Average EU tax burden is high

TAX LEVELS in Europe vary enormously from 29.4% of GDP in the case of Romania to 48.7% of GDP in the case of Denmark. (picture: Dublin Castle)

The European Union, as a whole, is a high tax area. The sum of taxes and social security contributions in the 27 Member States amounted to 39.8% of GDP. This proportion is about 12 percentage points higher that those of the United States and Japan. The EU Tax : GDP ratio is also high among major non-European OECD Members.

Tax : GDP ratios tend to be higher among the first 15 Member States of the EU than among the more recent Eastern European Members.

New Zealand if is the only country non-European OECD Member whose Tax : GDP ratio exceeds 35%.

A stabilisation in the overall EU tax burden has evolved following increases in government expenditure and coincidental taxes for a number of years.

Tax Burden in Ireland

The following summarises the position in Ireland:

€ Billion	2007	2008	Estimated 2009
National Taxes	47.50	41.07	34.4
Social Insurance	9.43	9.75	9.78
Local Government	2.70	2.75	2.83
Total Tax	€59.63 Bn	€53.57 Bn	€47.01 Bn
GDP	€189.75 Bn	€181.81 Bn	€172.80 Bn
Tax : GDP %	31.82%	29.44%	27.20%

Source: Commission on Taxation and CSO National Accounts

 

Total public expenditure as a percent of GDP for selected countries between 1974 and 2004 is set out below for illustrative purposes:

	1974	2004
Austria	41.9%	50.6%
Belgium	45.0%	49.3%
France	39.3%	53.4%
Italy	37.9%	48.5%
Japan	24.5%	38.2%
Netherlands	47.9%	48.6%
Spain	23.1%	38.6%
Sweden	48.1%	57.3%
United Kingdom	44.8%	43.9%
United States	31.7%	36.5%

Source: Tax Revenues in the EU, 11 July 2007

Overall Tax Burden in EU 2000 and 2007

	2000	2007
	Tax % GDP
Romania	30.40%	29.40%
Slovakia	34.10%	29.40%
Lithuania	30.10%	29.90%
Latvia	29.50%	30.50%
Ireland	31.60%	31.82%
Greece	34.60%	32.10%
Estonia	34.20%	33.10%
Bulgaria	32.50%	34.20%
Malta	28.20%	34.70%
Poland	32.60%	34.80%
United Kingdom	36.70%	36.30%
Luxembourg	39.10%	36.70%
Portugal	34.30%	36.80%
Czech Republic	33.80%	36.90%
Spain	33.90%	37.10%
Slovenia	37.50%	38.20%
Netherlands	39.90%	38.90%
Germany	41.90%	39.50%
Hungary	38.50%	39.80%
Cyprus	30.00%	41.60%
Austria	43.20%	42.10%
Finland	47.20%	43.00%
France	44.10%	43.30%
Italy	41.80%	43.30%
Belgium	45.20%	44.00%
Sweden	51.80%	48.30%
Denmark	49.40%	48.70%
Norway	42.60%	43.60%
EU-27 Average	40.60%	39.80%

Source eurostat: Taxation trends in the EU

These trends are a reflection of a more extensive role for the public service since the 1970’s. A number of Member States took advantage of buoyant tax revenues at the end of the 1990’s to reduce the tax burden, through cuts in personal income tax, social security contributions and corporate taxes. While the overall tax burden in some Member States decreased after 2000, this trend was not sustainable after 2005 – due to slower economic growth between 2000 and 2004. Some States needed tax revenue to reduce their government deficit, making it difficult to cut taxes

Personal Income Tax – 2008

Ireland ranks 15^th in the personal income tax rate hierarchy in the EU 27 with a 2008 maximum personal tax rate of 41%

 

	2008
	Top personal Income Tax rate
Bulgaria	10%
Czech Republic	15%
Romania	16%
Slovakia	19%
Estonia	21%
Lithuania	24%
Latvia	25%
Cyprus	30%
Malta	35%
Luxembourg	38.95%
Greece	40%
Poland	40%
United Kingdom	40%
Hungary	40%
Ireland	41%
Slovenia	41%
Portugal	42%
Spain	43%
Italy	45%
France	45.78%
Germany	47.48%
Austria	50%
Finland	50.05%
Netherlands	52%
Belgium	53.70%
Sweden	56.44%
Denmark	59%
Norway	40%
EU-27 Average	37.80%

Source eurostat: Taxation trends in the EU

Top Rate of Statutory Corporate Tax

Corporate tax is charged on the profits (income or gains) of a company. Irish companies are taxed on their worldwide profits. Non-resident companies that trade in Ireland through a branch, or agency, are charged on the profits of that entity.

The current Irish standard rate of Corporation Tax of 12½% applies to trading income and income from vocations and professions.

A rate of 25% Corporate Tax applies to non-trading income – interest, rents, royalties, as well as income from what are defined as ‘excepted trades’ – minerals, petroleum, dealing in or developing land, other than construction activities.

A rate of 25% applies to capital gains, except for gains from the disposal of development land, the gains on which are charged at 25% and are not included in the profits chargeable to corporate tax.

Companies with a corporate tax liability of less than €200,000 are defined as small companies. There are approximately 103,000 companies liable for corporate tax in Ireland. Over 64,000 of these had no taxable income in 2007 and a further 31,000 had a trading income of less than €200,000 in 2007.

Corporate taxes will account for about 11% of all national taxes in Ireland in 2009 and there will be a potential drop of €2.6 billion in 2009 attributable to the recession and the treachery and delinquency of Irish banks and the ‘loose stools’ that posture as their top-level leadership.

Top Rate of Corporation Tax	2009
Bulgaria	10.0%
Cyprus	10.0%
Ireland	12.5%
Latvia	15.0%
Romania	16.0%
Slovakia	19.0%
Poland	19.0%
Czech Republic	20.0%
Estonia	21.0%
Lithuania	21.0%
Greece	21.0%
Slovenia	21.0%
Hungary	21.3%
Austria	25.0%
Netherlands	25.5%
Finland	26.0%
Sweden	26.3%
Portugal	26.5%
United Kingdom	28.0%
Luxembourg	28.6%
Germany	29.8%
Denmark	29.8%
Spain	30.0%
Italy	31.4%
Belgium	34.0%
France	34.4%
Malta	35.0%
EU-27 Average	23.5%
Non-EU countries
OECD-6	32.5%
Switzerland	21.3%
Norway	28.0%
Australia	30.0%
Canada	34.6%
United States	39.0%
Japan	42.0%
BRIC
Brazil	34.0%
Russia	20.0%
India	34.0%
China	25.0%

Source eurostat: Taxation trends in the EU

The EU-27 average rate of corporate tax has declined steadily from 35.3% in 1995 to 23.5% in 2009. This trend has reduced fears of Member States competing to successively undercut each others tax rates. Enlargement had reinforced such fears as the tax rates especially in newer Member States reached levels of more than 10%-points lower than those of established Member States.

Taxes on corporate income in Europe is not only levied through corporation tax but, in some Member States through surcharges or additional taxes levied on tax bases that are similar but often not identical to traditional corporation tax. The simple corporate tax rate in the table above has been adjusted by Eurostat for comparison purposes. If several rates exist only the ‘basic’ top rate is presented. Existing surcharges and averages of local taxes are added to the standard rate. Adjustments have been made for Belgium, Germany, Estonia, France, Hungary, Italy, Lithuania, Luxembourg and Portugal.

Tax Issues in the Future

The economic impact of ageing will raise many challenges in terms of the structure of taxation. The working-age population will shrink and a fall in population growth rates is anticipated. Reforms in taxation and welfare that will increase productivity and labour supply will be desirable. Welfare will have to facilitate the long term sustainability of public finances.

The financing of welfare may rely less on income taxes and savings, as these too are expected to decline.

The impact of globalisation and tax competition could force a shift of the tax burden from geographically mobile to immobile tax bases. But such a shift is complex because the effect can take diverse forms. Globalisation may render it increasingly difficult to collect taxes from mobile bases and motivate a search for new alternatives – such as polluting activities and environmental taxes.

 

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The Debacle that is FÁS

WHEN public trusts is so utterly compromised, as in the case of FÁS, one is inclined to question upon what basis trust was reposed in the first instance. The executive leadership of FÁS never seemed to earn the highest public acclaim. Taxpayers’ and citizens’ would have thought that the board of an enterprise that was spending over €1 billion per annum and contained within its ranks trusted individuals who would be competent, visionary, inquisitorial and vigilant. But, tragically, the board of FÁS operated to the standard of geriatrics’ book club and the reputational fallout is far reaching at a personal and institutional level as the stench of geriatrics’ stale urine.

The architect of the culture of any organisation is its chief executive and the calibre of a chief executive defines an organization.

The public are now aware of what the management of FÁS were fully acquainted with last year when they appeared before The Public Accounts Committee. I read the transcript of the FÁS dialogue with The Public Accounts Committee again over this weekend. The explanations tendered to that Committee, in respect of certain decisions, are so utterly self-serving in the light of evidence now to hand. There was a great deals of wriggling and waddling behind the fig-leaf of legal nicety but to what ultimate avail?

The most recent report of the Comptroller & Auditor General is a sequel to a previous report with adverse findings on procurement and related matters at the agency.  It deals with the management of advertising, promotion and related activities, including jobs and activities to promote science.

The C&AG found that advertising and promotional activities lacked strategic direction because there was no marketing and communications strategy.  There was a substantial and prolonged breakdown in budgetary control.  Promotional expenditure in the period reviewed exceeded budgets by 38% and the general advertising expenditure exceeded budget by 66%.  But much of the advertising was ineffective in achieving the objective of increasing the awareness of the services provided.

There was nugatory expenditure of €622,000 as a result of a series of transactions for which there was no evidence of goods and services having been provided.

There was also considerable non-effective expenditure including over €600,000 spent on advertisements that were not broadcast and payment of €9,200 for a car that was not delivered.

The board of FÁS, under the chairmanship of Peter McLoone,  is to resign following the publication of this second report.  The chairmanship of this agency alternated between trade union representatives and the employer lobby group, IBEC.

 

The Belly Dance is about to begin …

As you listen to the siren calls for the curtailment of government expenditure reflect on the energy and vitality applied to curbing excessive spending at this agency.  The period between 2002 and 2007 was an era as close to full employment as Ireland is likely to see for a long time.  Did any of the distinguished board raise there hand to successfully counter this trend?  This board did not even react when the expenditure for the agency, as a whole, exceeded income in 2005 and 2006.  Perhaps they were in Florida having a pedicure.

Year	Income € Million	Surplus / (Deficit) of year-end income over expenditure €000	Live Register	Unemployment
2002	859.3	812.00	166,142	80,000
2003	823.1	664.00	170,604	85,200
2004	833.3	481.00	158,816	83,600
2005	912.0	-4,597.00	155,833	82,100
2006	974.6	-572.00	155,389	88,200
2007	1,071.5	5,762.00	170,376	93,400
	€5,473.8
CHANGE	24.7%		2.5%	16.8%

 

When IBEC Boys Choir hums sweetly about a reduction in wages and a reduction in welfare, should these remarks, in the interests of clarity and the elimination of ambiguity, be prefaced by:

 – “wages are what they are because of the social partnership agreements that IBEC negotiated with other stakeholders”

When you speak about welfare cuts, you could mention “

“when I was sitting on my precious idle arse in the boardroom of FÁS, dreaming about Ireland’s first astronaut, I did absolutely nothing to prevent the FÁS State subsidy increasing by 24.7% between 2002 and 2007 while the Live Register recorded a mere 2.5% increase and the number unemployed increased by 16.8% to 93,400 persons. My board knew nothing about the derring-do, even though expenditure exceeded income by €4.59 million in 2005 and by €572,000 in 2006.”

I look forward to the third report of the C&AG and the unfolding dynamic of the social partnership process with intriguing interest, especially as the Voice of the da Vulnerable has once again raised his hidden jowl above the parapet of public opinion, this time from a newly created vantage point but representing the sentiments of the same constituency. The stature and credibility of social partnership has, unfortunately, also been thrashed leaving its stakeholders naked and impotent.

Ireland needs to share aid burden

THE comments of junior minister Peter Power, to the effect that the amount spent on the Irish aid programme is equivalent to what the Government will borrow over 10 days (Irish Independent, September 10) is the weakest possible argument to maintain this programme in our current circumstances.

The Irish Government has generously provided, on behalf of the people, €5.8bn in Irish aid since the turn of the century.

Our circumstances are now radically different, quite unstable and wholly uncertain. There is a compelling need to use resources efficiently, productively and creatively.

There is, for example, something wholly irrational about closing embassies that are a potential conduit of investment, trade and reputation recovery and concurrently spending €600m of borrowed money to be recognised as the sixth largest donor of aid in the world, in per capita terms.

It is certainly a laudable objective to allocate a portion of income to noble objectives. It is a different matter to allocate a portion of debt.

Perhaps some effort could be made to jointly sponsor certain aid programmes with other parties, or nations, who have money, rather than seeking to be the sole sponsor.

That would mean an aid footprint could be maintained but that Ireland would forego its badge of exclusivity.

Mueller arrives to transform Aer Lingus into what it has been

CHRISTOPH MUELLER took on the role of chief executive of Aer Lingus at the beginning of the month with a mandate to “transform Aer Lingus from a legacy Irish business to a modern international airline”.  The Irish Times reported on 10th September that Mueller is to be paid a basic salary of €475,000 – in line with the pay of his predecessor, Dermot Mannion and that he will not be paid a bonus.  His remuneration package is said to be in line with that offered by similarly-sized Irish listed companies”

Success for Mueller is the recovery of the 2006 IPO share price within five years.

‘Trust but Verify’

I always find it instructive to adopt the Ronald Reagan adage ‘trust but verify’ when considering statements by Aer Lingus.  Reagan used the adage as US-Soviet relations were thawing in the 1980’s.

All has to be considered in the context of the real beneficiaries of the 2006 IPO.  They are the former chief executive, Dermot Mannion; the non-executive directors whose fees trebled and the professional advisors who obtained €30 million in fee income in respect of the IPO and €24 million in respect of the Aer Lingus response to the two Ryanair bids.  There have been no dividends.  The share price has collapsed.  The pilots’ pension fund has been severely depleted through its Aer Lingus investment.

‘Basic Salary – No Bonus’

Mannion joined Aer Lingus in August 2006.  He departed in April 2009.  Cumulative losses at the airline  during his tenure were €72.4 million.  Cumulative losses since 2006 increased to €165.4 by the end of June 2009.

Mannion’s pay record has been:

2006	€982,000
2007	€1,115,000
2008	€652,000
TOTAL	€2,749,000

 

 

 

 

 

 

 

 

 

 

 

Mueller’s salary is not  therefore in line with that of his predecessor. Greencore Plc, with a market capitalisation of €323 million,  is the nearest public company, in terms of market capitalisation, to Aer Lingus, which has a market capitalisation of €393 million – even though its cash resources apparently exceed this sum significantly.  The 2008 annual report reports the remuneration of its former chief executive, David J Dilger as being €1,095,000 in 2008 and €1,447,000 in 2007. 

 

Gesture of Confidence

 

Aer Lingus shares were priced at €0.52 on his Mueller’s first day at the helm of Aer Lingus.  They were worth €1.43 the day the person who hired him, Colm Barrington, became Chairman on 1 October 2008 so the stock market has not been enthusiastic about Barrington.

 

To demonstrate their confidence in the future of Aer Lingus, Barrington made his first-ever equity purchase when splurged €0.51 per share on 60,000 shares on 28 August. 

 

Mueller spent €29,275.70 on 50,000 Aer Lingus ordinary shares on 8 September.  That is equivalent to 6% of his annual salary, the same amount as his income tax levy.

 

His predecessor, Mannion, owned 18,988 shares, including an allocation of 9,803 shares under the Employee Share Ownership Plan.

 

Crystal Ball Gazing

 

Barrington issued a letter to Aer Lingus shareholders on 22 December 2008 advocating rejection of the 2nd Ryanair bid and he stated categorically then that “Aer Lingus is and will be profitable” and that it had cash resources in excess of €800 million.  When the results for 2008 were published Aer Lingus reported a loss of €107.8 million and €653 million.

 

Barrington was interviewed on the RTE Radio 1 This Week programme on Sunday 17 May and he rubbished claims by Michael O’Leary that Aer Lingus would run out of cash in 18 months (at the end of 2010).  He also said that Ryanair would be reporting losses but omitted to mention that if that was the case, the collapse in the Aer Lingus share price would account for a €220 million impairment charge as a consequence of the 71% fall in the value of Ryanair’s shareholding in Aer Lingus since Barrington became Chairman last October.  Five weeks after this interview the ‘legacy Irish business that is to be transformed into a modern international airline’ returned an operating loss of €93 million on revenues of €555 million – 12% lower than the previous June.

 

It would appear that the crystal ball can become a bit foggy from time to time.  But the one gesture that really undermined my respect for Barrington was the grovelling eulogy to the former senior independent director of Aer Lingus, Sean FitzPatrick, the disgraced former Chairman of Anglo Irish Bank - “in December 2008, Sean FitzPatrick resigned from the Board.  Sean served Aer Lingus extremely well and had a significant and positive influence on the company both before and after the IPO”.  Given that he was speaking of a eunuch that has utterly violated public trust and virtually bankrupted Ireland and that the Irish taxpayers own 25% of Aer Lingus, it might have been more appropriate to have said that “he has served on the Board but has departed”.  But he didn’t have the backbone to do that.

 

Incidentally, Ned Sullivan, Chairman of Greencore Plc was a director of Anglo Irish Bank from November 2001. He was also a member of the Risk and Compliance Committee at Anglo. Coincidentally, FitzPatrick was a director of Greencore from January 2003 until he had to also abruptly resign from that board in December 2008.  Sullivan, in his Chairman's Statement in the 2008 Greencore Annual Report opines “Sean had been a key contributor to the Board for six years during a period of significant change for the Group.  The Board would like to thank Sean sincerely for his valued input and wise counsel which has contributed greatly to the growth and development of the Group during that period”.  These sentiments provide a vivid insight into the umbilical relationship between the cute whore and the bucolic peasant.  There is no base threshold to which these self-aggrandising sycophants will not grovel.

 

FitzPatrick’s successor as senior independent director is a 72 year old ‘who has been everything’, including a pre-2008 director of the Bank of Ireland, the bank that was prepared to fund ‘Dubai-on-the-Dodder’, if that were to act as a bonus steroid for its leadership – is that the correct noun?

 

Non-Executive Directors Fees

 

The Secretary-General of the Department of Transport wrote to Barrington on the instructions of the Minister on 4 June concerning directors’ fees in advance of the AGM on 5 June and requested a review of these.

 

It is not clear if Barrington has sent an SMS text to these directors about this ‘legacy issue’ as promptly as he sent an SMS text to 63 contact  cabin crew last week to advice them they no longer have a job. 

 

I hope that the newly appointed Chief Executive of Aer Lingus succeeds.  Apart from the prevailing economic adversity, perhaps a bigger impediment to progress it contending with the embedded culture of a country club, the cute whore, the sycophant and the bucolic peasant.  Not even the gaudiest and most expensively produced  annual report can conceal the odious viral effect of that.

 

 

Brazil celebrates in 187th birthday in Dublin

HIS EXCELLENCY, Pedro Fernando Brêtas Bastos, the Ambassador of Brazil and his wife Margarida hosted a most pleasant reception in The Mansion House Dublin last night to celebrate Independence Day.

Brazil secured its independence from Portugal on 7 September 1822, having been a colony since 1500.  Newly independent Brazil became a monarchy and was known as the Empire of Brazil under Emperor Pedro I and his son Pedro II. The new Empire started off with a population of 4 million, 29% of whom were slaves.

It became a republic in 1889, a year after the abolition of slavery in 1888. Apart from Cuba, Brazil has been the only country. The country had a population of 14½ million but only 20% could read and write.

There was a coup d’état in 1964 and the military remained in control until March 1985 and Brazil became a federal republic in 1967.

Brazil is the 5th largest country in the world and occupies almost half the land mass of South America.  Today, it is the world’s 10th largest economy and reforms have imbued the country with an international perspective.  It is also a founding member of the United Nations.

Last night’s celebration was well attended reflecting expanding ties between Ireland and Brazil. I met the Ambassadors to Ireland from Japan, Egypt and Malaysia. The Ambassadors from Germany and Russia were among the many other ambassadors attending.

I had an interesting chat with Jill Donoghue, the Director General of the Institute for International and European Affairs. She hosted two distinguished visitors at the Institute earlier yesterday – the President of the European Parliament and former Prime Minister of Poland, Jerzy Buzak. The Secretary-General of The Organization for Security and Co-operation in Europe (OSCE), Marc Perrin de Brichambaut also spoke at the Institute about the role of OSCE in the modern security context.

Who dies of what in Europe before the age of 65 years?

AN atlas of mortality in the European Union has been published by Eurostat. It highlights important causes of avoidable mortality before the age of 65 between 2002 and 2004:

 

• Heart Disease
• Lung Cancer
• Alcohol-related mortality
• Suicide
• Transport accidents
• Cervical Cancer
• AIDS

The expression ‘avoidable’ is used in the context of important causes of death which could be avoided by changing lifestyles or national health policies.

In the EU,  men lost twice as many life years as women and the loss of life years by men in the Baltic region was more than twice the number of years compared to the EU-27 average. The lowest mortality in women before 65 years was in Italy, Spain, Cyprus and Greece.

Life expectancy in Ireland at birth between 2002 and 2004 when the study was undertaken, was mid range – 78.65 – 78.95 years. The Central and Eastern European new Member States have a high mortality as has the former East Germany and Scotland. Countries with very low mortality below age 65 are Italy, Switzerland, Malta, Norway, Sweden, Iceland, Holland and, to a lesser extent, Spain. The highest 10% of the EU regions have an average life expectancy of 80.6 years, the lowest 10% of 74.2 years. This is a difference of 6.4 years.

Heart Disease

Ischaemic heart disease is responsible for 14% of all years of lost life in Europe and 7% of all potential years of lost life below age 65 years. Munster and south Leinster record lower mortality rates in Ireland than the rest of the island of Ireland. Despite this, ischaemic heart disease mortality has halved in less than 30 years in most of the old Member States. This is attributed to a variety of reasons – increases in wealth, better levels of education and security, decreased levels of smoking and blood pressure, improved cardiovascular risk management, especially in individuals with a family background of cardiovascular disease and improvements in emergency treatment.

 

Lung Cancer

Lung cancer is rare in non-smokers. The average potential years of life lost is around 30 per 100,000 non smokers. Active smoking increases the risk of lung cancer 30-fold. Environmental tobacco smoke is thought to increase lung cancer risk by 15-30% from passive smoking. More than 90% of all lung cancer is caused by tobacco smoke and an estimated 1% is attributable to air pollution.

There have been two distinct smoking epidemics. Smoking by men reached very high levels after World War II before abating. The incidence of lung cancer among men reflected this trend. Women became more active smokers in the 1960’s. The current incidence of smoking is converging among the genders. The risk of men and women under 65 years old dying of lung cancer in Hungary is 131% higher than the EU-27 average. France, the industrial areas of the UK, Germany and Spain have the highest lung cancer mortality among the EU-15 Member States.

Alcohol-related Mortality

This refers to mortality as a consequence of cancer of the mouth, throat, oesophagus, liver, disease and alcohol abuse. Alcohol is also an important risk factor for road traffic injuries, suicide, falls, homicide and circulatory disease mortality. Mortality rates are six-fold higher in Hungary and Romania than in Greece, Norway, Iceland and Sweden. The Republic of Ireland records more favourable rates than Northern Ireland.

Suicide

Men are more likely to take their own lives than women. The highest suicide rates are found in the Estonia, Latvia and Lithuania; Hungary, Slovenia, and many regions of Poland, Finland, Belgium and in some regions of France (Normandy, Brittany, Loire).

Cultural or religious stigmas in certain regions are considered to have a bearing on suicide trends as have the practice that life assurance policies may not be paid after a suicide.

The lowest suicide rates are in Greece, Spain, Italy, Malta, the UK and Holland. The Republic of Ireland has a higher incidence of suicide than Northern Ireland (410 – 570 potential years of life lost in the Republic compared to 220 – 300 in the North).

Fatal Transport Accidents

Road traffic accident mortality is highest among young people. Transport related accidents cause 8% of all loss below 65 years in the EU-27, more than any disease. Men run higher risks than women with a male : female ratio of 3.9. Transport is most dangerous in Portugal, Lithuania, Latvia, Corsica. Greece and Poland. The safest areas are often areas where speed is limited – large German cities, Switzerland, Holland, south of England, Italy, Norway and Sweden.

Donegal, Mayo, Sligo, Leitrim, Cavan, Monaghan, Galway, Westmeath, Roscommon and Longford have a significantly higher fatality record than the rest of the island of Ireland.

Cervical Cancer

If cervical cancer screening successfully targets women most at risk, the mortality rates are lower. Conversely, the adverse effects of over-screening and over-treatment of women less at risk needs to be curtailed. Romania records the highest cervical cancer mortality – 20 times higher than Italy of Greece, which have the lowest mortality. Higher rates prevail in nearly all of the newer Member States. Ireland is mid-to-high ranking.

AIDS

HIV mortality is shifting away from men having sex with men to intravenous drug users and migrants from countries with a high incidence of HIV / AIDS. Spain, Portugal, France, Switzerland, Italy and Estonia have high rates of AIDS deaths. Romania experiences a high incidence of blood-borne HIV in children.

Those counties of Ireland where transport related fatalities are higher experience a lower levels of IADS related fatalities than the rest of the island.

When the imbeciles took over the asylum …

I HAVE exchanged some correspondence recently with Fergus Murphy, Chief Executive of EBS about the fundamental accuracy and the disingenuous spin of the EBS DKM Affordability Index. 

The EBS is one of the financial institutions covered by the Government Deposit Guarantee Scheme and is believed to be  about to seek several hundred million € from the taxpayers’ to support a severely weakened capital base.  Former Chairman Mark Moran and former Finance Director, Alan Merriman, resigned abruptly earlier this year following losses and loan impairment charges that arose through commercial property speculation.

This Affordability Index is aimed at first-time buyers on an average income.  The latest iteration contends that since house prices have fallen that

“affordability for house buyers has increased substantially over the past year”. 

65% per cent of the 483,000 claimants of mortgage interest tax relief in 2006 were either single men, single women, widowers or widows.  Their average income was under €59,000 so the maximum home loan they could safely sustain was €147,500 and the maximum price they could afford to pay for a house was €164,000.  Affordability, in the eyes of EBS, would have to be based on a very high gross income : loan ratio, which is why the transaction is simply not affordable.

The tragic, but irrefutable, fact is that the average Irish mortgagee has not been able to afford any house in Ireland since the end of 2002. The outstanding level of total Irish residential mortgages provided to Irish residents by all providers increased from €43.41 billion then to its current level of €148.2 billion. But the underlying income to sustain this mountain of debt increased from €18.6 billion to €28.1 billion in 2006, before the consequences of economic collapse gained traction.

The imbeciles had taken over the asylum when it came to the provision of residential mortgages in Ireland since 2003. The self-important flaccid wimps in charge of these financial institutions’ tolerated an income-to loan ratio increase from 2.33 to 5.27.  The Financial Regulator passively observed this debacle unfold and was ineffective and impotent to defend the borrower against the buccaneering lending practices.

A total of 540,000 mortgages worth €114.4 billion have been paid since 2002.  These properties are now experiencing the consequences of negative equity and the impact of this on ‘affordability’ as well as sustainability.

The most recent Monthly Economic Bulletin from the Department of Finance provides a rational basis for understanding affordability.

House Type and Location	Average Price €	Year-to-year change	90% Mortgage	Minimum necessary gross income €
Average new house, outside Dublin	255,029	-18%	230,000	92,000
Average second-hand house, outside Dublin	292,029	-17.3%	263,000	105,200
Average new house, Dublin	290,402	-27%	262,000	104,800
Average second-hand house, Dublin	380,965	-17.6%	343,000	137,200

The average income of a mortgage interest tax relief claimant in 2006 was €59,190. The only buyer category for whom affordability has improved in the past year us a cash buyer.  But that buyer does nothing to transform the 2008 EBS loss of €37.8 million into profit or reduce impairment losses of €110 million.

The DKM EBS Index is cited by the Irish Home Builders Association to imply that a single person with an annual gross income of €44,000 and a married couple with an annual gross income of €82,686 could afford to sustain a mortgage of approximately €230,000. The Association is a satellite of the Construction Industries Federation who stated on 17 August that construction in developed countries accounts for 12-15% of GDP with the implication that Ireland could emulate this. Construction in Ireland has never accounted for more than 10.3% of Gross National Income in the past decade. There are thousands of vacant new houses in Ireland today so it is hard to see on what basis this growth in economic significance is to be achieved.  State subsidies?  State contracts?  Meeting essential needs?  Offering value for money? 

Pride goes before a fall but is it not high time to see a measure of reality, candour and honesty being displayed by all of the nation’s decrepit financial institutions, not only EBS? 

Jon Snow comes to town

JON SNOW, the  newscaster from Channel 4, was the lively and engaging guest speaker at The Institute for International and European Affairs on North Great Georges Street this lunchtime about developments in media.  He was on his way to Electric Picnic Art and Music Festival at Stradbally.

Snow has been the familiar face on television news broadcasts since 1976.  He grew up in Sussex and, as a child, lived at Ardingly School, where his father was then headmaster  who later became a bishop.  Like many of a certain age, Jon Snow’s first memory of television was the BBC broadcast of Queen Elizabeth’s coronation in June 1953. The splendour of that event is remembered for the the distorted reception of the pioneering television broadcast than for the event itself.  Snow regaled his audience with a story concerning a distinguished looking elderly gentleman who attended his local church when Snow was a few years older.  One day his father introduced the man to him as, none other, than Harold Macmillan, Prime Minister, whose home at Birch Grove was nearby.  Macmillan told him that he was a Conservative politician “who runs the country” and did young Snow understand what a prime minister did to which he responded “are you married to the Queen?”

To use his own words, Jon Snow’s career in media extends from the ‘stone age’ to the ‘digital age’.  It began when a bulky, awkward  video camera functioned, without sound, and operated for approximately one minute was the primary tool of a television reporter.  It was possible back in the 1970’s to spend up to three days preparing a report in some far-flung location and to ask a passenger scheduled to fly to London to bring the unprocessed film back to ITN.

The transnational media battle of the mid 1980’s often centred on a televisions service being able to monopolise one of the two satellite services available at that time.  This is precisely what happened when the shuttle Discovery crashed off Cape Canaveral on 28 January 1986 when ITN commandeered the satellite service and BBC did not.

Nowadays, every report is required instantly leaving much less opportunity for both consideration and verification.  There is less on-the-spot reporting and the consequence of this diminished authenticity has been to impede the sense of trust that is cultivated between reporter and audience.  Today,  it is possible to stitch a story from a diversity of sources while being desk bound.  24-hour news television has also altered the news dissemination business.

The internet has had a transformative influence on news and in many respects has democratised it as blogs proliferate and primary information becomes much more widely accessible. But this trend intensifies the requirement for excellent content with a unique perspective.  It is no longer possible to publish material that remains unchallenged.

Snow compared the current state of digital media to a pair of towers that a tight-rope walker is seeking to traverse.  One tower comprises excellent content but without the capacity of yielding a monetary return yet while the other tower comprises elements that are capable of making profit – such as Google, eBay, Yahoo and their counterparts.

Blogging, of course, has reintroduced the personal footprint of a story and I would commends Snow’s Channel 4 blog, called Snowblog to you.

Irish TD’s salaries over £30,000 higher than British MP’s

THE Irish Independent revealed details of Irish politicians’ expenses this week.  The Irish political enterprise comes at a hefty price. The Oireachtas typically passes 42 pieces of legislation each year at an average cost €3.25 million each.

Irish and British Parliamentary Salaries

The 2009 tab for 166 members of Dáil Éireann is €18.248 million.  A further €4.5 million is required to pay 60 senators and €1.9 million to pay 12 MEP’s.

It was not always so costly.  The 1918 general election elected 100 MP’s to the British Parliament.  Each was paid £400 per annum and that rate held until 1931.

The average pay of an Irish TD is just shy of €110,000 (£95,700)when long-service increments are factored in.  This figure does not include the plethora of allowances that are claimable, including pensions accrued when formerly a minister while continuing to serve as a TD.

Members of Parliament in London are paid £64,766 since 1 April 2009.  They are also eligible to claim the following allowances:

Staffing	£103,812 max	‘in respect of qualified staff actually doing the job’
Administrative and Office Expenditure	£22,393	Constituency clinic / office
Personal Additional Accommodation Expenditure	£24,222	Away from home overnight costs incurred to perform parliamentary duties
London cost allowance	£7,500	for inner London MP’s
Winding-up allowance	£42,068	ceases to be an MP
Communications	£10,400 max	web site, publicity
Mileage	40P 25P 24P 20P	first 10,000 miles after 10,000 miles motorcycle bicycle
Subsistence	£25	per day

 

UK Dual Mandate

An MP who is a member of the Northern Ireland Assembly receive a full parliamentary allowance but a reduced salary of one-third of the full rate in respect of the other assembly.  This works out at £10,606 in the case of Northern Ireland.

Sinn Féin Conundrum

There are 5 Sinn Féin MP’s in the current Westminster Parliament but they do not participate in parliamentary proceedings. But they do claim the allowances, a total of £662,600 in 2007-08 notwithstanding that they have not taken the oath of allegiance, or affirmed.

This figure includes:

• £105,131 for the cost of staying away from their main home for the purpose of performing duties in a parliament. But they do not attend sittings in the House (in the chamber) or its committees, or sub committees at Westminster
• £106,248 for running their five offices
• £442,744 for staff
• £461 for stationary and £1,529 for postage associated with this stationary
• £6,547 for the cost of equipment supplied on loan to MP’s.
• £7,672 for mileage
• £4,631 for air tickets to Westminster
• £1,549 for 10 spouse journeys to London
• £4,743 for 22 staff journey’s to London

The Robinson Duo

The Northern Ireland First Minister, Peter Robinson and his wife Iris are MP’s. Peter collected £114,163 and Iris £113,500 in allowances in 2007-08.  This sum included £40,342 in respect of alternative accommodation.  MP’s who are married to each other must nominate the same main home and a limited to claiming one person’s alternative accommodation allowance between them – according to the latest edition of The House of Commons Green Book.

The Robinsons’ also incurred £19,898 on air travel between Belfast and London.

Members’ of House of Lords

Members’ do not, in genera, receive a salary in respect of parliamentary duties. But they are reimbursed actual expenses incurred arising from these duties. Those who claim expenses must have already taken the oath of allegiance or affirmed.  Expenses are only claimable in respect of attendance in the chamber, or at committee or sub-committees of Westminster.

There are some special regulations.  If a member of the Lords resides outside the UK, travel costs are only recoverable from the point of entry in the UK.  Double journeys are claimable if a Member’s car takes him or her from home to an airport or railway station.  Travels costs to Westminster for a Member’s spouse or civil partner maybe claimed six times each year.  There is a maximum limit of £174 for Members whose home is outside London.  The daily subsistence limit in the House of Lords in £86.50, somewhat more generous than in the Other House.

Tracing Irish Ancestors

THE arson of the Customs House by the Dublin Brigade of the IRA on 25 May 1921 resulted in the destruction of many records of genealogical significance, some dating back to the 13^th century.

The cost of the destruction of the James Gandon designed building was then in the region of £2 million  but the frustration of those across the world seeking to trace their Irish roots was incalculable. The Customs House cost £200,000 to build in the decade between 1781 and 1791

1911 Census of Ireland

The National Archives of Ireland has made the Irish census of Sunday, 2 April 1911 available on the internet. I have found this an extremely user-friendly site that offers multiple search options to trace individuals across the thirty two counties.

The census was taken every ten years from 1821 to 1911. The returns are arranged by townland, or in the case of urban areas, streets. If you wish to see the returns for a townland, or street, try and identify the relevant District Electoral Division.

The population in 1911 of, what is now the Republic of Ireland, was 3,139,688 and the number of people employed in central government was a mere 3,526.

The enumerators were drawn from the ranks of the Royal Irish Constabulary and not the civilian population as was the case in England. The census details available on the web site includes facsimiles of the actual census forms. There are also questions about religion, capacity to speak Irish and whether the respondent can read and write.

Census Returns of Prominent Citizens

It is possible to see the census details of prominent individuals of that time, including

The servants and retainers of the Earl of Aberdeen, Lord Lieutenant of Ireland from 1905 to 1915

Bernard Tinckler, 43 Goldsmith St, Dublin – Arms Clerk

John Dillon, MP Irish Parliamentary Party, 6 Albert Tce, Fitzwilliam Ward, Dublin

Thomas Michael Kettle, MP, 23 Northumberland Rd, Dublin

Sir Maurice Dockrell, Unionist MP for Rathmines and later last Unionist MP elected in County Dublin, 1 Belgrave Road, Blackrock, Dublin

John Joseph Farrell, Lord Mayor of Dublin 1911-1912, Dawson Street, Mansion House Ward

James Connolly, socialist shot by firing squad 12 May 1916, 70 South Lotts Rd, Dublin

Sean O’Casey (Seaghan Ó’Cathasaigh), playright, 18 Abercorn Rd, North Dock, Dublin

Arthur Griffith (Art ÓGriobtha), Founder and 3^rd Leader of Sinn Féin, 136 St Joseph’s Crescent, Glasnevin

Thomas Clarke, Newsagent and person most responsible for 1916 Rising, 59 St Patrick’s Road, Drumcondra Dublin

William T. Cosgrave (Liam T Ua Cosgair), future President of Executive Council. 174 James St Dublin

Eamonn deValera (Edward), mathematics professor and later founder of Fianna Fáil, 33 Morehampton Terrce, Donnybrook

Samuel Beckett, Nobel Laureate, 14 Kerrymount, Ballybrack Co. Dublin

Douglas Hyde (Dubhglas de Híde), first President of Ireland, 1 Earlsfort Place

 

Dublin in 1911

Dublin, with a population of 477,000 people in 1911, was a city deeply divided by wealth, class and religion. The political power of Ireland reposed in the British administration at Dublin Castle. The Lord Lieutenant was the Earl of Aberdeen who had formerly been Governor of Canada and had held this position briefly prior to that appointment in 1886 under the patronage of Prime Minister, William Gladstone. The Chief Secretary was Augustine Birrell, who held this office from 1907 until the aftermath of the Easter Rising in 1916. Birrell, as President of the Board of Education, had been the sponsor of the legislation in 1908 setting up the National University of Ireland and Queen’s University Belfast. He also sponsored the Irish Land Act 1909 which facilitated the compulsory purchase of land to relieve congestion. A huge number of people lived in extremely underprivileged circumstances.

Beginning a Search

It is useful to start knowing the name of the family concerned, the parish, or townland in which they lived and the approximate date.

There are no complete set of census returns for the period prior to 1901. but there are two record which provide some useful insights:

The Tithe Applotment books were compiled between 1823 and 1838 in order to determine the amount which occupiers of agricultural holdings of over one acre should pay in tithes to the Church of Ireland – the main Protestant church and the church established by the State until 1871. Tithes had been paid in kind before this time; they were now required in cash and even those who were not members of the Church of Ireland were obliged to pay! Tithes were abolished in 1838.

There is a manuscript book for almost every parish in the country, giving the names of occupiers, the amount of land held and the sums to be paid in tithes. These records are now available in microfilm at the Public Record Office of Northern Ireland Belfast and the National Archives, 8 Bishop Street, Dublin 8.

The Tithe Defaulters Lists in the National Archives detail people who refused to pay tithes as part of what was known as the Tithe War from 1831 to 1838, which was very vigorous in Leinster and Munster. The 29,000 names were recorded by Church of Ireland clergy.  Tithes in Munster were payable on potato patches but not on grassland.

The Primary Valuation (Griffiths Valuation), was established between 1847 and 1864. There is a printed valuation book for each barony or poor law union in Ireland, showing the names of occupiers of land and buildings, the names of those from whom they were leased and the amount and value of the property held. It was the first ever full scale valuation of property in Ireland.  These records are available on microfilm at the National Archives. and on the Irish Origins web site.

Good luck with your investigations!

NAMA – Crucial considerations from a consumer perspective

THE European Central Bank has exhorted the Irish authorities not to overpay for assets that the proposed National Asset Management Agency (NAMA) is set to acquire. Mr John Mulcahy, a chartered surveyor who has been seconded to NAMA, opined at the meeting of the Joint Committee on Finance and the Public Service on 31 August, that “there has always been a recovery in the property market, although sometimes it has been more vigorous than in others. In general, the commercial market has recovered over a seven year period to an average of about 88% of where is was in the trough. For residential property, the market has recovered in seven years to a figure of about 96% of where it was in the trough”.

Two fundamental questions must be addressed before these opinions can be relied on to become viable propositions.

“Is recovery to be based on individual continuing to take on mortgages based on a wholly unsustainable income-to-loan and loan-to-value ratios, as has been the case over the past several years? If so, the proposal is doomed to catastrophic failure”

Residential mortgages are the largest single component of private sector credit in Ireland. The economic crisis that this country is now inflicted with is a direct consequence of sclerotic levels of credit being made available by delinquent banks and building societies since 2002 – loans that are too many multiples of gross income, or loans that are equivalent to almost 100% of the value of the underlying asset, obliterating any potential equity element.

Traditional prudent lending practice dictated the following maximum limits for house loans:

• Not more than 2½ times annual gross income. If a spouse or partner has an income, a sum equivalent to that person’s annual income can be factored into the calculation of the maximum sum that can be borrowed.

• The loan should not exceed 90% of the value of the mortgaged property

The evidence of recent Irish banking practice and the lack of adequate oversight can be traced through the following table:

Actual Income to Loan Ratio 2002 - 2006

€ Million	2002	2003	2004	2005	2006
Collective gross income of mortgagees1	18,671.29	20,537.96	22,757.63	24,859.01	28,143.10
Prudent borrowing capacity (2½ times gross income)	46,678.22	51,344.90	56,894.07	62,147.52	67,857.75
Actual residential mortgage lending2	47,212.00	59,242.00	77,029.00	98,956.00	123,288.00
Excess lending : ‘bubble’	534	7,897.10	20,134.93	36,808.48	55,430.25
Loan : Lending ratio	2.52	2.88	3.38	3.98	4.38

1 Based on data contained in Revenue Commissioner Statistical Reports Tables IDS 1 and 15
2 Source Table A2.2 ‘Residential Mortgage Lending to Irish resident’s, Central Bank Quarterly Bulletin

² Actual residential mortgage lending includes outstanding securitised mortgages (the initial amount of the securitisation less all repayments of capital made by borrowers’).

The consumer housing credit bubble started in earnest in 2003, the year Ireland ceded control over interest rates to the European Central Bank and the year that The Financial Regulator came into being.

The pace at which this bubble gathered momentum is staggering. It grew within eighteen months to over €20 billion, equivalent to 88% of the gross income of all claimants of mortgage interest tax relief in 2004.

When it reached €55.43 billion at the end of 2006, the bubble was over 197% of the estimated gross income of all those claiming mortgage interest tax relief that year. The consequences of this credit bubble after 2006 has to be considered in the context of even greater debt and prevailing adverse economic circumstances.

This pace of the housing bubble was almost reminiscent of Moore’s Law which was defined by a founder of Intel, Gordon Moore. It describes a long-term trend in the history of microprocessors that the number of transistors that could be placed on an integrated circuit doubled approximately every two years. While that pace of incremental change is sustainable in the computer world, it is certainly not sustainable in the residential mortgage market.

The bubble took shape following a 43.8% increase in the total gross income of all Irish taxpayers from €36,899 million in 2001 to 53,090.7 million in 2002. The number of taxpayers increased from 1,763,859 in 2001 to 1,824,878 in 2002, an increase of 3.4%.

Programme for Prosperity and Fairness 2000

The social partnership agreement, Programme for Prosperity and Fairness 2000, covered the 33 month period between 2000 and 2002. The agreement provided for the following increases in basic pay as it applies in each particular industry:

• 5½% of basic pay for the first 12 months

• 5½% of basic pay for the second 12 months

• 4% of basic pay for the next 9 months

Statutory minimum pay was adjusted to £4.70 (€5.97), on 1 July 2001; £% (€6.35) from 1 October 2002. PPF also provided for the benchmarking of public sector pay vis-à-vis  the private sector. These rates of increase do not account for the entire actual increase in gross income of €16.19 billion across all taxpayers’.

Role and Impact of The Financial Regulator

The Financial Regulator does not have the power of utility regulators to price financial products.

The Chairman of The Financial Regulator, Jim Farrell, commenting in the 2008 annual report, stated that their strategic approach to regulation was framed in a much “more benign environment” but the Regulator “had taken steps to slow bank lending, in particular in 2006 and again in 2007”. The steps taken did not achieve the intended goal.

The evidence presented above does not indicate that the environment was as benign as Mr Farrell intimates. Residential mortgage lending to Irish residents increased from €98.56 billion in 2005 to €123.28 billion in 2006 and to €139.84 billion in 2007. The latest figures indicates that residential mortgage debt sat the end of May 2009 was €148.2 billion.

The former chief executive of the Regulator, Liam O’Reilly, stated in the 2005 annual report that

“Along with the Central Bank, we are concerned about the rapid rise in the levels of indebtedness in the economy and are well aware that if conditions change adversely, many people could be severely affected. We monitor and require institutions to anticipate and prevent risk issues now rather than to have to address problems down the line. There has been much debate about high loan-to-value ratios in recent days for mortgage borrowers. In this debate, the critical issue is the ability of borrowers to repay the loan in full. It is the responsibility of each financial institution to ensure that their credit standards, provisioning policy and levels of capital are appropriate to provide not only for today, but, in the event of any future downturn in the market. So long as the quality of credit is maintained and the ability to repay is not compromised this is not a problem. We have a responsibility to inform consumers which we are doing through our publications, which set out the risks and benefits of various financial products, including mortgages and personal loans.”

How Responsible Are Banks in Ireland?

 

Private sector credit to Irish residents expanded from €142.6 billion (109.5% of GDP) in 2002 to €317.7 billion (179.8% of GDP) in 2006. It reached €389.1 billion by May 2009 (216% of GDP). Iceland was the only country in 2005 to have exceeded the PSC-GDP ratio of 200%.

Residential mortgages are the largest element of private sector credit.

The construction sector component of this increased from €4.4 billion in 2002 to €20.7 billion in 2006 – from 3.2% to 6.5% of GDP and is significantly smaller than the residential element.

The catastrophe that has now unfolded indicates that the chances of avoiding lethal consequences as a result of relying the standards of responsibility of Irish banks is comparable to the chance of avoiding death, having been bitten by a rabid dog.

Consequences of Housing Credit Bubble

 

The house building cost index increased from 171.8 in 2002 to 194.2 (13%)

Average new house prices outside Dublin increased by 51% from €206,879 to €313,087. The average price of a second-hand house, outside Dublin, increased by 56% from €241,054 to €375,577. Prices bore no relationship to costs and were escalating because credit restrictions were effectively non existent.

Conclusions

The apparent economic climate at the end of 2006 was one of calm before the tsunami. The construction sector completed 350,035 new houses during the preceding five years sufficient for an additional population of 840,000 persons. But the population of Ireland only expanded by less than 323,000 in this period.

There are approximately 1,469,000 households in the country. The following table summarises the number and value of mortgages paid between 2002 and 2006:

	New	Used	Total
Number of mortgages paid	221,316	260,767	482,038
Value of mortgages paid € Million	€50,454.0	49,669.8	€100,123.8

Source: Department of the Environment, Heritage and Local Government

Over 32% of the nation’s housing stock has been caught up in this bubble. Mortgagees’, with indebtedness of over €100 billion, are now subject to the consequences of negative equity as well as the other implications of the most severe economic downturn in living memory.

A crisis of a similar nature occurred in Ireland as a consequence of the agricultural depression of the 1870’s. It followed a 20-year period of economic expansion following The Famine. But rents became unaffordable and land values collapsed. Credit became unavailable as the insurance companies who provided it vanished from the marketplace. That downturn lasted until 1914.

If the malignancy of the credit bubble that now paralyses our economy is not eliminated Ireland will never successfully escape this downturn. The only course that will protect society is to legislate the maximum gross income-to-loan and loan-to-value ratios that are prudent and sustainable.

It is abundantly clear that the passive advocacy of The Financial Regulator has been wholly ineffective. The history of the relationship between the leadership of Ireland’s banks and Irish society is not based on shared values or the common good. If it were the Exchequer would not have lost hundreds of millions of € when the Irish banks facilitated the setting up of illicit off-shore accounts. Rampant customer overcharging would not have occurred and the ranks of the leadership of the banks’ would not have been cited for personal income tax evasion, when they were on 28 March 2006.

Bankers’ now claim they made ‘regrettable mistakes’. The did, in fact, engage in delinquency of a treasonable scale and nothing short of stringent legislation will restore a balance and sentiment from which stability and sustainability has some hope of being nurtured.

Eighty per cent of all those claiming mortgage interest tax relief earn less than €75,000 per year and many earn significantly less. Over 43,000 mortgagees earned less than €20,000 per year in 2006 when the economy appeared to be significantly more buoyant. Their interests deserve the protection of the State from predatory banking practices.