Mandating change in Europe

Fianna Fáil Leader, Micheál Martin TD argues that the people should be consulted in advance of significant changes in Europe that impact our nation. The German Government is proposing to treat Greece and any other fiscal miscreants like a back-office supervised by an EU Budget Commissioner.

There is an enormous and unsustainable democratic deficit in the relationship between Ireland and the European Union that must be recognised and promptly repaired so that the sovereign voice of the people is listened to and heeded.

This hiatus is evident beyond the agenda connected to the fiscal compact and the brinkmanship and doomsday options presented by ministers’ - were there to be a referendum to change the Constitution.

The Irish Merry-go-Round

Three of the nations twelve MEP’s elected in 2009 have now retired and been replaced by others automatically chosen from a Replacement List. A 25% churn is before the middle of a parliamentary term is significant change by any standard.

These replacements have neither presented a proposal to the electorate to introduce themselves nor do they have a mandate from the people. None of them even presented themselves as a candidate in the 2009 election, so from a European political perspective these replacements are total strangers.

This List from which they are chosen was presented by parties and independent candidates to the returning officer in each constituency before the election even took place – as if it were a matter of personal, confessional expediency over which the electorate over had as much influence as they had in choosing the cast of a pantomime. The consequences are that over 194,000 Irish voters have been disenfranchised while an insidious process of highly remunerated and abundantly expensed ‘jobs for insiders’ has thrived.

Gravy Train

The European Parliament is one well endowed gravy train with little, or no oversight of MEPs. Each of the 754 or them is paid a monthly pre-tax salary of €7,956.87 from the Parliament’s budget. This is subject to an EU tax and accident insurance contribution, after which the salary is €6,200.72. Member states can also subject the salary to national taxes. But, as is the case with Oireachtas politicians, no details are available on the Oireachtas web site of the tax liabilities of politicians.

MEPs are also granted an allowance of €4,299 each month – to cover the expenditure they incur in the performance of parliamentary duties. But when it was revealed that Irish senators were receiving an allowance of €23,000 per annum and Independent TD’s were receiving an allowance of €42,000 per annum, it was disclosed that some of this money was used for charity!

Apart from the allowance MEP’s get a mileage allowance of €0.50 per kilometre for a car journey plus fixed allowances based on the distance and duration of the journey. If they travel via other means to meetings of the European Parliament in Brussels or Strasbourg MEPs are refunded the actual cost of their travel based on receipts up to a maximum of a business class air fare or a first-class rail ticket.

MEPs often have to travel outside their home Member State for purposes other than official meetings (e.g. conferences). For this they receive reimbursement from a fixed yearly travel allowance of €4,243 for their travel, accommodation and out-of-pocket expenses. This is made on the presentation of supporting documentation.

The Parliament also pays MEPs a flat rate allowance of €304 for each day they attend official meetings of the Parliament bodies on which an MEP serves that are held within the European Community. This covers accommodation, meals and all other expenses involved in such attendance. The MEP must sign the attendance register to trigger payment. During plenary sessions this amount is reduced by 50% for MEPs who have not taken part in one half of the roll call votes held on the Tuesdays, Wednesdays. And Thursdays of part-sessions held in Strasbourg and on the second day of part-sessions held in Brussels.

Parliament pays a sum of €152 per day plus accommodation and breakfast expenses for attendance at meetings held outside the European Community – provided the MEP has signed the official attendance register for the meeting.

Filling Casual Vacancies

The procedure to fill the vacant seat mid-term of any retiring or deceased MEP is governed by national law. Irish law provides that it is not even necessary for a candidate, or a replacement, to even be a citizen of Ireland to represent an Irish constituency. Candidates are merely prohibited from standing for election in two Member Countries at the same time.

Why therefore, should the European Assembly Elections Act, 1984 not be amended so as to prescribe that when an MEP retires or dies in the course of the life of a Parliament his, or her, votes are examined by the chief returning officer and allocated to the next preference given by the voters to determine who the replacement is? Alternatively a by-election could be held as is the procedure in the independent-minded United Kingdom.

The Irish Government must demonstrate unambiguous leadership with the same agility as the capacity of an MEP to sign his, or her name, in giving concrete expression to the sovereignty of the people especially in the elevated strategic context of our relationship with the European Union.

Among the poor mouths, are some very high-earners in Ireland

Despite economic woes there are some very high income earners in Ireland. The latest figures refer to 2009 when 620 people declared an annual income of over €1 million and 261 paid tax of 30% , or less, on that income. Almost 2,500 declared an income of between a half million and one million euro and over 1,000 of them paid tax of 30%, or less.

The recession was gathering pace in Ireland in 2009. The number on the Live Register had increased from 290,018 in December 2008 to 413,505 (+42%!) in December 2009. The number of people employed dropped from 2,054,600 in December 2008 to 1,887,700 at the end of 2009, a drop of 8.1%.

All of this was reflected in lower national income tax receipts. Total gross income dropped from €78,152 million to €71,673 million, (-8.2%).

109,109 (4.3%) of Ireland’s 2.1 million income tax payers declared incomes in excess of €100,000 in 2009. Almost 10,000 (9,895 to be precise) declared incomes between €250,001 and €500,000; 2,495 persons declared incomes between €500,001 and €1 million and 620 declared an annual income in excess of €1 million.

Between them they pocketed an annal income of €19,791 million, 27% of the total gross income earned in the country that year.

They collectively paid income tax of €4,915 million, 46% of the total income tax collected.

The average effective tax rate for all Irish income tax payers in 2009 was 12.9% and the net tax due on their gross income that year was €10,616 million, a reduction in total income tax receipts of 13.2% from 2008. The average effective tax rate for the high-earners was 25%.

Under 50% of the high earners had an effective tax rate of 30%, or less, in 2009. This is calculated as the percentage of total tax liability to gross income. Those high earners in Ireland who make significant use of certain specified tax reliefs have had to deal with tighter restrictions since 2010 so that a 30% effective tax arte applies for those subject to the full restriction. Those reliefs do not include those for health expense and standard tax credits, which are available to all taxpayers.

The demographic profile of Ireland 2.1 million income tax payers in 2009 comprised – 30% single males; 28% single females; 20% married and both are working while 17% were married but only one person is working. There were 20,171 widowers and 57,186 widows.

Over 982,000 (46%) of all income tax payers had an annual income of €25,000, or less, in 2009.

Dublin accounts for 60% of smuggled cigarette seizures in Ireland

Customs officers seized over 715 million smuggled cigarettes in Ireland over the past five years. Seizures in Dublin accouted for 437 million of these followed by the Border-Midlands-West where Customs discovered over 184 million illicit cigarettes. The remainder of the country (East, except Dublin, South-East and South-West) was the source of 94 million smuggled cigarettes between 2006 and the end of 2011.

Customs also seized over 29½ tonnes of tobacco with a corresponding loss to the Exchequer of €10.28 million.

To put this combined loss in a context – the prospective yield this year from the newly introduced Household Charge is €180 million. The loss of revenue to the Irish Exchequer from tobacco and cigarette smuggling in two years, 2008 and 2009, is comparable to the prospective yield in 2012 from the newly introduced Household Charge (€180 million).

The detections and seizures of smuggled cigarettes and tobacco is achieved through a combination of risk analysis, profiling, intelligence as well as the screening of cargo, vehicles and postal packages. Intelligence checks and random checks are made of retail outlets, farmers markets and private and commercial premises. Seversal blitz operations were conducted which uncovered over 34 million cigarettes and over 1,700 kgs of tobacco.

The European Anti-Fraud Office (OLAF) is very active in tackling this menace at an international level and is an important source of intelligence gathering in combating illegal tobacco smuggling globally.

Spanish Customs launched Operation "BALMAN" in February 2010 when specific intelligence about suspicious imports of cigarettes from China was received by OLAF and the Customs Service of the Czech Republic. Fast and accurate exchanges of information between OLAF and national authorities allowed investigators to track containers of counterfeit cigarettes from China to ports on the east coast of Spain, where they were diverted onto the illegal market. OLAF's involvement contributed to the seizure of six containers with more than 40 million cigarettes in Spain and Portugal, preventing financial losses to the EU budget and Member States of more than € 6 million.

In June 2010 the joint customs operation "SIROCCO" focused on deep sea containers loaded in China or the United Arab Emirates and arriving in the Mediterranean area. The objective was to identify consignments suspected of containing counterfeit or smuggled genuine cigarettes, as well as other counterfeit and illegal goods. It is estimated that the seizure of cigarettes alone prevented a potential loss of approximately € 8 million in customs duties and taxes in the EU.

Around 40 million cigarettes, 1.2 tonnes of hand-rolled tobacco, as well as 7,000 litres of alcohol and 8 million other counterfeit items including clothing, shoes, toys and electronics, were seized during the joint customs operations. Three suspected cigarette traffickers were arrested. OLAF provided logistical and technical support throughout the operation. It coordinated the operation from a Permanent Operational Coordination Unit based in OLAF’s premises in Brussels. The unit was staffed by customs liaison officers from nine EU Member States (Belgium, Denmark, Germany, Italy, the Netherlands, Poland, Portugal, Spain and Romania), Egypt, Morocco and Turkey, as well as a liaison officer from Europol.

2011: A flat year for Údarás na Gaeltachta

Údaras na Gaeltachta, that economic development agency of the Gaeltacht with the 20-member board and 96 staff published its year-end review for 2011 this week. Headline milestones were that 734 jobs were ‘created’. Despite the incidence of ‘job creation’ the overall employment in their client companies stagnated at 104 fewer than the 7,074 that were employed at the end of 2010.

Last year was a difficult year because budgets were trimmed and the board of 20 expressed their ‘great disapproval’ when they realised this in December 2010. The capital budget was to be cut from €15 million to €6 million and a further €6.2 million was to be funded from the resources of An tÚdaras and that included a prospective €2 million to be generated from the sale of assets. It responded to this trauma by cutting its ‘job creation target’ from 600 to 300.

But, glory-be, by the end of 2011 guess what? 400 jobs were ‘approved’ in 2011 that they believe have an associated investment of €21 million. They ave not managed in the past decade to deliver more than 100 extra jobs. That was in 2008 when 8,193 were employed in their client companies.

The budget for 2012 was discussed in early December and is to be reduced by a further 4% compared to the 2011 budget. But the 20-member board, who pocketed over €2 million in fees and expenses since they were elected in 2006, conceded that despite the reduction they would construe the 2012 budget as ‘a vote of confidence in them’ in their enterprise functions.

A few weeks earlier the Minister in charge of them, Dinny McGinley, suggested that he could save €500,000 by deferring the election of a new board; that he would reduce the board to 12 members and explore the possibility of these being appointed by local councils.

As recently as 2008 they boasted that 65% of the Gaeltacht ‘some level of internet connectivity’, but that the quality of the service was deficient in some regions and there was no provision in others – this is the view of a agency that spent €315 million between 2006 and 2010.

It is interesting, for example, to see that Dell Computer is now operating a social media monitoring centre. This monitors more than 25,000 posts daily on Twitter that relate to Dell. The underlying philosophy is that a single customer complaint, from someone with influence, can have more reputational impact than other forms of marketing. Dell boasts a 99% resolution rate customer satisfaction. This approach to feedback and service recognises that in an age of smart internet-enabled consumers, being ‘customer focused’ is not enough. How is the Gaeltacht able to compete at that level?

An tÚdarás is very gung-ho about its role in the 20-Year Strategy for the Irish Language. This envisages that there will be 250,000 daily Irish speakers by 2030. Their contribution to this strategy in 2011 was to subsidise 70 preschools attended by 900 youngsters and 565 adults attended other Irish Language courses. This would mean that the Government target of 250,000 daily Irish speakers might be achieved in 170 years providing there is no duplication of attendees from year to year. But they want a 'central role' as an implementing agency of this Strategy and being the midwife of a 'new era of history'. That national role is also a 'vote of confidence in the organisation', according to themselves.

Rambling, shambolic Irish Red Cross stumbles on

Despite admitting to being in what was termed 'uncharted waters', on the groundsthat the Irish Red Cross Society does not fall under its direct remit, the Public Accounts Committee of Dáil Éreann was treated to a mind-numbing account this week of its unfinalised response to dealing with areas of governance, financial control and the management of its headquarters. This session followed a prior session with the Committee last October when the Vote of the Department of Defence was being examined.
It beggars belief that the State is continuing to provide close to €1 million in annual funding to the Irish Red Cross Society. This wretched organisation has been in existence for over 70 years and its primary function is to support the military and tend to prisoners-of-war, but it has never engaged in either function.

Instead, it is a generic charity that had no strategic relationship whatsoever to the nation that could not be adequately and more competently catered for by other charities and Civil Defence.

The sponsor of its State funding is the Department of Defence. The former Secretary-General of this Department from 1995 to 2003, David O’Callaghan told the Public Accounts Committee meeting on 19 January that for nearly ten years he 'had been racking his brain as to how many times the Red Cross appeared on his radar of top-ten issues' and 'could remember no time when we had difficulties with it’.

That is despite the fact that in December 1999 there was major public concern about the conduct of this Society. The Minister of Defence at the time, Michael Smith, told the Dáil that a new secretary-general had been recruited by the Red Cross earlier in 1999 and that ‘one of his first tasks … was a strategic review of the operation of the Society, encompassing the views of all organs of the Society to ‘ensure the strengthening and development of the Society' and that the review will be completed by mid-2000.

Twelve years later and O’Callaghan, as Chairman of the Red Cross, tells the Public Accounts Committee that the Red Cross ‘did not keep pace with standards of best practice in respect of governance and oversight’, but that ‘the Society has recognised that weakness and responded to it in a substantial and convincing manner’.

Their response includes an overhaul of the Constitution which would preclude members of the Executive Committee from serving more than two consecutive three-year terms. However, this will not mean that the current Vice Chairman of the Society, who was one of two cheque signatories of one of 49 undisclosed bank accounts, can continue in the role of Vice Chairman for a further six years. Putin could not devise a more self-serving response to governance.

The existence of the missing bank accounts was exposed in August 2008, but it took until November 2009 before the matter reached the agenda of the 12-member Executive Committee and the member representing the Department of Finance became aware of it, despite it meeting meets each month, except August. The Society's Head of Finance had attemtped to bury the matter as an 'administrative error' until the Fourth Estate made the public aware of the latest of shenanigans which trace their origin as far back as April 1991.

O’Callaghan’s successor as Secretary-General of the Department of Defence since 2004, Michael Howard was asked by the Public Accounts Committee if he had any recollection of a Government appointee to the Executive Committee of the Red Cross resigning in 2009 citing loose financial controls, impropriety or undisclosed bank accounts, but Howard said ‘it does not spring to mind’

It was also disclosed to the Public Accounts Committee that the Red Cross has a portfolio of 17 properties but the accounts it presents that incorporate the State subsidy only include Head Office property and income.

It was confirmed to the Committee that €136,000 was spent on legal fees in 2010 by the Red Cross prosecuting Google so as to identify a blogger who blew the whistle on the undisclosed bank account which contained public voluntary donations amouting to €160,000 and on 'how t manage information that was appearing on a blog'. The cover of the Head of Finance who was apparently trying to keep the undisclosed bank accounts that the Vice Chairman of the Red Cross was a signatory to was blown apart. The €140,000 spent on legal fees was from money collected from members of the public or recevied from the State.

During these controversies the Irish Red Cross retained an acting secretary-general on a consulting basis for a fee of €160,000 per annum, prior to acting on a consulting basis as Head of Finance. Professional fees charged to the Red Cross in 2010 were €211,000 and in 2009 were €288,000 while the Society ran a deficit of €12,000 and €64,000 in these years.

O’Callaghan in his opening contribution to the Public Accounts Committee defined his Society as ‘an independent charitable organisation’ and when Smith spoke in the Dáil in 1999 he stated that a fundament principle of Red Cross societies is that they enjoy freedom from political involvement worldwide. If the Government stopped the State subvention, removed the patronage of the President and its nominees to the Central Council the Red Cross would be free of political oversight and the resources of the Oireachtas could be deployed more prioductively.

Changing dynamics of Irish motor industry in a decade

The number of new private cars licensed in Ireland for the first time was totalled 160,908 having dropped from 225,269 the previous year. A decade later it dropped by a further 46% to 86,932 new cars licensed for the first time in 2011.

The changes were characterised by fairly dramatic changes:

Six marques disappeared altogether as being seperately listed - Alfa Romeo, Austin/Rover, Daewoo, Daihatsu, Izuzu and Saab - accounting for 8,553 units of the reduction.

There were three new arrivals, Cheverolet, Kia and Lexus which sold 3,418 units

Audi, Skoda and 'other makes' between them added 1,799 units in 2011 over what they sold in 2001.

Those marques that lost more than 46% include Citroen, Honda, Mitsubishi, Peugeot, Seat and Suzuki which collectively lost 25,054 units.

The marques which, relatively speaking, maintained popularity over the decade, insofar as the market decline was less than 46%, include BMW, Ford, Hyandai, Mazda, Mercedes-benz, Nissan, Opel, Renault, Suburu, Toyota, Volkswagen and Volvo but who, between them ropped volume 45,586 new cars.

Fancy selling Škoda in Ireland?

Last Friday, 20 January 2012, The Irish Times published an interview in its Business Section with the recently appointed managing director of Volkswagen Group Ireland which gave him a unique platform to introduce himself. But does he drive a Škoda?

At the back of the paper there was an avertisement in the Appointments Section where Škoda, the Volkswagen subsidiary, which bills itself as 'Simply Clever', announced it is looking for a Head of Sales and described how Škoda is a 'fast moving, dynamic brand with strong and exciting plans for growth'

The responsonsibilities include 'manage the dealer network to ensure that all sales KPI's are achieved'. The appointee is expected to have a 'passion for results and delivery of KPI's' (sic). He, or she will also deliver sales training programmes for 'Dealer Principles' (sic) and Sales Staff' and is expected to have 'a high level of written, verbal and presentation skills'.

Do these Škoda people not realise that is grammatically incorrect to write an acronym, such as KPI, in the possessive case? Are they also confusing principles with principals? What is to become of the reputation of Volkswagen if its subsidiary is shown to be not proficient in the use of English?

My perception of Škoda has never been inspiring, especially after a friend of mine purchased one and brought it to the vendor, a main Škoda dealer in Dublin, for its first service. My friend discovered afterwards that the oil had not been changed. But this astute customer knows his oils thoroughly, he having worked in the oil industry for a lifetime.

Another blackmark for Škoda in my book. Is this a case of a dealer without principles being supplied by a manufacturer who is not 'simply clever', but is 'simply incoherent'?

Last year there were 86,932 new private cars licensed in Ireland for the first time and Škoda accounted for 4,457 of these - fewer than Ford, Nissan, Opel, Renault, Toyota and Volkswagen. But so much for 'fast moving' - there were 210 fewer new Škoda cars licensed in 2011 compared to 2010.

Rampant cigarette smuggling forcing swingeing spending cuts on the Irish Government

The Irish Government intends to cut the Education Budget by €916 million between what it spent in 2010 and what it intends to spend in 2014. That sum is comparable to the exchequer revenue that will be lost as a result of cigarette smuggling even if Customs succeed in executing 50,000 seizures worth a further €1 billion in lost taxes.  Less than half of smuggled cigarettes are seized by the authorities according to anecdotal evidence and research.

Last year the Irish Government collected €4.6 billion in excise duties, of which over €1 billion was in respect of cigarettes. The tax component of cigarettes in Ireland is of the order of 80% of the retail price and the price of cigarettes in Ireland is among the highest in the European Union.

The ban on smoking in the workplace introduced in 2004 and the high price of cigarettes combined with rampant smuggling have been a deterrent on demand causing cigarette consumption of duty-paid cigarettes to drop by 41% since the smoking ban became law.

While total tax receipts from cigarette smokers have fallen by just 7%, the Irish Exchequer has lost an estimated €1.6 billion in exchequer receipts since 2004 as a consequence of cigarette smuggling, making this one of the most costly losses to the State. The European Union states are said to lose €10 billion per year as a consequence of the trade in illicit cigarettes.

Our customs authorities have undertaken more than 710 million cigarettes in more than 55,500 seizures in the past five years with an associated revenue loss to the State of over €290 million. But anecdotal and research evidence suggest that non duty-paid cigarettes is equivalent to 23% of total consumption.

Some of this is accounted for by the legitimate importation of cigarettes by bona fide international travellers and by immigrants from countries with a lower incidence of taxation on cigarettes.

The European Court of Justice banned Ireland, France and Austria from imposing State-controlled minimum prices.

The black market price of cigarettes in Ireland can be as low as 40% of the prevailing retail price.

But behind the 54,500 detections and seizures of illicit cigarettes in Ireland is an elaborate criminal complex that is heavily embedded in trafficking because the penalties are lower than is the case for involvement with other contraband and the profits large. The modus operandi ranges from ‘ant’ smuggling when small groups make frequent cross-border visits to large-scale container shipments and the 710 million cigarettes smuggled into Ireland in 2011 would have required seven fully laden 40-foot containers to transport them.

China, Russia and the Commonwealth of Independent States and some Baltic States are major source countries. Transhipment of large volumes before entry into the EU occurs in order to conceal the scale of activity with Middle East duty-free ports being a preferred venue.

Apart from Ireland, other sought after destinations in the EU are Germany, Spain and the UK.

There are various categories of smuggled cigarettes. Some are genuine but another category are known as ‘cheap whites’ – the term for cigarettes produced independently of normal manufacturers. Cheap white are typically cheap brands of reasonable and consistent quality, unlike counterfeits. The most popular ‘cheap white’ brand is Jin Ling, a brand that had not been heard of in 2005 but which is intended to mimic Camel cigarettes, which is manufactured in the Russian seaport enclave of Kalingrad, Ukraine and Moldova. This brand alone accounts for over 20% of the German illicit market. Five Russian illicit cigarette factories are said to have the capacity to make 24 billion sticks per year, equivalent to 7% of annual legal imports into the EU. This brand has no legal legitimacy in any part of Europe. It is distributed and sold exclusively through underground networks. The packs do not even feature the standard health warning on all normal packs.

The United Arab Emirates is another critical source of cheap whites from where they are shipped into Europe via Greece.

China is the largest source of counterfeit cigarettes of well known brands, such as Marlboro and this merchandise is typically shipped into Europe by sea.

There are also illegal cigarette factories in the EU, especially in Poland and some Baltic States with much of the output ending up in Germany. The tobacco is frequently sourced in Ukraine; while other factors are obtained in Lithuania and the manufacture takes place in Poland.

Last year a case was initiated in France that involved five countries: Hungary, Slovak, Czech, Germany and Italy against a large network operating from Ukraine to the United Kingdom. More than 150 personnel were deployed to support local police. This investigation uncovered the existence of a structured criminal organisation based in Ukraine which operated through front companies in several EU Member States. These companies established fictional commercial routes which concealed fraudulent activity using normal shippers. Transhipments were arranged in France through normal logistics companies. Illicit shipments were blended with legal cargoes of vegetables, fish, building supplies, peat moss, cardboard, paper etc. Key personnel were arrested in a coordinated and simultaneous police action on June 21^st 2011.

The financial loss arising from cigarette smuggling is borne by governments and taxpayers, not by producers or distributors who make their profit when the product is sold, not when it is taxed at the point of importation.

The response of Ireland’s Revenue Commissioners is to ‘target and confront those who do not comply’ with their obligations under tax and duty regulations. A key objective is to deter smugglers of tobacco products and to reduce the availability of contraband in Ireland. The overall approach includes:

• Educating the public on the negative aspects of contraband and media coverage of prosecutions. There were 14 convictions for customs offences in 2011.
• Ensuring that the legitimate trade remains compliant – excise duty collection; verification of sales figures; testing the legality of products sold
• Visible interventions – through more streamlined deployment of resources; the use of analytics, trend analysis of assessments.
• Improved collaboration with other State entities, including the Criminal Assets Bureau, Gardaí, shippers and others
• Prosecuting cases. There were over 200 formal Revenue criminal investigations in 2011

Philip Morris entered into an agreement with ten Member States of the European Union in 2004,that did not include Ireland, to fight cigarette smuggling and counterfeiting activity by making substantial payments to support additional measures and procedures. This also covered procedures to track and trace its cigarettes.

But smuggling is also sustained by other factors, including:

• The involvement of legitimate cigarette companies in smuggling activities. This has resulted in convictions in Hong Kong and Canada.
• The lack of more secure systems for transporting cigarettes giving smugglers access to large volumes of cigarettes free of all taxes and duties
• Price differentials. The highest prices in Europe are those charged in the UK and Ireland.
• Duty-free sales provides a venue for large volumes of cigarettes and smuggling opportunities
• Lack of resources to tobacco enforcement in most countries make it more difficult to eradicate smuggling
• Some countries tolerate smuggling more than others when enforcement is lax, penalties low, corruption widespread and smuggling is not deemed a serious crime.

The ‘independence’ of the Irish legal profession is a shroud for obscene costs

The legal profession has been in overdrive to defend their vested interests as the Legal Services Regulation bill is considered by the Oireachtas.  The public are repeatedly told that the independence of the profession will be undermined at the whim of any Government while taxpayers are burdened with their obscene costs.

The much-vaunted independence comes with a very high price tag.  This mornings edition of the Irish Independent reports that The Mahon Tribunal incurred expenditure of the order of €30 million on a plethora of overheads during the course of its existence since 1997.  We were told that €80,000 was spent on tea, coffee and water; €70,000 was spent on newspapers and €50,000 was spent on lunches.  The Government of the day reposed spending decisions exclusively with the sole member of the various tribunals without any procedures or oversight.  The total cost of The Mahon Tribunal is apparently in the region of €97 million.

When the Revenue Commissioners published their Headline Results for 2011 it was disturbing to read that only 88 members of the judiciary made voluntary contributions of €927,000 last year in recognition of the pension levy imposed generally on public servants under the terms of the Financial Emergency Measures in the Public Interest Act 2009.

These compare to voluntary payments of €1,246,787 by 125 judges in 2010. The outcome for 2011 means that 60% of the judiciary made a voluntary payment compared to 85% in 2010 leaving other taxpayers’ to carry the inescapable Exchequer burden.

Is that how social solidarity, equity and burden-sharing are spontaneously defined in the privileged, protected and exclusive domain of jurisprudence, where not alone have judges been exceptionally well paid, but retired judges are among the recipients of the most generous pensions paid by the State?

The faster that there is a bridle put around the neck of these lawyers who seem to believe that this country is a personal goldmine to flatter them, the better.  The first step is to implement the recommendations of the Competition Authority, which were issued in 2006 and to establish the practice of competitive tendering for legal services provided to the State.

Irish economy fragile despite higher tax receipts

Ireland’s Revenue Commissioners reported a €2.28 billion uplift in tax receipts for 2011, as a consequence of receipts in respect of the universal social charge and the public sector income levy.

That ought to be encouraging news except that the exchequer deficit in 2011 was over €6 billion higher than in 2010. 

It was in 2006 when Ireland last recorded an exchequer surplus.  Government expenditure since then has been €269 billion but tax revenue in the past five years were only €186.8 billion, leaving a cumulative exchequer deficit of €82.6 billion.

The reduction in exchequer receipt is reflect in lower VAT (-€4.75 billion), lower Excise (-€1.16 billion), lower Corporation Tax (-€2.8 billion), lower Stamps (-€1.79 billion) and lower Capital Gains Tax (-€2.68 billion).

Some €233 billion of the Government expenditure was voted while a further €36 billion was in respect of non-voted expenditure which covers costs such as interest on the National Debt – which reached €119 billion last month.

During the past five years the Government has reduced spending by a total €5.45 billion but spending in four departments, Health, Social Protection, the new departments of Public Expenditure and Reform and Health & Children caused an increase in spending of €6.55 billion.

The Eurozone convergence criteria requires the exchequer deficit to be no higher than 3% of the prior year’s GDP.  If this criteria had applied since 2007, the following circumstances would have applied:

Year	Actual Deficit €billion	Deficit permitted by 3% GDP Eurozone Criteria	Overrun
2007	1,618.5	5,697	-
2008	12,713.8	5,397	7,316.8
2009	24,640.9	4,815	19,825.9
2010	18,744.2	4,677	14,067.2
2011	24,917.1	4,620	20,297.1
TOTAL	82,634.5	25,206	57,428.5

Public sector employment has been reduced from 320,387 at the end of 2008 to 302,769 in mid 2011, a cut of 5.4% after employment in the Department of Social Protection was increased by over 1,200 to oversee additional expenditure of €5.2 billion.

If Ireland is to meet the convergence criteria and continue State spending at prevailing levels it would require a GDP of the order of €830 billion, 5.3 times larger than 2011 GDP.  If that was to be achieved our GDP would equate with that of Indonesia (population 237.6 million) ahead of that of countries such as Australia, Holland and Saudi Arabia.

But if expenditure is to be trimmed to comply with the Eurozone criteria the Government will be limited to spending of the order of €37 billion, over €20 billion less than it spent last year but close enough to its 2003 expenditure.

Sick Leave escalates to fever pitch in Irish local authorities

In Ireland there are five city councils, 29 county councils, 80 town authorities (75 town and five borough councils3) and eight regional authorities. There are 883 elected councillors at city and county level and 744 on town authorities. The budgets of these councils varied in 2009 from €929 million in Dublin City to €45 million in County Leitrim.  The average municipal size in Ireland is 38,975 inhabitants and an average geographical area of 612 km.  Ireland’s local Government revenue at 7.7% of GDP is one of the lowest rates across the EU.

There are two councils in Tipperary (North Riding and South Riding), Limerick City and Limerick County, Cork City and Cork Country, Waterford City and Waterford County.  There are four local authorities in Dublin: Dublin City Council, Fingal County Council, Dun Laoghaire-Rathdown County Council and South Dublin Country Council.  Collectively they spend between €8 and €9 billion per annum.

The biggest source of local government funding, since 1977 when household rates were done away with, has been national government followed by revenue from goods and services.  The biggest expenditure of local governments is capital investments, followed by salaries of employees and intermediate consumption.11
On a national basis the Exchequer provides 44% of the funding for local government, made up of the General Purpose Grants as well as subsidies Intermediate consumption.

However, as Irish householders are likely to become increasingly sensitive to the cost of running the €9 billion per annum local authority system as the prospect of paying the Household Charge and property taxes becomes more imminent.

There is a substantial variance in the performance of councils when it comes to their staff taking sick leave – certified and uncertified.

The best and worst performers in 2010 in terms of days lost for total sick leave as a percentage of days available were:

 

Best Managers of Sick Leave	Worst Managers of Sick Leave
Clare (3.45%)	Sligo (6.44%)
Wicklow (3.49%)	Wexford (6.19%)
Waterford City (3.67%)	Kildare (6.08%)
Louth (4.56%)	Limerick City (5.88%)

 

Uncertified sick leave also has a league table with Cork City, Dublin City, Dun Laoghaire-Rathdown performing poorly and Cavan, Galway City, Mayo and Waterford County leading the best performers in the management of uncertified sick leave in 2010.

The incidence of sick-leave in local authorities is apparently double that of the private sector. Sick-leave absenteeism trends in local authorities increased by 43% between 2004 and 2010 when a total of 346,750 days were lost, according to the annual Service Indicator Report of the Local Government Management Services Board.

This equates to the working time of 1,527 whole-time employees, a figure which happens to coincide almost exactly with the number of temporary workers currently employed by local authorities.

While the bulk of sick leave is certified, uncertified sick-leave in local authorities accounted for over 47,000 days in 2010 – equivalent to the annual working time of 207 full-time workers. The system allows for paid sick leave for not more than seven days in a year, which would be the equivalent of the working time of 95 full-time employees were all employees to be sick for that time period – a factor which is implausible and improbable.

Local authorities shed 3,400 employees over recent years but has there been any investigation as to why a higher proportion of those remaining are now falling ill and what steps are being taken to curtail those who exploit the system?

Perhaps if the Campaign Against Household and Water Charges to subvert the implementation of the underlying legislation is resoundingly successful the local authorities will be deprived of funds and that might pave where there are no payments in respect of uncertified sick leave.

Údarás na Gaeltachta–value or wanton waste?

Údarás na Gaeltachta caters for a supposedly Irish language speaking population of 92,000 persons. 

It employs 96 persons but has a very costly  20-person board of directors whose fees and expenses for the last four years exceeded €1.5 million.  The incidental expenses of the board in 2010 amounted to over €90,000, of which €64,723 was in respect of travel only.  The travel-only figure for this board compares to a combined travel-only expense of €21,287 in respect of the 48 members who serve on the boards of IDA Ireland, Enterprise Ireland and Shannon Development.

The following table puts these 2010 board expenses into a comparative context:

 

	Fees	Other Expenses	Total
Údarás na Gaeltachta	€247,950	€90,078	€343,428
Enterprise Ireland	€124,000	€7,318	€131,318
IDA Ireland	€106,163	€27,963	€134,126
Science Foundation Ireland	€134,000	€52,000	€186,000

During this time it has paid €96 million to a cluster of companies with the following employment profile:

 

Year	Employment Base	Jobs ‘Created’	Jobs ‘Lost’
2006	7,953	1,186	1,113
2007	8,026	1,038	971
2008	8,193	1,269	1,990
2009	7,472	710	1,108
2010	7,074	704	?

 

During the same period it paid over €12 million in research & development grants and, in the 2010 it claimed that the recipients of the €2.6 million paid in research & development grants caused a total investment of €19.9 million by the recipients, a multiplier of 7.6.  If this multiplier was applicable throughout the past five years research and development in Ireland by the recipients would be in the region of €94.2 million.  Where is the economic impact of this expenditure in the context of the table above?

It claims that the client companies paid €42.22 million in taxes to the Irish exchequer in 2010, while the agency itself spent over €65 million that year

Meitheal Forbartha na Gaeltachta

Last September, this State-funded hobby horse and absorber of resources closed after a consultant’s report proved that it was insolvent.  This so-called partnership had 34 employees + another 100 somewhere or other in the shadows and operated under the shadow of Údarás na Gaeltachta with its own board of no less than 24 individuals, four of whom are also serving members of the board of Údarás na Gaeltachta.  Under this titanic emblem of ‘excellence in corporate governance’ was a series of regional coordinating committees with 46 members.

Irish Language

Údaras na Gaeltachta is the national guardian of the Irish language.  It is stated in its 2006 annual report that ‘there are heartening signs of vitality and reinvigoration in some important spheres of the maintenance of Irish as a community language in the Gaeltacht. More and more people are recognising the language as advantageous to material advancement arising from the gradual implementation of the provisions of the Official Languages Act, the emergence of a new tier of small language-based enterprises in the Gaeltacht augmenting the existing audio-visual sector, and the growth in third-level accredited courses through Irish focusing on employment opportunities in these sectors.’

Five years later after frittering over €315 million of public funds it states in 2010 ‘the publication by the previous Government of the 20-Year Strategy for the Irish Language in 2010 and the commitment by the current Government to support the Strategy and to deliver on its achievable goals and targets is an important step for both the Gaeltacht and the Irish language community.  Previous studies show the vulnerable position of the Irish language with experts predicting that the language may only survive as a household and community language for another 15 to 20 years’.

2012 Budget

The august board of this agency met last month to consider the provision of funding by the State for 2012 – funding of the order of €18.8 million for capital and current expenditure, a reduction of on the funding provided in 2011.  But they agreed that this allocation is a ‘vote of confidence’ in themselves and the ‘central role’ they claim to have in presumably ‘buying’ the future of the Irish language and in promoting community, social and cultural development.

Senior Irish public sector pay levels will define Irish competitiveness in 2012

The General Government Debt of Ireland has soared from €144.4 billion (93% of GDP) in 2010 to €166.1 billion by the end 2011 (107% of GDP).  General Government Debt measures the total debt of the State and is used as a comparative measure across the European Union.  But to judge top-level public sector pay in the country one could be forgiven for thinking that the Celtic Tiger is still jiving!

The main story in today’s edition of the Irish Independent (3 Jan 2012) reports a difference of opinion between Finance Minister, Michael Noonan and Public Expenditure Minister, Brendan Howlin about how much the next Secretary-General of the department of Finance is to be paid. Noonan wants to bust the Governments €200,000 per annum pay cap on civil servants because apparently several candidates are ‘put off by curbs on salary and perks’, according to the Independent. Some overseas applicants are skittish about no reimbursement to attend interviews and no relocation expenses. But times have changed in Ireland from the time that the chief executive of an internation charity that raises funds for worthy causes in Ireland could be paid a severance package close to €400,000 and remuneration of over €700,000 while State agencies paid close to €8,000 per table to host a party of ten guests at a charity’s fund-raising dinner.

Public sector employment implies service to the public and senior public sector employees across the world are typically paid less than their counterparts at an equivalent level in the private sector.

It is interesting to compare rates of top-level public service pay in Ireland with those in other jurisdictions. The ten highest paid public sector office holders in the United States are:

10. Hilary Clinton, Secretary of State €144,500

9. Timothy Geithner, Secretary of the Treasury, €147,700

8. Harry Reid, Senate Majority Leader, €149,300

7. Benjamin Bernanke, Chairman of the Federal Reserve, €154,170

6. John Roberts, Chief Justice of the Supreme Court, €167,900

5. Admiral Michael Mullen, Chairman of the Joint Chiefs of Staff, €170,400

4. John Boehner, Speaker of the House, €172,550

3. Joseph Biden, Vice President, €175,500

2. Patrick Donohue, Postmaster General, €189,140

1. Barrack Obama, President of the United States, €309,000

The Permanent Secretary of HM Treasury is paid within the range €209,000 - €215,000, a rate that takes into account that London is ranked 18th highest in terms of global cost of living.

The recently reported 15% pay cut in 2012 that will save the State €138,000 and the waiving of potentially hefty bonuses by the chief executives of National Treasury Management Agency (NTMA) and National Asset Management Agency (NAMA, Ireland’s bad bank) may seem like an extraordinarily benevolent personal gesture There are 14 executives of NTMA and NAMA in receipt of an annual salary of more than €250,000.

The salary of the chief executive of NTMA will apparently be reduced to €416,500 in 2012, compared to the reported €1 million paid to the post-holder in 2008.  This reduction occurs at a time when Ireland is not fit to be in the bond market, but this level of remuneration is still 215% higher than the combined salary and performance pay of the chief executive of the UK Debt Management Agency who oversees exchequer borrowing that is almost nine times greater than the current record-high General Government Debt of Ireland.  It is also noteworthy that 35% of the British national debt is owing to parties outside Britain compared to 85% in the case of Ireland before Troika package became available, a clear indication of the wealth creation capacity of both nations.

Is there not a case for reintegrating these agencies into the Department of Finance from which NTMA was spawned over twenty years ago and dispensing with remuneration policies and practices that bear absolutely no relationship to the cost burden on taxpayers for similar work in other jurisdictions, or the capacity of the State to pay? A strategic move of this nature would clearly signal the Government's unambiguous priority to make Ireland globally competitive and economically robust.