Irish Department of Finance shortcomings highlighted

When Ireland became enveloped in an unprecedented financial crisis in 2008 it became clear that it had failed the test of prudent financial management,, which in turn, can provide a greater capacity to manage unanticipated outcomes.

Budgetary processes lacked coherence and ministerial accountability to the Oireachtas was weak throughout the previous decade. A lack of transparency was characterised by the absence of adequate information and analysis from the Department of Finance for the purpose of public debate and consultation.

An independent Review, published on 1 March, of the effectiveness of the 542-person Department of Finance is highly critical and portrays a Department as buckling under the reckless dominance and feckless political incompetence of Finance Ministers’ McCreevy and Cowen and Bertie Ahern Government. The Review also cites the invasiveness of political agendas including the PD-FF coalition Programmes for Government and the diabolical social partnerships which allowed lobbyists and their chaplain run riot with their unsustainable wage demands.

The Review covers the period this Department was in the charge of Secretaries-General , Hurley (March 2000 to March 2002 who subsequently became Governor of the Central Bank ), Considine (March 2002 to June 2006, now a public interest director of Bank of Ireland) and Doyle (June 2006 to January 2010), who ought to have demonstrated stronger leadership and done more to avoid the collapse of the Irish economy.

The currency devaluation of 1992 and the emergence of the Single European Market enabled Ireland surge ahead economically; experience strong investment and export growth until 2000. Thereafter a property boom took hold powered by low interest rates and cheap credit, much of it sourced outside Ireland. When the property bubble inflated in 2003 in some years more than 80% of annual incremental credit growth went to fund house purchase, construction and property speculation.

The property bubble collapsed in mid 2007 and Government revenue fell by 21% by 2009 but spending on social welfare soared as unemployment grew rapidly. In 2009 the deficit was 14.4% of GDP and last year this rose to 32% of GDP after taking account of emergency assistance to Irish banks.

The Review focused on:

The Department’s advice on the risk of pro-cyclical policy

Their repose to the overheating of the property sector

The nature of the Department’s advice on the vulnerability of the Irish tax system to an economic downturn.

The Review states that the Department of Finance

• Does not have the critical mass in areas where technical economic skills are required. There are 39 economists in the Department of Finance, less than 10% of the total staff complement. Approximately 60% of the Canadian counterpart to the Department of Finance are economists while 40% of the staff in the core areas of the Dutch counterpart are trained to a Masters, or higher level.
  
• Has too many generalists in positions requiring technical economic and other skills
  
• It is more number-driven than strategic as evidenced by its failure to set out options to moderate activity in the construction sector, including the introduction of 100% residential mortgages.
  
• Does not have sufficient engagement with the wider economic community in Ireland
  
• Operates in silos with limited information sharing
  
• Is poorly structured in a number of areas, including senior management and there is insufficient attention given to performance management, skill shortages and reporting structures at senior and middle-management levels. The Review comments ‘that as in any organisation there are some who conspicuously underperform causing serious morale issues.
  
• Is poor on human resources. Assistant Secretaries do not report to the Secretary-General reporting instead to a Second Secretary General. The review recommends that Second Secretaries-General do not manage large divisions and provide more strategic support.

While officials provided oral advice to the Government on Budgetary Policy in June of each year on the risks of a pro-cyclical fiscal stance the advice was not heeded and spending provisions in the subsequent December Budget in 2001, 2006, 2006 and 2007 was especially higher. This poor budgetary process obscured ministerial and Government accountability to the Oireachtas. Spending marched to the beat of a political drum and the sabre rattling of the so-called social partners.

The review recommends

1. The creation of a meaningful consultation period seeking broad feedback
2. Releasing Departmental analysis to the public debate
3. Providing for third party validation of Department of Finance analysis through an independent Fiscal Council
4. Greater emphasis on a formal written record rather than oral briefings to Ministers for Finance

The Department of Finance must now remake itself through changes in structure, professional capacity and internal working methods. There has also to be a more outward-looking attitude.

Shoddy corporate housekeeping at the Road Safety Authority

The essential role of Ireland’s Road Safety Authority is the advocacy of public compliance insofar as it relates to road safety, so I was surprised to discover some shortcomings with respect to compliance by the Authority itself

The Authority’s 2009 Annual Report is based on accounts that are unsigned by the chief executive and chief financial officer and are unaudited. There is not a single note to elaborate on the contents of the accounts, or to reflect compliance in all material respects with the Code of Practice for the Governance of State Bodies.

The Annual Report identified one board member as Chairman of the Internal Audit Committee. There is no information to indicate what qualifies him to take on this role, nor is there any indication who the other member of the Internal Audit Committee are; if there is a member of the staff of the Department of Transport on that Committee; how many meetings were convened in 2009 and what they have to say to taxpayers.

The Chairman of the Remuneration Committee has been a member of the Court of Bank of Ireland since 2005. That is an institution that is intimately familiar with finer the dynamics of remuneration. They have paid themselves in the region of €47 million since 2005.

The Annual Report neglects to identify the membership of the Remuneration Committee; nor does it disclose the details of the chief executive’s remuneration and board members’ expenses, as required by the Code promulgated by the Department of Finance.

When it appeared last November that the Roma beggars who sit on their arse on the streets of Dublin were more au fait with the arrival of the IMF in Ireland than the Minister for Transport was prepared to admit, a taxpayer would be forgiven for concluding that former Minister Dempsey’s understanding of codes, accounts and governance issues might be compromised by an inability, on his part, to differentiate between a balance sheet and a bingo card.

Ireland is about to embark on the PBE (post-Beverly era) after next Friday’s general election and a new generation of politicians are more likely to emerge who will trim their flaming red eyebrows from time to time. An opportunity for the Road Safety Authority to synchronise with this change, show leadership and creativity could lie in how it reports to its stakeholders.

The membership of the Authority, for example, is currently defined by a set of names that presumably tally with those on corresponding birth certificates and utility bills and photographs which confirm gender and if there is a proclivity to smile. But, with the exception of Gay Byrne with whom the public are most familiar and whom they trust, these details convey no information to describe what credentials the other members have to advocate road safety as set out in S14 (4) of the Act and their capacity to contribute to the orderly governance of the Authority to a standard more desirable than that which prevailed at FÁS or Dublin Docklands Development Authority over the past several years.

Taxpayers, with their financial partners in the IMF, ECB and HM Treasury pay Authority membership fees and require more information about these individuals than might be typically forthcoming from a cohort of masked members of the Ku Klux Klan in the 1940’s.

The mission of the Road Safety Authority as ‘simple’. Fast food stalls at a farmers market have a ‘simple’ mission. The mission of the Authority to be relatively complex, far reaching and sophisticated, as it seeks to fundamentally change stubborn and embedded social habits. The catastrophic distress caused by delinquent banks is of such viral and venal gravity as to prompt the desirability of research to establish the significance of the correlation between instances of suicide involving single vehicle collisions and financial distress attributable to Ireland’s delinquent banks.

A culture of fossilised inertia based on ‘twill do’ and ‘shure, what’s wrong with it’ no longer pleases a very restless, agitated and wounded society.

Compulsion will not boost Irish language

Media report sthat Enda Kenny is under pressure over the Fine Gael Irish language plan in the TG 4 debate (17 February) should more properly prompt the language advocates to question their own competence to nourish the language and the enduring legacy of their efforts and vision.

Our 80-year legacy of compulsory Irish teaching in schools has produced 1.6 million people who claim to have a familiarity with the language, according to the 2006 census. But that legacy is incapable of securing a thriving future for Irish. The objective of the recently inaugurated Irish language policy is to nourish the more spontaneous and widespread speaking of Irish on a daily basis by 250,000 people within 20 years. Progress towards this target will depend on personal preference, curiosity, passion and conviction, nor compulsion.

Any viable policy with respect to Irish must first discern which factors underlie changes in personal tastes, habits and preferences.

Our society, for example, embraced refused recycling, a disinclination to smoke cigarettes and a massive preference for wine at the expense of beer over the past decade, totally on a voluntary, or optional basis.

Compulsion, politicians promises, hare-brained policies and millions of euro poured into sterile vested interests will not, on their own, be the powerful catalyst to inspire the necessary passion for the Irish language to thrive. There is no substitute for a genuine affection for the language itself.

Large leap in Irish public sector pensioner numbers

Ireland’s Department of Finance has published the 2011 Revised Estimates Volume which complements the details contained in the 2011 Budget. The following is a summary of the Estimates for this year:

Gross Estimates
(including expenditure from the Social Insurance Fund and the National Training Fund)

	2010	2011	Change %
Current Expenditure	54,266,425	52,826,910	-2.7%
Capital Expenditure	6,269,216	4,676,500	-25.4%
TOTAL	€60,535,641	€57,503,410	-5%

Net Estimates

	2010	2011	Change %
Current Expenditure	40,600,479	41,710,547	2.7%
Capital Expenditure	5,918,136	4,341,072	-26.6%
TOTAL	€46,518,615	€46,051,619	-1%

Significant Changes from 2007 to 2011

• Gross National Product decline by 20.2% from 2007 to 2011
  
• Gross Current Expenditure as a % of GNP to rise from 30% in 2007 to 41% in 2011
  
• Gross Current Expenditure to increase by 8.3% from €48,798 million in 2007 to €52,826 million in 2011
  
• Gross Current Expenditure as a % of GNP to rise from 30% in 2007 to 41% in 2011
  
• The number of public service pensioners to rise from 86,780 in 2007 to 124,090 in 2011, + 43%
  
• Gross Voted Capital Expenditure to drop by 43% from €8,143 million in 2007 to €4,676 million in 2011
  
• Public service employment to rise from 271,858 in 2007 to 302,140 in 2011 (+30,282 / +11.1%)
  
• The ratio of public sector staff to public sector pensioners will have increased from 32% in 2007 to 41% in 2011.

Evolving Role of the US Secret Service

The United States Secret Service has been in existence since 1865 and has an annual budget broadly similar to that of FÁS - $1.57 million and a staff of 3.200 personnel. It has two functions – ‘criminal investigation’ and ‘protection’. Almost $800 million of this is spent directly on protection.

The catalyst for setting up the US SS was a need to combat currency counterfeiting. This had become a real problem throughout the Civil War when between ⅓ and ½ of all US currency in circulation was counterfeit and this continued to be its only function until 1894 when it function evolved to include protection and the investigation of the Ku Klux Klan and counter-espionage during World War I.

The US SS today investigates counterfeiting and financial crimes involving identity theft, credit card fraud, counterfeiting, computer-based fraud and attacks on the US financial, banking and telecommunications infrastructure. The protection mission covers the President, Vice President, former Presidents and candidates for President, visiting dignitaries and the families of the Head of State and Vice President.

The protection role began in 1894 with the protection of President Grover Cleveland on a part-time basis. President McKinley received protection during the Spanish-American War and there were three agents present when he was assassinated in Buffalo. The transfer of several agents in 1908 to the Department of Justice served as the foundation team in the establishment of the FBI. A 1917 Act made it a crime to threaten a President. The White House Police force was created in 1922 to secure and patrol the Executive Mansion. The protection of the President role was further enhanced in the 1950’s and in 1965 this was upgraded to include ‘permanent protection’. Following the assassination of President Kennedy in 1963, Jacqui Kennedy and her children were protected for two years and now Presidents and their spouse are protected for the duration of their lives and, in the case of their children – until they are 16 years old. Diplomatic missions now come within the remit of the US SS.

President Woodrow Wilson introduced the espionage mandate in 1915 and in 1948 the US SS was directed to investigate crimes against the Federal Deposit Insurance Corporation, federal land banks, and various farm loan associations. Nowadays it investigates a wide range of crimes against financial institutions, telemarketing and identity theft used in committing these crimes.

The post 11 September 2001 environment in the US has extended the US SS mandate to cover terrorist financing and financial crimes, including money laundering, counterfeiting and other offences that threaten the integrity of the banking and financial systems.

Presidential safety is an enduring concern that began in 1861 with fears for the safety of Abraham Lincoln on his journey from Illinois to his inauguration in Washington DC. More recently, there have been security breaches at White House dinners in November 2009 when two gate-crashers were discovered.

Ten Presidents have been victims of direct assault by assassins with four resulting in death. But only one death has occurred since the US SS began protecting Presidents in 1906.

The direct assault on Presidents protected by the Secret Service included:

Date	President	Location	Assailant
1 Nov 1950	Harry S Truman	Washington DC	Oscar Collazo and Griseillo Torressola, advocates of Puerto Rican independence.
22 Nov 1963	John F Kennedy	Dallas TX	Lee Harvey Oswald
5 Sep 1975	Gerald Ford	Sacramento CA	Lynette Alice Fromme
22 Sep 1975	Gerald Ford	San Francisco CA	Sara Jane Moore
30 Mar 1981	Ronald Reagan	Washington DC	John Hinkley Jr
29 Oct 1994	Bill Clinton	Washington DC	Francesco Duran
10 May 2005	George Bush	Tiblisi, Georgia	Vladimir Arutyunian

National Consumer Agency to tackle Irish Mail on Sunday over Sunday Tribune stunt

It was reported in the Irish Independent on February 12^th that the National Consumer Agency is ‘actively pursuing’ a complaint from the National Union of Journalists and the Sunday Tribune with respect to the publication of a bogus ‘Sunday Tribune’ cover on the Irish Mail on Sunday issue of February 6^th. It was also reported that Associated Newspapers could face legal action under the Consumer Protection Act 2007.

The National Consumer Agency in Ireland was set up in 2007. It has a budget of €6.1 million and 42 staff. Its chief executive, Ann Fitzgerald, is paid €186,190. Fitzgerald is a former Director of Consumer Affairs.  Its board includes

The United States Department of Commerce was set up in 1903. It has a budget of $6.5 billion and has a staff of 38,000. Its chief executive, Gary Locke, is paid €146,760. Locke was a two-term Governor of Washington and is the first Chinese-American to hold Cabinet rank.

The purpose of the National Consumer Agency is to ‘defend consumer interests’ and ‘embed a consumer culture’ in Ireland. Forceful advocacy, targeted research, consumer information, education and awareness programmes are the prime tools of this Agency.

Writing as a taxpayer, why is the State should become involved in a case that a multinational company of the size of Independent News & Media Plc could quite easily pursue on its own account, should it choose to do so?

It seems to me that the State has become the bearer of all risk making many of the nation’s lawyers fat, smug and unseemly prosperous while those who ought to be risk bearers can exploit the moral hazard opportunities that arise when another party pays the bills and carries the can.

The State hasn’t lifted a finger to implement the recommendations of the Competition Authority to liberate the archaic legal services sector. The absolute and total capitulation of authority by the Government to Members’ of Tribunals to determine Tribunal lawyers’ fees exposes our buffeted, put-upon nation to an estimated liability of €366 million, whenever the Tribunals finally conclude, which is as difficult to define in advance as is the date of the Islamic New Year. While that fact remains uncertain and ambiguous there was no such ambiguity when the Moriarty Tribunal paid three senior counsel €2,500 per day for 304 days in 2008, notwithstanding that the Tribunal sat in public session for an average of 20 days in the last three years.

This scale of expenditure by taxpayers on Tribunals is sufficient to pay for the parking of 200 cars belonging to members of the Bar Council in the short-term car park at Dublin Airport for 100 years, but that taxpayers are not receiving any return for their money.

Ken Olsen–Founder of Digital Equipment Corporation is dead

The death took place last Sunday, 5^th February ,of a man Ireland owes a great deal of gratitude to. Ken Olsen, was one of the two founders of Digital Equipment Corporation (DEC). His company became the second-largest computer company in the United States by inventing small but powerful computers, called minicomputers.

The Digital facility in Galway was the pioneering emblem of industrial development of its time until it closed in February 1993, with the loss of 780 jobs, having been in Galway for the previous 22 years.

Digital had been the economic fulcrum of Galway and the west of Ireland. It trained many of those who were to lead IDA client companies that subsequently came to our shores. It was at the cutting edge of human resource development and was most pro-active in fostering relations with Ireland’s universities. Many post-graduate students gleaned their first insight into a modern industrial facility at that site, where people were treated as a vital resource and great care was taken to integrate excellent talent into all facets of the business. Team working and innovation were hallmarks of DEC in Galway. It is ironic that the vacuum created by the loss of DEC in Galway was filled by another very progressive Massachusetts corporation, Boston Scientific.

Ken Olsen was 84 years old when died. He launched Digital in 1957 when he was 31 years old in a derelict wool mill in Maynard Massachusetts, north-west of Boston with $70,000 in venture capital and loans of $2 million. He, his partner, Harlan Anderson, and his brother Stanley Olsen were the company’s only employees in the early days.

But they created a new generation of the computer industry and at one time DEC was valued in excess of €11 billion and employed 140,000 people worldwide.

Digital achieved its breakthrough by offering a smaller, less- expensive and more user friendly alternative, known as PDP and VAX series, to the bulky IBM System 370 mainframes that dominated the computer industry.

Mainframes were usually run by specially-trained operators based in ultra clean rooms and were off-limits to everyone else. Users typically handed over their computing tasks to specialists, then waited for minutes or hours for the results. The old fashioned computers of the 1960’s co-existed with the telex, the telegram and a pint of Double Diamond!

But the minicomputers developed by Digital were cheap enough for businesses to be less cost conscious. They were also more powerful and companies could buy several and let the all interested employees use the computers directly.

Digital and Wang Laboratories from Lowell Massachusetts (which was based in Limerick for many years), along with their spinoffs, were widely credited with playing a large role in the ‘Massachusetts Miracle’, along the perimeter of Route 128 which circumnavigated Boston in the 1980s.

Despite his abundant prosperity, Ken Olsen resembled a hands-on engineer rather than a billionaire, preferring thick-soled work boots and driving an old Ford Falcon because he admired its design and found it easy to maintain.

Under his leadership, Digital endured financial hazards. It flourished in the mid-1980s and Fortune magazine published a cover story profile on Ken Olsen in 1986, calling him “arguably the most successful entrepreneur in the history of American business.’’

Allowing for inflation, Fortune said, Digital was bigger than Ford Motor Co. at the death of its founder, Henry Ford, and also larger than US Steel when Andrew Carnegie sold his company or Standard Oil when John D. Rockefeller retired.

Digital was second to IBM in the computer industry, though it was less than one-sixth of IBM’s size and 14 years younger.

Digital’s fortunes slumped when it was slow to enter the burgeoning personal computer market and its Apple Mackintosh counterpart. Digital had missed the tide of opportunity. Olsen resigned as president in 1992 and resigned from the board subsequently, cutting ties with the company. Digital was acquired by Compaq in 1998.

Ken Olsen regularly attended the Paulist Fathers Park Street church in Boston, as I did myself on many Sundays. He was a native of Bridgeport Connecticut. He started studying electrical engineering in the US Navy, which he joined in 1944, and continued his studies at the Massachusetts Institute of Technology. At MIT, he received a bachelor’s degree in 1950 and a master’sin 1952, in electrical engineering.

Afterward, he worked at the MIT Lincoln Laboratory until he launched Digital, getting seed money from the early venture capital firm American Research and Development Corp. That firm was founded in 1946 by a former Dean of the Harvard Business School and a former President of MIT. While Digital changed the computer industry it was this venture capital investment that redefined that business. The financial backers did not want the word computer in the company’s name, so Olsen settled on Digital Equipment Corp., or DEC.

The company had sales of $94,000 in its first year. Times are difficult in Ireland now but in 1971 they were in many ways worse. But Ken Olsen whose arrival in Ireland coincided with the demise of another great economic pioneer, Seán Lemass was a massive force for a change in our fortunes and self-belief. He taught us the meaning of the slogan ‘Oh yes, we can’.

Right of prisoners to vote in parliamentary elections

Prisoners in Ireland have a right to be registered in the political constituency where they would normally live if they were not in prison. However, they have no right to be given physical access to a ballot box by temporary release or a postal vote or any other way.

If they happen to be on parole, or temporary release, at the time of an election, they are free to vote where you are registered.

Prisoners rights if thye are on remand are the same as if you were a convicted prisoner.

The Electoral (Amendment) Act 2006 provides procedures that enable prisoners to vote by post. If in prison, a prisoner can register for a postal vote in the area that you would otherwise be living in. If they are already registered to vote in that area and wish to be able to vote from prison then a prisoner should fill out a form called Form RFG. If a prisoner is not already on the register then he, or she, should complete Form RFA4 as well.

United Kingdom

The European Court of Human Rights found in 2005 that the UK’s current ban on all serving prisoners from voting contravenes Article 3 of Protocol No 1 of the European Convention on Human Rights.

In June 2010 the Council of Europe’s Committee of Ministers expressed ‘profound regret’ that the ban had not been lifted in time for the 2010 general election. 

The Committee of Ministers said that it would draw up a resolution for action if the UK Government failed to give prisoners the right to vote in time for the elections to the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly in 2011.

On 20 December 2010 Mark Harper MP, the Minister for Political and Constitutional Reform, announced that offenders sentenced to a custodial sentence of less than four years will be given the right to vote in UK Westminster Parliamentary and European Parliament elections, unless the judge considered this inappropriate when making the sentence.

Can Ireland renegotiate its IMF/ECB/EU deal?

The Irish parliament (the Oireachtas) was stood down today.  Brian Cowen the outgoing Taoiseach has been effectively run out of town and will not contest the general election.  The general election will take place on Fri, 25 Feb.  The potential alternative government leaders have been posturing for the past several days about renegotiation the bailout deals. 

It is hard to see this as anything other than empty, vacuous, meaningless, political posturing! The horse has bolted and the stable door is off its hinges. Those with massive ambitions to renegotiate have no leverage.

The bailout deal was not negotiated in the first instance. Those whose interests were threatened arrived in the country, walked the streets, sniffed the air, took the Government by the scruff of the neck and told them that they were no longer in control of the economic stewardship of Ireland. The interest rate was prescribed unilaterally, as were the ongoing detailed quarterly reporting and compliance arrangements. That in a nutshell is how Ireland has been humiliated and joined the line of other can’t cope, won’t cope headless-chicken nations – where ministers abandon their roles abruptly and for no rational or coherent reason.

Apart from the bail-out proposition, over 80% of national debt is due to foreigners. Those foreign interests together with the IMF, ECB, EU and HM Treasury have the Irish authorities under the heel of their jackboot and they have no option but to be as compliant as a prisoner seeking goodwill in return for good behaviour.

The relationship the Irish Government has with these stakeholders is going to provide a salutary lesson in the concept of moral hazard and how its consequences cannot be always shuffled and finessed into the ether, as has been the case for too long within the country.

What the electorate will take a particular interest in is the capacity of the alternative government to bring about change in spheres over which they ought to have some control and leverage – for example, the gigantic scale of fees paid for professional advice and the ancient restricted structures that facilitate these charges; the cost of running the NTMA and its foster children and the transparency of these entities being specimens of how a government and their senior civil servants could demonstrate that their bargaining power and focus is not totally exhausted.

When the Fingleton 2008 ‘€1 million pre-contracted bonus’ has been redeemed the Government will have shown negotiating form. When bankers appear in the criminal courts the country will have demonstrated a sense of resolve and can begin to lay claim to be taken seriously. But blather at the onset of a general election campaign is just that.

Fine Gael to reverse minimum wage cut

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

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

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

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

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

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

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

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

‘Andrews’ – an enduring political icon in Dun Laoghaire

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

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

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

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

 

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

Fianna Fail circus heads for the knackers yard

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

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

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

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

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

Are public interest directors effective?

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

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

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

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

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

The membership of CIROC comprised:

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

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

When Cowen played golf with FitzPatrick in 2008

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The benefits to be provided to Fingleton include:

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

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

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

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

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

When Secretary Snow met the gurus of the Celtic Tiger

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

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

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

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

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

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

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

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

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

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

Northern Ireland Executive posturing with respect to water disruption is pathetic

It is a bit rich for the Northern Ireland Executive to posture like Pontius Pilate adorned in Teflon with respect to the shambolic performance of Northern Ireland Water.

This public utility monopoly is controlled by them. The sacking of four non-executive directors last July following the disclosure of 73 irregular contracts with a value of £28.4 million over a 3-year period must have been the consequence of a legacy of shoddy oversight by the Department of Regional Development.

The interim board was directly selected and appointed by Conor Murphy, Minister for Regional Development last August - outside the Code of Practice of the Commissioner for Public Appointments. Personal choice cannot therefore be divorced from direct responsibility.

The Chairman is paid £45,000 per year on the basis of no more than typically three or four days attendance per month, a considerable outlay for dry taps, parched livestock and toilets that don’t flush in tens of thousands of Ulster homes in mid winter.

Surely the buck now stops with Conor Murphy and, if heads are to roll, should his not be first in line to underline his accountability in this primitive, disruptive debacle before the entire board of directors suffer the inevitable consequences of systemic, failure that is not merely attributable to circumstances of force majeure ? That gesture would be the essence of accountability and good governance at the highest level and it would emphasise the importance of effective risk evaluation and customer service in a monopoly utility.

Incestuous Social Partners are as stale as the current Irish Government

Danny McCoy, boss of IBEC (Irish Business and Employers Confederation),  and Paul Sweeney, the economic adviser to the ICTU (Irish Congress of Trade Unions), set out their respective panacea for the future of Ireland in The Irish Times today.  Both speak as high-priests and advocates of the social partnership process.  Each is seeking wriggle-room to establish a bedrock of influence in 2011. 

This time in the context is that of ‘a collective’ that is ‘robust and rational’, whose deliberations are based on ‘evidence-based policy’ making.   They opine that ‘social partnership’ is ‘dysfunctional and politically expedient’ .  ‘We’ in Ireland need to reflect on the type of economy and society ‘we’ would like to emerge and ‘we’ need to craft laws and policies that reflect that vision!  The ‘perverse economic experiment must be dismantled’ and the next government will have to be ‘courageous and radical’; the private sector will have to be ‘reformed’ so as to move from ‘shareholder value’ to ‘stakeholder value’ and ‘cronyism is to be stamped out’. 

Who, under God, will deliver this utopia?  Lobbyists?? The backing of at least a dozen Nobel Laureates will be necessary to attribute credibility to all of this and to ensure the Jewish and Arab bankers who buy Irish bonds adapt to the collective’s notion of ‘stakeholder value’ and fall into line like obedient foot-soldiers.

Social partnership started modestly in the late 1980’s as an attempt to successfully tame a flaming industrial relations jungle. But, by the turn of this century, it had become a disingenuous platform that provided lobbyists with an unwarranted span of influence, instant access to government and direct funding amounting to millions of wasted euro that has been shown to have been inadequately accounted for. This led to a ‘dig-out’ culture of entitlement, free of any risk to the negotiating parties, which ignored the obligation that bread must be earned in the universe - not doled out at the parish pump.

This is the culture that gave legitimacy to gigantic ‘pre-contracted’ bonuses, outrageous professional fees, described as ‘fair and reasonable’ and annual cumulative directors’ emoluments in domestic financial institutions routinely exceeding €30 million because the government and its agencies failed to govern and the absence of moral responsibility is shrouded in legal legitimacy.

Mr McCoy is concerned about the trauma of the past few months; what about the trauma of the past decade? Does the memory of the lines of people queuing to buy a lousy-designed, poor quality residence on highway-robbery terms not make him squirm in outrage? Does the experience of the thousands of FÁS trainees who never obtained certification from an agency controlled and directed by these very same, ever-solicitous, ‘social partners’ not tell its own story about their capacity to be accountable and practice a decent standard of corporate governance?

He is concerned about the Climate Change Bill and the impact of ‘rushed legislation’. But is he not also concerned that the Government has failed to open the marketplace for professional services by, for example, not implementing the Competition Authority’s 2006 recommendations to open the legal services marketplace, a development which would surely benefit IBEC members.

Mr Sweeney, I also abhor the use of the NPRF resources to bail out the vandalism and delinquency of mercenary galoots, but how could this have been avoided? Japan’s debt/GDP ratio is twice that of Ireland but 95% of its debt is due to Japanese people, a higher proportion of whom are in the older age bracket. If bond holders renegotiate and play their ace card – not to put a further cent into Ireland – what happens next when all new Irish debt is owing to foreigners? It is not unnatural to expect borrowers to spend their own money as well?

It is a pity that Mr Sweeney did not define our ‘real economy’ and elaborate on how it is in ‘good shape’ and what the basis of its sustainable strength is.

This country does not have mineral or energy resources. Recovery from the more restricted Swedish bank bailout of the 1990’s was facilitated by a viable engineering and timber sector as well as hydro capacity. Ireland’s younger demographic profile is an important asset but where is the wealth creation potential for this resource to exploit?

HAPPY NEW YEAR!

Are Irish political opinion polls really accurate?

Have Irish political parties become intoxicated by opinion polls as they reflect on their ambition to abseil the pantheon of political stardom?

While the polls are giving Fianna Fail a severe hangover, they also indicate that support is not committed firmly and that opinion polls really do not capture voting intentions in a representative way. How could they when those seeking to enter government appear to be paralysed by inertia and in sleep-walking mode within an anticipated 100 days of a widely expected general election?  Perhaps they ought to examine the message from the electorate in opinion polls more closely and not merely rely on the froth of the headline trend.

Fine Gael have yet to choose candidates in 7 Dáil constituencies and given the considerable number of Fine Gael candidates chosen who are strangers to the electorate there is little flair or imagination evident on their web site to educate the electorate about their candidate offering and policies.  

The Labour Party web site does not identify one single general election candidate. Their web site offers the usual blancmange of a ‘better’, ‘fairer’ nation but they still blather about ‘Stop NAMA’ and the ‘threatened’ move to transfer €90 million of property loans from banks. Despite the opinion polls there is no evidence that Labour has a well-drilled, sophisticated, army in place to fight the battle ahead. Will positive opinion poll trends be soured by poor candidate selection?  

The web site of Sinn Féin does have a tab called ‘candidate’ – but that relates to their candidates for the May 2010 British general election in their traditional heartlands in Northern Ireland. Apart from media reports that Mr Adams is to migrate to somewhere in Co Louth there is no evidence that Sinn Féin is serious about general election in the Republic of Ireland other than a generic warble about ‘better’, ‘fairer’ ‘change’ and continue pursuing the goal of Liam Mellows and Bobby Sands ‘to bring us closer to our goals of Irish unity and independence’. Independence of what – the IMF and the ECB? They advocate ‘building an Ireland of equals’ – would that be equality of debt, bound in the chains of eternal welfare, poverty, aimlessness and hopelessness? Given the experience of the 2007 general election a voter would have expected to observe the shoots of economic genius and economic leadership but perhaps what is not there simply cannot be observed and what is offered by Sinn Féin is merely rousing neighbourhood activism. 

The Green Party, at whose instigation, the timing of this general election is to be determined, have shrouded the identity of potential candidates, the constituencies they intend to contest and policies for the future in opacity as dark as mushroom compost covered in black polythene. Is their stamina exhausted or a symptom of jaded leadership? 

The electorate deserve to be informed of the identity of general election candidates; to understand their values and competency. The electorate should not be expected to make choices wearing a blindfold. The electorate also need to form an opinion on the capacity of parties to govern with integrity, wisdom and decisiveness. Ireland will not waffle its way, using clichés, to achieve a semblance of recovery. 

Coping with bad weather

Ireland has experienced unprecedented disruption as a consequence of snow and freezing weather during  two consecutive winters and repeated episodes of large scale flooding at other times. Government agencies, local authorities and transport providers attempt to provide a coordinated response to weather-related emergencies but are doing so in the absence of any predetermined published priorities, benchmark levels of resources and equipment, lines of accountability, legal or regulatory framework.

A nationwide Adverse Weather Operations Plan needs to be devised and published to overcome these shortcomings.   An operations plan should identify who in a particular region is responsible for declaring a weather-related emergency and leading the response to it. This ought to facilitate  the response of the authorities and integrate those with communities and farmers with suitable equipment against a framework of known priorities and expectations.  Regulations should cover snow and slush clearance and the identification of which roads and routes across the country have priority in terms of attention and resources.  Categories of priority attaching to particular roads would be determined by the importance of the access they provide.  An effective response to the threat of widespread flooding also needs to be taken into consideration in devising such a plan.

Regulations ought to, for example, ban the dumping of snow from a private property onto a footpath or road and establish guidance on the adequate clearance of snow to allow safe passage on footpaths and from fire hydrants and storm drains.

Regulations could also establish emergency parking bans along critically important routes to keep traffic moving safely in snow or in freezing conditions.  Discounted off-street parking might be made available for as long as a weather emergency exists - as a condition of planning approval. 

Bright coloured highly visible sand and grit boxes might be located at strategically important junctions and close to train stations to allow communities clear footpaths, drains and fire hydrants and to encourage use of public transport.

A central low-cost telephone service and and flooding web site might be established to provide a 1-stop source of information dealing with emergency consequences such as driving conditions, school closures, the cancellation of examinations, or changes to the routines of hospitals.   It ought to to be possible to identify vital arteries on such a web site as a component of the long-term planning process and this would enable motorists to become aware of them and respond appropriately when an emergency arises.

The impact of these suggestions ought to enhance the safe passage of vehicles and pedestrians - residents, workers and visitors, but especially the elderly and the handicapped.  It would also provide a context for the avoidance of the threat of flooding on the devastating scale witnessed too frequently in recent times, as well as dealing with its immediate consequences.

What promise does 2011 hold for Ireland?

We ought to remind ourselves that the average age of our abundantly educated, talented, well-travelled, multi-lingual, sophisticated population is under 35 years and that in itself is a magnificent asset. But the chamber of celestial irrelevancies is entirely populated by jaded, faded mainly late middle-aged members, not one of whom is under 30 years of age. How could they possibly have a relevant engaging relationship, vibrant empathy and a convincing understanding of the needs and aspirations of that younger cohort of the population whose prospects they have seriously blighted?

A new lexicon, based on dubious sense of entitlement, has emerged in Ireland that has allowed its advocates to become more and more detached from the necessity of earning prosperity and wellbeing. Politicians using the expression ‘fair and just’ as code for unsustainable levels of welfare, of a scale that ought not to be necessary in a viable, stable, pay-your-way economy but the scale of which creates a long-term poverty trap for those in receipt of it and those who are obliged to pay for it.

‘Fair and reasonable’ is becoming synonymous with exorbitant professional fees and charges, bonus payments, retirement entitlements of ministers’ etc. – which are also on a scale that is detached from our economic reality. How can a bust nation, whose sovereignty has been surrendered and whose GDP accounts for such a tiny portion of that of the EU, for example, support so many professional firms whose annual revenues place them firmly in the top quartile of their European counterparts? If ‘fair and reasonable’ payments are significantly higher than international norms and greatly exceed what can be afforded – what particular criteria define ‘fair and reasonable’ and what outcomes are delivered by those in receipt of such largesse other than a well-nurtured sense of infinite entitlement?

Ireland’s GDP in 2009 is apparently being 27% higher than the EU average as a consequence of asset price inflation but this so-called wealth is not capable of fully employing the nation’s population or funding its spiralling debt. Where is it, who controls it and how productive is it and what benefit is the nation achieving from it?

Ireland needs an establishment that recognises the importance of and is capable of delivery the nation from one generation to the next in a more enhanced condition than prevailed when they obtained the power to influence it. That requires more than a Dáil comprised of neighbourhood populists, passing opportunists, the unimaginative self-righteous and sundry ‘blow-in’s’ from distant parts.

But neither Fine Gael, the Greens, nor The Labour Party has presented a complete panel of prospective candidates to the electorate to contest the general election that is to take place only weeks away. How can the electorate form an opinion of what these parties are capable of achieving, or is the electorate to merely rely on the trends in opinion polls to identify virtue and potential?

Bank directors remuneration immune moderation

The boards of the banks and building societies which are transferring heavily discounted loans to NAMA are populated by approximately 60 individuals, a significant number of whom have been in situ for many years prior to September 2008.  Their fees and remuneration from 2005 amounted to €148.4 million.

While 11,000 loans to 850 borrowers with a nominal value of €71.2 billion have been transferred to NAMA at a discount of 59%, the bona fides of each loan have to be painstakingly tested and evaluated because the representations of the banks and building societies cannot be trusted at face value.

But the 60 directors who lent this money and endorsed these transactions were paid remuneration and fees of €16.5 million in 2009. That may represent a haircut of 47% on the €31.2 million they were paid in 2008. But the losses incurred on the NAMA loans are equivalent to 180% of the remuneration they were paid last year.

It is from this rudderless, self-serving, opportunistic, morally bankrupt culture that bonus payments of tens of millions of euro are concocted and justified.  Will the Government intercept and definitively halt this wanton plundering of taxpayers money and the willy-nilly invention of yet more customer fees and charges in 2011 spearheaded by Bank of Ireland?

NTMA defy Public Accounts Committee

I have been observing the relationship between the National Treasury Management Agency and the National Assets Management Agency with the Public Accounts Committee with increasing concern.

NTMA and NAMA Remuneration

The activities of the NTMA and NAMA have been examined on several occasions by the Public Accounts Committee in 2010, most recently on 18 November when the Committee sought a breakdown of the remuneration paid to NAMA employees – all seconded to NAMA from NTMA. The Chief Executive of NAMA, Mr Brendan McDonagh in a letter to the PAC dated 7 December 2010 defied the Committee and advised:

That he discussed the Committee request with Mr John Corrigan, Chief Executive of NTMA – but not, curiously, with the Secretary General of the Department of Finance,  an ex officio member of the statutory  NTMA Advisory Committee and principal advisor to the Minister for Finance to whom both agencies are accountable.

• That the pay structures in NTMA are outside of public service pay structures (as authorised by the National Treasury Management Act 1990).
  
• That the NTMA recruit mid-career specialists in banking, property, corporate finance and law for NAMA on what he termed a ‘fixed purpose’ contracts.
  
• The contract and remuneration arrangements of each employee are unique  to a particular individual and are treated as confidential.
  
• The NTMA/NAMA staffing ‘operating model’ is shrouded in so much secrecy and opacity that colleagues do not know how much each other is paid and that NAMA would apparently be seriously compromised in the conduct of its mandate were it to be exposed – (presumably, to the rigours of public and media scrutiny and that of the marketplace  from which NAMA seeks to determine  ’ market competitive’ salaries). 
  
• ‘Operational freedom to negotiate’, authorised by legislation, in NTMA has apparently become seamlessly synonymous with clandestine secrecy by the Chief Executive of a State agency which does not have a conventional board of directors and where the same chief executive, rather than an independent chairman, corresponds with the Minister for Finance on the performance of the entity that he manages on a day-to-day basis.

McDonagh’s letter and Corrigan’s patrician perspective on the Committee’s request is such an appalling indictment of these State agencies that a citizen would wonder about its capacity to fulfil its core objectives in a culture clearly devoid candour, accountability and transparency.  NTMA and NAMA need to be advised in blunt and uncompromising terms  by the PAC  that the principles of transparency and accountability expected of the Irish public sector are not those of the nod, wink and handshake that prevail, for example,  in the dictatorships of North Korea and Burma. The standards espoused by NTMA also directly contravene the policy of the Department of Finance with respect to the governance of commercial State entities.

Furthermore, this is precisely the self-righteous, conniving, corporate attitude which champions generic, non-itemised accounting that prevailed in FÁS, the HSE SKILL Programme, the Health Services National Partnership Forum and other grossly dysfunctional State entities which have shattered public confidence after the wanton squandering of hundreds of millions of euro with abandon.

Transparency has not compromised the ‘operating model ‘or the efficiency and effectiveness of any the debt management agencies in any other OECD country.  The transparency of these agencies would also suggest that the NTMA is an excessively costly agency compared to its counterparts.

NTMA Costs and Operating Efficiency

The activities of NTMA remained substantially the same in scope between 2000 and 2008 with the exception of the establishment of the National Development Finance Agency in 2003.  Between 2000 and 2007 Ireland’s national debt ranged from €36.5 billion to €37.5 billion.  It increased to €50.3 billion in 2008, an overall increase of 38% since 2000.

But the operating costs of NTMA in that period increased by 314% and remuneration, including superannuation, by 365%.

NTMA held nine bond auctions in 2009 and raised €35.4 billion which brought the National Debt to €75.1 billion.  Salary and pension costs were €22.86 million, or an average of €135,384 per person.  Total expenses in 2009 at €39.4 million were significantly ahead of other OECD government debt management offices.  Debt servicing costs as a percentage of year-end national debt, excluding sinking fund payments, in this period were:

 

2000	5.74%
2001	5.25%
2002	4.66%
2003	4.78%
2004	4.53%
2005	4.61%
2006	5.31%
2007	4.29%
2008	5.24%

Australian Office of Financial Management

The Australian counterpart of NTMA is the Australian Office of Financial Management (AOFM). It raised €38.9 billion by approximately 100 competitive tender in the year to 30 June 2010. Apart from managing the Australian national debt AOFM invested €12 billion in residential mortgage-backed securities to provide funding for small mortgage lenders.  Total expenses for the year amounted to €11.5 million – less than ⅓ of what it costs to run NTMA.  The salary, pension and fringe benefits of Neil Hyden, the recently retired chief executive of AOFM, cost €250,000.  The remuneration, superannuation and fringe benefits of the 36 staff of AOFM amounted to €3.94 million in the year to 30 June 2010, or an average of €109,502 per person.   Approximately 60% of Australia’s government bonds are held by non-Australian residents - compared to 84% foreign ownership in the case of Ireland’s Government bonds.

HM Debt Management Office

The British counterpart of NTMA is the Debt Management Office.  Employing a staff of 112 persons, it raised €267 billion on the bond market in the year ended 31 December 2009 in 58 major and 13 minor auctions – a scale of borrowing 7.6 times greater than that of NTMA.  The activities of the DMO also include the administration of the UK Credit Guarantee Scheme in respect of debt issued by banks and building societies and the Emissions Trading System in the UK.  The salary, pension and fringe benefits of Robert Stheeman, Chief Executive of the DMO was €188,000 – some €12,000 less than the 2009 bonus of Dr Somers.  The net operating cost of DMO operating in the City of London in 2009 was €18.5 million – less than 50% of the overhead to run the NTMA in Grand Canal Street Dublin.

Chief Executive’s Bonus

It was officially disclosed last week that Dr Michael Somers, the founding chief executive of NTMA received a bonus of €200,000 in respect of 2009.  It was reported in the media last September that Dr Somers received a bonus of €400,000 apparently bringing his total remuneration to €1 million.

Ireland enjoyed the considerable advantage of lower level government debt relative to GDP for much of the decade to 2008.  Investor perception of Ireland was positive and reflected in excellent credit ratings; an economy that was perceived to be robust; a positive fiscal outlook and attractive yields on Irish debt.  Irish debt was adopted enthusiastically by investors.  There is no withholding tax on Irish bonds thus removing a barrier to investment for foreign investors unwilling, or unable to invest in assets subject to withholding tax.  Was this bonus merely based on surfing these positive circumstances or what precisely was Dr Somer’s contribution to making a distinctive difference which benefited taxpayers?  The citizen is left scavenging the internet for clues because the agency conveys no information whatsoever  on this issue.  The public are treated with the same bland contempt that occurred days before the recent arrival of the IMF and ECB to take economic control by the scruff of Ireland’s emaciated neck.

It would be helpful  if this key agency of the Department of Finance were to publish the fullest details of all executive remuneration for each of the last 10 years.  This, in the case of bonus payments should identify achievements against particular objectives and confirmation of who approved objectives, achievement and bonus payments. 

Department of Finance Code, 2 October 2001

State bodies, including the subsidiaries of such bodies, are required in the conduct of their operations to adopt this Code of Practice promulgated by the Department of Finance and advocated by the Director of Corporate Enforcement.

The Code of Conduct for the Governance of State Bodies states that the remuneration of a chief executive of a State agency and the remuneration of the chief executive of any subsidiary should be subject to audit and set out in the entities annual report which should state:

• The basic salary
• Payments made under a performance-related pay scheme
• The total value of the chief executives superannuation benefits, with a breakdown between standard entity superannuation benefits and any additional benefits  being provided for the chief executive

NTMA has consistently disregarded this guidance.  S6.(3) of the National treasury Management Act 1990 provides that the terms and conditions relating to the remuneration of the Chief Executive of NTMA are determined by the Minister for Finance after consultation with the Advisory Committee – on which the Secretary General of the Department of Finance is an ex officio member.  State agencies are required to implement Government pay policy, as expressed from time to time, in relation to other staff, including the chief executive and other staff of any subsidiary.

The Department of Finance, in the case of NTMA, is expected to be consulted, according to this guidance,  in good time on any pay proposal, or likely development, that could have significant implications for (i) general Government pay policy (ii) NTMA finances (iii) charges for goods and services provided and / or (iv) other areas of the public sector.  Compliance with Government pay policy, or with any particular Government decision, should not be effected in ways which cut across public service standards of integrity or conduct or involve unacceptable practices which result in a loss of tax revenue to the Exchequer.

The annual report of a State entity should include a schedule of the fees and aggregate expenses paid to each of the directors – or, presumably, in the case of NTMA, to each member of the Advisory Committee

There is, therefore, an obligation on the Secretary General of the Department of Finance to explain the remuneration trends at NTMA and very particularly, the remuneration arrangements between the chief executive and the Minister for Finance to the Public Accounts Committee.  How can he sit on the Advisory Committee and observe long-standing policies of his own department ignored?  That slipshod attitude to supervision allowed FÁS function as a ceded territory dominated and unilaterally controlled and dominated by the chief executive who, in practice was accountable to nobody.

Consultancy & Legal Expenses

NTMA has become a large-scale purchaser of legal and consultancy services.  Details should be provided of the number and value of contracts in each financial year, differentiating between new and existing contracts. 

The annual report should, in the case of consultancy contracts with a value of €10,000, or more, identify the consultant concerned; describe the service provides; confirm the price of that service; details of the selections process and the justification for using the services – to demonstrate transparency and compliance with relevant regulations and directives.  Taxpayers should not have to scavenge internet search sites or surveys of the highest revenue earning professional firms in Europe to distil how much revenue Irish professional firms are obtaining from public sources.

Zuma’s spending spree on State cars

The Irish Government is not the only government under the spotlight for spending on State cars.

A widespread public backlash broke out in South Africa late last year when the government of President Jacob Zuma, elected in April 2009 with an overwhelming majority, spent over €3 million on luxury cars for the use of ministers and senior officials.

Zuma (68), incidentally, was a member of the South African Communist Party from 1963 until 1990, is the father of 20 children and has been married five times.  He was charged an acquitted of rape in 2005 and fought a long battle over allegations of racketeering and corruption.  An 18-seat Boeing 737-7ED VIP business jet is one of four jets at his disposal.

No rules were broken by this outrageous spending spree. The South African ministerial handbook provides for the purchase of up to 220 luxury State cars at a total cost of over €24 million, each car equivalent in value to 70% of the user’s annual salary. A locally commissioned study indicated that this level of expenditure would be sufficient to provide 5,500 houses, 25 schools or pay the annual salaries of 1,500 nurses.

While the global economic recession prompted a reappraisal of State spending before the spending spree, the South African government has failed to curtail extravagant public spending on personal luxuries. The elite of Africa are imbued with a culture of unremitting self-entitlement while the masses are deprived of basic services such as access to water, sewage, electricity and refuse removal. South African ministers argue that top-end luxury vehicles are necessary to meet public expectations and to conduct their mandate.

The Irish Government has spent over €42 million on bilateral aid to South Africa since 2005. Why does the Irish Government not use its diplomatic might, agility and vitality to exert its influence on the governments of aid-recipient countries to curtail self-enrichment and corruption and to foster more sympathy and support to alleviate the financial hardship of the masses they govern?

Irish diplomatic success could, in the case of South Africa, be reflected in the context of the political will of the authorities delivering the values and aspiration of Nelson Mandela with respect to greed, corruption and selfishness.

Real change would be recognised in amendments to their ministerial handbook that outlaws public spending on personal luxuries, improved efficiency in the provision of basic services and the consequential avoidance of a climate of instability and unrest. That would be an authentic demonstration that the poor, hungry and marginalised of Africa are not forgotten and it would imbue the quality and effectiveness of the Irish Aid programme with outcomes that are unambiguous, defensible and sustainable.

Failure to make progress would mean that the Irish Aid programme is really propping up government self-indulgent extravagance in Africa at enormous cost to a dwindling cohort of very hard-pressed Irish taxpayers - with no long-term benefits ever achieved.

Irish Central Bank Review - a toothless wonder

The widespread explicit criticism of incentive structures contained in the recently published Review of Remuneration Policies and Practices by the Central Bank would bear more moral authority if the Government had not made the recently inaugurated Central Bank Commission another haven for political appointees and former overpaid bankers.

It is all very well for this Central Bank review to advocate the necessity for non-executive directors of banks to step up their scrutiny of remuneration arrangements but virtue is never spawned in a vacuum and it never flourishes in circumstances where leadership is not underpinned by compelling and principled good example.  If Irish domestic banks had not demonstrated contempt for the concept of the common good for a very long time there would be no crisis - but they continue to do so. Their practices of paying obscene levels of remuneration are fully insulated by a culture of indifference to the common good that is secured by a phalanx of cronies and yes-men that serve on their boards of directors. These boards are preoccupied and obsessed by their own self-interest.  They have demonstrated that they are incapable of embracing any fundamental change and, according to NAMA, they tend to be economical with the truth when it suits them. They bear no responsibility for the consequences of their decisions because the government insists that moral hazard passes seamlessly, totally and relentlessly to the taxpayers of Ireland for whom there is no apparent ceiling to the burden that is thrust upon them.

The next phase of Ireland’s lost sovereignty will become manifest when the ownership of the domestic banks inevitably falls into foreign hands because they are incapable of resourcing themselves adequately and winning the trust of stakeholders whose support, investment and benevolence is vital. Irish banks will then be accountable to foreign regulators whose exhortations will likely carry more weight and the domestic financial sector will be reduced to credit unions.  The Central Bank will have no control over the banks but remuneration paid by them may only moderate at that stage.