive to thousands of public servants and families and to the operation of relocated departments, the roll-out of these private hospitals is potentially far more serious.

At a time when inequitable property tax breaks are being closed off, a new break for hospitals is being ramped up. This will result in the State losing taxes equivalent to 48% of the cost of developments. In addition, it will have to give away prime sites, be obliged to pay full commercial fees to use the facilities and have no ownership or managerial rights notwithstanding having contributed almost half the total capital cost. How can this be remotely described as either progress or value for money? It is patently clear that co-locating private and public hospitals is like trying to mix oil and water. It will give rise to fragmentation, duplication and staffing and operational problems on a huge scale and, most critically, drive an even deeper wedge into our inequitable health service.

Based on your report, many key bodies have reservations or are outrightly opposed to the proposals and the only people in favour seem to be the Tanaiste, consultants, builders and investors.  As the proposals seem to driven by ideology and profit and are being pursued without any popular mandate or genuine debate, the major political parties should pledge to unwind them and the Dail should ensure that no binding commitments are entered into ahead of the next election and a comprehensive review. If, in the meantime, the Minister and HSE have the luxury of surplus resources and energy to pursue these risky and unproven ideas, they should be immediately redeployed to provide more public hospital beds, improve services and develop a more unified health service.

Letter published in the Sunday Business Post on 19th June 2006.

Benchmarking Data

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The CSO's recently published National Employment Survey found that average public sector pay was 40% ahead of private sector pay back in 2003. As this survey was completed before benchmarking increases averaging 9% started to take effect, the implication is that average pay could now be about 50% higher for the public sector than for private sector. This is on top of secure employment and underfunded, earnings-related pensions.

The survey findings, even after taking account of undoubted differences in education and experience, undermine the first benchmarking exercise which, based on unpublished studies, has already resulted in mutli-billion euro handouts to the public sector.  Will the second benchmarking exercise roll back these unjustified pay increases and restore equity between the public and private sectors or will it just further widen the gap?

Letter published in the Sunday Business Post on 4th June 2006.

Prescription for Pensions

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David Clerkin's piece on pensions (12th March) has highlighted inequities in public and private sector pension arrangements and in the role of the National Pension Reserve Fund.  Tax payers, predominantly in the private sector, are contributing over �2 billion a year in taxes to pensions. Unfortunately, this is not for their own pensions. About half their contributions go to pay "gold-plated" pensions of public servants and politicians, and the balance goes into the National Pension Reserve Fund. 

The following suggestions would put some fairness into national pension arrangements and help resolve the looming pensions crisis:

  1. The next round of benchmarking should take full account of the cost of public sector pensions. In addition, the public sector should progressively introduce self-funded schemes for all its employees.

  2. State organisations with pension deficits, amounting to a billion euro, should be required to sort these out internally and not be baled out by the taxpayer and by raising prices to consumers.

  3. The role of the National Pension Reserve Fund should be clarified as regards the expected distribution between public sector and social welfare pensions. This should take account of the fact that the vast bulk of the payments into the Fund effectively come from private sector workers notwithstanding that the main beneficiaries will be the public sector. Indeed, a fundamental reassessment of this organisation should be conducted on the grounds that the State effectively borrows over a billion euro year to invest in this Fund while it has a deficit in infrastructural funding which is being addressed via expensive and inefficient public-private partnerships.

  4. As TDs and Ministers are amongst the best paid and, probably, best pensioned in the world, they should fund their own pensions over and above a single basic scheme. The sums involved are not large but there is a principle involved and a lead should be given.

This prescription is likely to be painful but, as everyone knows, it is better to start pension planning earlier rather than later. So, before introducing mandatory pensions, the Government should create an equitable starting point.

Letter published in the Sunday Business Post on 19th March 2006.

TDs are Winning Race to the Top

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The Government is continually emphasising the importance of competitiveness to the social partners as they start negotiations on a new national wage agreement. Are similar exhortations being made to the Review Body on Higher Remuneration in the Public Service which has just commenced a major review?

In the past, this Review Body made comparisons with the domestic private sector jobs but this time around it should also consider similar public sector jobs in other comparable economies.

Much of the data required for this work is published on the Internet. But there are gaps. For example, to compare current salaries of British MPs and TDs, copious material can be found on the Westminster website but the Oireachtas website contains no relevant information. For the record and to illustrate the problem, TDs now earn between 2% and 9% more than their UK counterparts notwithstanding that the Dail meets for only about 60% of the sitting time of Westminster and TDs effectively serve only a quarter the number of constituents covered by MPs. Likewise, Irish Cabinet Ministers and Ministers of State earn between 1% and 5% more than their UK counterparts notwithstanding that they preside over a country that is no larger than some counties in the UK. Is it any wonder that the Irish information is hard to find.

If broader study confirms that other top-level salaries are also completely uncompetitive, the Review Body must confront the "appalling vista" of salary reductions to maintain competitiveness. Of course, they must take account of our recent economic progress. In doing so, it should also take cognisance of the fact that many key public services - health, law and order, transport and infrastructure - has been so ineptly lead and inefficiently managed that major achievements in other areas have been negated.

When establishment figures speak of international competitiveness, they should practice it. For starters, the Review Body on Higher Remuneration should be instructed to take account of and publish international comparisons when it devises new salary levels. This approach should also apply to the forthcoming benchmarking review. Additionally, the negotiators of the next national wage agreement should review the practice of setting percentage rather than absolute wage increases. This only widens the gap between the top and bottom grades and can result in senior officeholders receiving wage increases as large as average wages earned at the bottom.

A race to the top can be just as destructive for the national interest as the race to the bottom.

Note to Editor: The Irish salary levels were secured from the Oireachtas PR Office. A TD earns between €88,556 and €94,205. Ministers earn €199,044 and Junior Ministers get  €136,771. MPs earn the equivalent of €86,636. UK Cabinet Ministers and Minsters of State get €196,447 and €129,872 respectively (Source: House of Commons Fact Sheets M5 and M6).

Lead letter published in the Irish Times on the 13th February 2006.

Taxes are for Little People

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Following publication this week of reports on tax schemes for property development etc, it is clear that the stable door is being belatedly closed. These reports point to the existence of a "black hole" which must rank alongside benchmarking, decentralisation and infrastructural overruns as clear evidence of imprudent and incompetent management of the State's finances. The reports prompt two basic questions:

  1. Why should someone earning €50,000 pay tax on incremental income at 42% while an earner of €250,000 might pay only 20% on all income and personal capital gains? Surely, a top rate of tax should be exactly that. The current rate should be rebalanced and applied to everyone 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.

  2. Why give investment tax breaks to individuals? Surely, breaks should be only available (where strictly necessary) to companies via accelerated depreciation, once-off grants and special allowances which, with the low corporate tax rate, would enable investment reserves to be built up virtually tax free. Done this way, all distributions and gains from companies could then be taxed in the normal way, without further relief, at a rebalanced and reduced top rate.

Letter published in the Sunday Business Post on 19th February 2006.

Transport Authority for Dublin

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The establishment of a single transport authority for Greater Dublin is long overdue. If it had been established at the right time, we might not have spent €2 billion on Luas and the Port Tunnel.

The proposed body must operate as an authority in both name and deed. In the long run, it is unlikely to be effective unless it controls (or, at least, supervises) Dublin Bus, Luas and DART and has real clout with the four local authorities and other vested interests which collectively and separately are making such an utter mess of Dublin's traffic. However, no amount of legislation will ensure this.  The only way forward is brute political force and, where this doesn't work, to unhesitantly "name and shame" over the heads of obstructing bureaucrats. When Minister Cullen ditched Minister Dempsey's plans for directly-elected mayors, he also jettisoned the opportunity to put in place a publicly accountable transport supremo for Dublin, namely, a directly-elected Lord Mayor.

It is far from clear whether the authority is being set up to manage future developments  or whether it will also have an overriding role in sorting out the existing traffic and public transport chaos. If only the former, then we could be throwing more good money after bad. I hope Professor Margaret O'Mahony will take this broader need into account when planning the authority and locating its chief executive.

This letter was published in the Irish Times on 8th November 2005.

Dail Productivity

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When the Dail resumes today, it will have sat for just 58 days this year -equivalent to about 1.5 days per week. As a benchmark, UK MPs are paid about the same as TDs notwithstanding much larger effective constituencies (66,000 versus 18,000) and Parliament sitting for 150+ days a year versus 90+ for the Dail. Based on the latter, UK MPs offer seventy percent better value than TDs.

In any other context, this divergence would be viewed as a rip off. To resolve these matters, the Dail should be obliged to sit for four full days a week and forty weeks a year following the next election. If this doesn't suit prospective TDs, then they shouldn't stand for election.

This letter was published in the Irish Times on the 1st October 2005.

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.

Effectiveness of Dail

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The Government Chief Whip (4th August) undermines his defence of the Dail's recesses by acknowledging that  it is hoped to increase Dail sitting times. Why has this not been done before now and why did the Dail sit for 12 fewer days this year than last year?

Unless something unexpected happens, the Dail will have sat for just 58 days during the first nine months of  this year notwithstanding perpetual crises in law and order, health services, infrastructure, environment, responsibility and accountability. It is noteworthy that UK MPs are paid about the same as TDs. However, MPs have much larger effective constituencies (66,000 versus 18,000), and their Parliament meets for many more days a year (150+ versus 90+) and proportionately more hours than the Dail. Is it any wonder that the electorate thinks that TDs are overpaid and that the Dail is in urgent need of root and branch reform.

Letter published in the Irish Times on 9th August 2005.

Ministerial Gravy Train

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The latest report of the Review Body on public sector pay found that salaries of higher public service groups have fallen out of line with the private sector and  recommended an interim increase of 7.5% pending a full review. As a result, Irish Ministers will earn more than their UK counterparts when parliamentary salaries are included (€195,800 versus �194,900).

How can this be justified when the huge differences between the respective budgets and responsibilities are taken into account and when the ineffectiveness and avoidance of accountability by many of our ministers are considered?

Letter published in the Irish Times on 19th July 2005.

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.

House Prices: The Real Financial Scandal

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It is a pity that outrage over AIB's overcharging and NIB's transgressions is not being directed also at the fact that house buyers were obliged to borrow €17 billion last year to acquire overpriced houses. Arguably, if house prices had been, say, 10% lower, these new borrowings might have been reduced by as much as €2 billion and interest payments would have been lower for new and recent borrowers throughout the life of their mortgages.

Having ceded control over interest rates to the European Central Bank, the Government tried, and failed, to contain house prices by tinkering at the edges - mainly by encouraging the building of even greater numbers of overpriced houses. It has ducked real issues such as land prices and hoarding, excessive lending, inflationary tax incentives, profiteering, overcharging and tax gouging. As a consequence, hundreds of thousands of house buyers will be making excessive loan repayments amounting to billions of euro for decades to come.

Given that house prices have escalated to such a degree, containment of price inflation is no longer adequate. It is small consolation to see a slow down in price increase when current prices should never have been reached in the first instance. Instead, what is needed is a substantial reduction in house prices to bring them back to levels that make them sustainable when interest rates rise and economic growth moderates.

To start this process, the Government should immediately establish a Task Force to implement key suggestions in the All Party Committee on the Constitution's progress report on private property. If the Government fails to unwind the house price problem in an orderly way, then its much-beloved "market forces" will do the job with consequences that will be many orders of magnitude greater than the current financial scandals.

Lead letter in the Sunday Tribune and published in Sunday Business Post on 8th August 2004.

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.

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