Fine Gael to reverse minimum wage cut

Fine Gael’s Michael Noonan TD has unilaterally confirmed that a Fine Gael government will reverse the minimum wage cut imposed by Brian Lenihan in the 2011 Budget. Noonan presumably believes that his solo run will not have moral hazard consequences but he omitted to indicate what Ireland’s rankings in the EU Harmonised Labour Cost Index is likely to be one year after a Fine Gael led government takes office.

The National Minimum Wage Act 2000 set the minimum wage for an adult at €4.40 per hour. The Irish minimum wage increased by over 96% from 2000 to 2009 while GDP per capita in that period had increased by 11.8%.

The restoration of the statutory minimum wage to €8.65 per hour (€17,542 per annum) on the basis that ‘only 3% of the labour force are paid the minimum wage and that its reduction was merely ideological flag waving on the part of Fianna Fáil’.  That begs the question – what happens to the other 97% of the nation’s labour force.

Approximately 3.3% of the labour force received the minimum wage in 2005 when the hourly rate was €7.65; 155,000 were on the Live Register and 91,300 were unemployed.

But in 2006 data from the Revenue Commissioners indicates that 675,000 of those assessed for income tax declared an annual income that was significantly less than the minimum wage before it was increased to €8.30 on 1 January 2007 and to €8.65 on 1 July that year. There are also more minimum wage recipients in the public sector than in the private sector.

Wages and salaries in Ireland dropped by 10.6% in overall terms in the year ended 30 September 2010, before the 2011 Budget was announced.   29% of the labour force do not even make the equivalent of the minimum wage annually and a further 13.5% are unemployed. 

Fine Gael intend to slash tens of thousands of jobs from the public sector and close 145 State bodies.  Who is going to pay the cost of this proposal and what impact will it have on investment, exports, job creation and job maintenance of a scale sufficiently large to reduce chronic levels of unemployment and forced emigration, both documented and undocumented? 

Fine Gael need to clearly articulate the character and stability of living standards and hardship avoidance that will evolve for all citizens under their governance and the relative importance that wealth, welfare and debt will have in underpinning these.

‘Andrews’ – an enduring political icon in Dun Laoghaire

Andrews is one of the most enduring names in the electoral politics of Dun Laoghaire since April 1965 when 29-year old David Andrews made his debut as a Fianna Fáil TD. It was a 4-seat constituency from 1965 until 1981 when it became a 5-seater.  This legacy has survived the leadership of Lemass, Haughey. Ahern and, latterly, Cowen.

David Andrews was succeeded by his son Barry in the 2002 general election when he polled 7,425 votes in his first outing.

During the intervening 46 years the Andrews candidature has secured 121,103 first preference votes in 13 general elections when the cumulative quota was 111,240. The Andrews ticket beat quota in 8 of these elections. Barry Andrews achieved 83% of quota in his maiden outing but in 2007 he achieved 102% of quota – a solid 9,977 first preference votes.

Now that the constituency is once again a 4-seater it would be presumptuous to presume that the Andrews name will not prevail in 2011

 

Election	Barry Andrews	David Andrews	% Quota
2007		9,786	102%
2002		8,939	83%
1997	8,933		99%
1992	13,418		136%
1989	9,987		114%
1987	8,414		91%
1982 - 11	7,643		91%
1982 - 02	7,931		98%
1981	9,471		118%
1977	8,754		115%
1973	10,926		130%
1969	10,292		137%
1965	7,932		105%

Fianna Fail circus heads for the knackers yard

Fianna Fáil seems to be travelling in a parallel trajectory to that of the Ulster Unionist Party and are as likely to end up in the same long-term predicament. Lapses in political judgement and common sense this week illustrate how dislocated FF has become from its centre of gravity, its duty accountability and responsibility and, even, its raison d'etre. 

The carry-on was reminiscent of a badly produced circus and a crass attempt at the crudest political expediency for which no price seems to be too much to pay. Do Brian Cowen and Mary Coughlan really think that voters are gormless fools who will tolerate well paid individuals walking away en masse from important roles before the job is complete, leaving the conduct of government like a ghost housing estate? Were those who fled really team players, or merely a collection of eccentrics, oblivious to the public interest but with an exclusive focus on suiting their own whims, personal priorities and preferences?  A master craftsman who starts a job is expected to finish that job – not hand it off to a novice apprentice.

Have there not been enough episodes of atrocious governance, both within and beyond the political system, not to have a situation arise where there was a major lacuna in the control of the most important departments of State - justice, health, enterprise and public transport? 

Fianna Fail could have made a case to the electorate on the grounds that much has been learned from their lousy economic policy judgement and atrocious leadership of the economy from 2003 to 2007 but, instead, this week’s events demonstrate the opposite with Brian Lenihan and Mary Hanafin talking from both sides of their political mouth about Brian Cowen as though he is a fig roll – ‘I like him as a biscuit, but not as a bar’!

Ireland has made no political progress or accomplished any greater maturity towards stability than was the position when Rody Molloy drove home from his chief executive’s office in his FAS owned car for the last time - with the blessing of the Department of Finance.

Are public interest directors effective?

The Court of Directors at Bank of Ireland nominated two non-executive directors to represent the public interest at the behest of the Government following the introduction of the Government guarantee. They are Tom Considine, Secretary-General of the Department of Finance from March 2002 to June 2006 and former Fianna Fáil TD and minister, Joe Walsh.

They were paid €119,000 in the nine months ended 31 December 2009.

The Minister for Finance, Brian Lenihan, advised the Dáil barely a month ago that public interest directors “owe their duties to the company”; that “the interests of the company are paramount”. Public interest directors, he explained, “bring civic mindedness and a sense of what is in the public interest but that, to a great extent, the public interest and the covered institutions interest are likely to coincide”.

What are the consequences when this is not the case? The decision by Bank of Ireland to make outrageously extravagant bonus payments directly contravenes public policy articulated by the Department of Finance and utterly defies the role of society in keeping Bank of Ireland viable.

The Covered Institutions Remuneration Oversight Committee (CIROC) established by the Department of Finance were informed in early 2009 by the covered institutions that they did not intend to pay bonuses in respect of 2008 and CIROC recommended in February 2009 that bonuses should not be payable then, or for the period of the Government guarantee.

The membership of CIROC comprised:

• Vivienne Jupp, a former executive of Accenture Ireland’s Government Operating Group. The Irish Government appointed her a member of the Broadcasting Commission and the Review Body on Higher Remuneration in the Public Sector. She is a member of the Finance Committee of Concern Worldwide and a board member of the Irish Hospice Foundation.
  
• John Purcell former Comptroller and Auditor General
  
• Eddie Sullivan, Secretary-General for Public Service Management and Development. Sullivan served as interim director of FÁS following the Rody Molloy debacle

How can the public interest be adequately served when the duties and obligation to serve the public interest are so ill defined by the Minister and there is apparently no communication to Government when public policy is contravened and the Dáil is blind-sided by inaccurate information provided by Bank of Ireland? What will the consequences be and who will bear them?

When Cowen played golf with FitzPatrick in 2008

TThe response of Taoiseach Brian Cowen to the recent disclosure that the affairs of Anglo Irish Bank were apparently not discussed during a golf outing to Druid’s Glen GC in July 2008 he had with Seán FitzPatrick, at the invitation of Cowen’s friend, Fintan Drury defies credibility and beggars belief. It is tone like the response one might anticipate from a shifty, tribal African chief with vulnerable democratic credentials and more to hide than reveal.

But Cowen’s reaction also provides an interesting insight into where his own centre of gravity is; what his default position is with respect to the entire banking debacle.

Cowen issued a statement on 10 January in which he “refutes any suggestions of impropriety” and that the outing was arranged by “a friend Fintan Drury which Mr FitzPatrick also attended”.

No one had made any suggestions of impropriety! But when precious time is spent by the Taoiseach with the Chairman of a Bank that is about the nobble the Irish nation and the invitation is extended by a friend who is a six-year veteran of the Anglo’s Risk & Compliance Committee and Chairman of that Committee for the prior four years -  until day’s prior to this golf outing – would this not be a wasted opportunity to ask some searching and penetrating questions? Who could possibly better informed about the intricacies of Anglo Irish Bank than this combination of experience, genius and insight?

Cowen’s friend, Drury, was co-opted to the board of Anglo Irish Bank on 30 May 2002 and remained on the board until 27 June 2008. He became a member of the Risk and Compliance Committee immediately and succeeded by former Anglo director Michael Jacob, who is a former President of the Royal Dublin Society, as Chairman of the Risk & Compliance Committee from 2004 until he departed from the board. This was a small committee whose membership included Lar Bradshaw who was entrusted to lead Dublin Dockland Development Authority.

The function of the Committee was to review key risks and compliance issues inherent in the Anglo business and the system of internal control necessary to manage them and present its findings to the board of Anglo Irish Bank. Did these findings, for example, include the history of FitzPatrick’s loans from Anglo and his annual year-end transactions with Irish Nationwide Building Society which came into public awareness in December of that year?

Drury, a former journalist at RTE was appointed Chairman of the State-owned television service during his tenure at Anglo, an appointment likely to have been strongly advocated by Cowen. His non-executive role at Anglo was handsomely paid. His cumulative fees his six years service amounted to €462,000. He also accumulated shares in Anglo – starting in mid 2002 with 15,000 shares and finishing with 53,796. This portfolio was worth €90,000 on 30 September 2002 and €713,335 on 20 September 2007.

Drury became a member of the board of Paddy Power Plc on 29 August 2002 and held the post of Chairman of that company from 26 May 2003 to 31 December 2008 for which he received cumulative emoluments of €818,000.  His shareholding in Paddy Power Plc increased in value from €58,420 to €448,362 when he concluded his term was Chairman.  Group revenue increased from €673.7 million in 2002 to €2,751 million in 2008.

Cowen’s statement also refers to a phone call he received from FitzPatrick on St Patrick’s Day about issues connected to the shares of Anglo Irish Bank when he was Minister for Finance. Cowen says that he informed the then Governor of the Central Bank, John Hurley, ‘that a situation was developing in regard to the contracts for difference issue in Anglo Irish Bank – the exact scale and detail of the difficulty was not apparently known as that point.’ A meeting between FitzPatrick and the Central Bank Governor and Financial Regulator (Patrick Neary) took place on 21 March 2008.

It is also noteworthy that Drury Communications have been retained by the current regime to promote the Anglo Irish Bank annual report in the post nationalisation phase. Fintan Drury founded this company in 1988 and retired from the business in 1999 when he sold his controlling interest in the company. One of the directors of Drury Communications, until September 2009, was 72-year old David M Kennedy, former boss of Aer Lingus and, incidentally, father of Patrick Kennedy the chief executive of Paddy Power Plc.

How would you cope with an annual pension of €1 million +?

The Irish financial institutions dealt with by the Covered Institutions Remuneration Oversight Committee are those that have obtained financial support from the State since 2008. They include AIB, Bank of Ireland, Anglo Irish Bank, Irish Nationwide Building Society, Irish Life & Permanent and EBS. Postbank Ireland had been included but has subsequently ceased to operate.

This CIROC members were mandated to investigate the remuneration of those in charge of these institutions and to recommend pay ceilings to the Minister for Finance – which they did in February 2009.

One facet of remuneration they investigated was pensions. They noted that cash allowances had been paid to compensate for the effects of the ‘pension cap’ imposed by the Finance Act 2006 and that it was unacceptable that pension schemes should be inconsistent with the intent of relevant legislation. The found that top management made little, or no contribution for their own pensions and that in future an appropriate balance was necessary between employee and employer contributions with the former being increased to achieve this balance. They also recommended that bonus payments should not be pensionable and that pension arrangements for top management should be at least broadly similar to those of the generality of staff of the institution.

The pension arrangements of Michael Fingleton, formerly head bottle-washer at Irish Nationwide Building Society were published by the Public Accounts Committee.

Fingleton accumulated a pension fund for himself at Irish Nationwide with assets of over €29 million when it was wound up in 2007 when Fingleton was 67 years old. A pension insurance policy was established for the benefit of Fingleton and other employees in 1975. This INBS pension scheme was originally set up in 1981, 10 years after Fingelton became connected to it. A second which was to directly benefit Fingleton was established in 1995 with the transfer of accumulated assets of €4.5 million too which a further €3.4 million was added in 2005. Various other enhancements, including serial annual pay increases of the order of 8 – 10%, were made throughout the existence of the scheme including an average of the bonus payments over the previous three years. Investments by the scheme by directed by the beneficiary.

The benefits to be provided to Fingleton include:

• His spouse’s benefit was increased from ⅔ to 100% of his pension entitlement
• The final salary, for pension purposes, was to have been the final calendar year salary – including basic salary and an average of the three prior years ‘annual bonus payments.

Fingleton’s remuneration for the final three calendar years of his employment at Irish Nationwide were as follows

Year	Salary	Bonus	Fees	Benefits	TOTAL
2006	738,000	1,000,000	48,000	50,000	1,836,000
2007	813,000	1,400,000	53,000	48,000	2,313,000
2008	893,000	1,000,000	4,000	520,000	2,417,000

His pension would therefore have been based on ⅔ of his final’s calendar year’s salary €589,380 plus ⅔ of an average of his bonus for the final three years of his employment - €528,000 providing him a potential  annual defined benefit pension of €1,117,380.

That perhaps explains why the ‘pre-contracted’ bonus of €1 million has not been repaid. Fingleton’s remuneration from 2003 until his employment at Irish Nationwide terminated was €11, 322,000

When Secretary Snow met the gurus of the Celtic Tiger

Secretary of the US Treasury John W Snow came to Dublin on 14 and 15 November 2004 to sit at the ankles of far-sighted, visionary and sure-footed Irish Celtic Tiger architects to inhale their wisdom and discover what it takes to create an economic miracle, according to WikiLeaks.

Snow, formerly, chief executive of the railroad giant CSX Corporation, was appointed to this post in February 2003 by President George Bush and held this office until he was succeeded by Harry Poulson in July 2006. He was forced to resign when it emerged that Snow failed to pay income tax on a $24 million loan forgiveness he has received while chief executive of CSX Corporation.  Bush needed a ‘new face’ at the Treasury.

Snow was told that the concepts behind the Celtic Tiger economy ‘were simple’. ‘The political will to carry out reforms had to be seen in the context of the economic meltdown of the mid 1980’s (18% unemployment and a debt/GDP ratio of 130%). The social partnership process was described as a ‘good-faith relationship’ with trade unions, investment in education and a ‘dictatorial leadership’ that exposed industry to ‘the full discipline of the market’. Ireland’s ‘skill’ in securing EU subsidies and in ‘exploiting’ US policy on corporate tax had a role to play in the insemination of the Celtic Tiger cub.

Social partnership led to a ‘shared understanding’ between government and lobbyists on the importance of decent wages and housing. Even the most disgruntled trade unionist was given a voice but this process, Snow was advised, might not work in other jurisdictions which are more populous than Ireland with more diffuse trade union structures.

Former Finance Minister and architect of public sector decentralization, Charlie McCreevy told Snow that the introduction of free primary and second level education in Ireland in the mid 1960’s had been a boon to other countries, including the US which absorbed tens of thousands of undocumented Irish emigrants. But McCreevy expressed concern that the 1970’s Irish baby boom was a potential looming disaster which was averted by the jobs boom between 1997 and 2003 when unemployment levels dropped to 4%. McCreevy strongly advocated the concept of ‘dictatorial leadership’ to Snow – of incentivizing industries to achieve efficiencies by exposing them to the full discipline of the market, even at the risk of bankruptcies.

Snow responded to the lessons he was being taught by commenting that gains from economic reforms tend to be diffuse, losses were often more concentrated in particular sectors or geographic areas making it easier for those effected to organize political opposition. McCreevy replied that the test of any government was how well it explained to dislocated workers that the reforms responsible for their plight ‘were good for the country’

The boss of Indecon Economic Consultants, Alan Grey, piped up that as Ireland has given workers the skills to move across industries to the point where those laid off did not ask “have I any hope of a job?” but rather “which of my new employment choices should I take”

Albert Reynolds advised Snow that he had secured over €1 billion in EU subsidies when he supported the push of Germany’s Chancellor Kohl for EU enlargement.

Snow also met the then chief of the Ulster Bank, Cormac McCarthy who opined that ‘an ironic feature of Ireland’s success has been the Irish Government’s lack of monetary policy tools citing that strong international trading performance would be normally bolstered by interest rate and exchange rate levers. McCarthy considered that the low interest rates set by the European Central Bank at that time ‘had been a boon to Ireland’s private sector and had lent a sense of stability and consistency’ to the Irish market.

The boss of Forfás, Eoin O’Driscoll, told Snow that Ireland needed to guard against complacency if competitiveness is to be maintained and that Ireland needed a ‘new shared vision’ to go another rung higher than basic to produce innovative, high-value goods and services. This would involve marrying innovation to better business practices, particularly in sales and marketing that would emulate the US approach of perfecting product designs in the market as opposed to the European preference of the laboratory. Snow cautioned against an approach of ‘picking winners’ in the market but did endorse the sentiment that US prosperity lay in a culture of innovation and entrepreneurship.