Gravy train for top echelons in Irish State companies

UCD economist Colm McCarthy published a review of the Irish commercial State companies this week as a prelude to the Government considering their possible sale.  The media have been commenting on the high level level of pay at the top of these organisations.  The average employee remuneration in all of them is €54,600 but I thought it would be interesting to set out the the average pay in each of them and the multiple of that average which the chief executive receives.  The data relates to 2009.

Entity	CEO Remuneration in 2009 €	Average Employee Remuneration in 2009 €	Multiple of employee average received by CEO
CIE	251,160	49,100	5.1
ESB	752,568	75,500	9.9
Bord Gais	394,000	67,300	5.8
EirGrid	407,000	83,400	4.8
Bord na Móna	392,000	44,800	8.7
Coilte	417,000	54,267	7.6
Dublin Airport Authority	568,100	49,300	11.5
Irish Aviation Authority	324,000	95,600	3.3
Dublin Port	317,000	67,900	4.6
RTÉ	326,000	59,700	5.4
An Post	500,000	43,300	11.5

The Minister for Finance, Brian Lenihan,  announced in his Budget speech last December that ‘there should be a maximum salary rate of €250,000 in the public sector and that the position of the Minister for Finance as a shareholder or the statutory shareholder can be used to enforce the objective of the maximum salary within a reasonable timeframe’.

Lenihan’s ‘capacity to enforce’ was not apparent when the former managing director when he demanded the resignation of the former managing director of AIB just weeks earlier and he departed having pocketed benefits worth €3 million after one year in that role

Pay Day at AIB

When the Covered Institutions Remuneration Oversight Committee reported to the Finance Minister in February 2009 they stated that ‘pension arrangements for senior executives in banks should be at least broadly similar to those applicable to the generality of the staff of the institution’ This Report also recognised that the top management of banks make little or no contribution for their pensions and recommended an appropriate balance between personal employee contributions and the employer contributions and the extent to which they employee contribution may need to be increased needed to be immediately reviewed

Why did the Department of Finance tolerate an agreement nine months later, in November 2009, to facilitate the payment to Colm Doherty, the former managing director of AIB, a cash payment of €2 million in lieu of a contribution to his pension? Given the trading results for 2010 and the overall circumstances of AIB, how is it possible, for this nationalised bank, to fully discharge such extravagant payments to a departing managing director - while thousands of AIB employees are facing the loss of their jobs and great uncertainty about their termination packages?

During his 1-year tenure from mid November 2009 AIB lost €10.2 billion and total assets decreased from €174 billion on 31 December 2009 to €145 billion at the end of last year. It was obliged to take a 54% haircut on the €18 billion of property loans taken over by the State. It lost its listing on the Irish and London Stock Exchanges and a taxpayer investment of €7 billion means that with 92% of the equity owned by the State it is effectively nationalised. Its shares now trade on the Enterprise Securities Market alongside the mom and pop operation.

Loans outstanding are €94 billion, of which €56.8 billion are either in residential mortgages or property and construction and almost 30% of them are wither vulnerable, impaired or under scrutiny. Customer accounts have dropped from €84 billion to €63 billion in a year and the Irish banks are generally unable to tap funding markets.

Former United States Presidents retirement packages

Outgoing Irish TD’s from the last Dáil received more than €13 million in pension lump sums and termination payments and on top of these outgoing TD’s aged 50 and over will receive more than €4 million annually in pension payments. Seven ministers of state shared close to €250,000 in severance payments, including three who were returned to the Dáil – (McGuinness €25,276, Browne €24,952 and Micheál Kitt, now Leas Ceann Comhairle €25,276)

Former US Presidents

Former Presidents of the United States have only qualified for a pension since 1958. The current value of a former President’s pension is €138,366 and it is aligned to the salary of the Head of an Executive Department (e.g. Cabinet Secretary / Secretary of State, Secretary of Commerce etc.)

Former Presidents retiring before 1958 often pursued various occupations in retirement and received no federal assistance. The industrialist, Andrew Carnegie (1835-1919), who created US Steel announced a plan in 1912 to offer $25,000 annual pensions to former Presidents but many Members of Congress considered it inappropriate that such a pension should be provided by a private citizen. Legislation was passed to create a presidential pension but it was not enacted until 1955 when the 33rd President, Harry S. Truman (1884-1972), experienced financial limitations in recruiting an office staff.

Today, transition funding is available to former Presidents and Vice Presidents for seven months to facilitate their return to private life. These funds are used to provide suitable office space, staff remuneration, communication services, printing and postage associated with the transition.

The maximum annual rate of remuneration for an individual staff member of a former President cannot exceed the pay of a Level II appointee to the Executive Schedule (e.g. Deputy Secretary of a Federal Government department) and the current rate is just under €120,000. A former President supplements staff remuneration costs with private funds.

A total of €2.6 million is provided for former Presidents, their offices and Presidents widow in the 2010 Budget. This comprises €360,000 for Jimmy Carter, €576,000 for George Bush Snr, €756,000 for Bill Clinton, €907,000 for George H W Bush. The sum of €9 is provided for postage used by widows.

The aforementioned sum covers pension compensation, office rental, travel supplies and equipment.

State Funeral

United States Presidents are also entitled to other benefits. These include a State Funeral at the request of the surviving family. The sitting President officially announces the death of a former President and commander-in-chief by presidential proclamation and offers the nation’s condolences to the former President’s immediate family. Suitable honours are rendered by units of the armed forces under orders from the Secretary of Defence and the Secretary of the Army as his personal representative. In turn, the Secretary of the Army delegates to the Commanding Officer of the US Military District of Washington the overall authority for planning and implementing funeral arrangements for former Presidents. Each living former President has also prepared a formal funeral request which is kept by the MDW. There is a long standing tradition that an officer escorts the immediate family of a deceased military member until burial and the in case of former President’s that duty falls on the commanding general of the Military District of Washington.

Each branch of the armed forces provides personnel and support to a State funeral and, as a former commander-in-chief, each former President is entitled to be buried in the National Cemetery at Arlington Virginia.

Congress honours a former President by allowing his coffin lie in state in the Capitol Rotunda for a State ceremony followed by public viewing of the closed coffin.

Medical Expenses

Former Presidents and their spouses, widows and minor children are entitled to treatment in military hospitals.

Secret Service Protection

The Secret Service provides lifetime protection for former Presidents who entered office before 1 January 1997. Surviving spouses receive lifetime protection until remarriage. Those entering office after 1 January 1997 and their spouses receive protection for 10 years. Protection for the spouse ends upon divorce or remarriage. The widow of a President receives protection for a year following the death of a President. Temporary protection can be authorised at any time. Protection for a former President’s children is available to them until they reach 16 years of age, or for a period not exceeding ten years, whichever occurs first.

Presidential Libraries

With the exception of Richard Nixon, every former President since Herbert Hoover (1874-1964), the 31^st President, has had a presidential library managed by the National Archives and Records Administration established in his name.

The process of establishing a presidential library may begin with the establishment of a presidential library foundation – a private organization under the leadership of friends of the President. This usually enjoys tax exempt status and is allowed to receive donations and contributions which are used to purchase a site and construct a library building, that is deeded to the US Government. The Archivist deposits the President’s official records and papers in it and assumes management of the library.

Savings on Irish ministerial transport not as great as suggested

The new Irish Government tell us that substantial savings will be made on Official Cars from 16 June 2011 and on ministerial air transport.

The total cost of providing official transport to 27 Irish Office Holders in 2009 was €31,946,650. This includes €7,500,000 for 27 Garda-driven cars; the two aircraft assigned to ministerial use and four helicopters.

Last month Alan Shatter, Minister for Justice, Equality & Defence announced new arrangements for ministerial transport in place of the prevailing arrangements which consisted of 27 vehicles and 54 Garda drivers.

The new arrangement will mean that only the President, the Taoiseach, the Tánaiste the Chief Justice, the Director of Public Prosecutions and the Minister for Justice, Equality & Defence will continue to be provided with Garda transport and drivers for security reasons. The fleet of 27 vehicles will be reduced to 7. Cabinet ministers will be required to provide their own cars but will the professional drivers they recruit will be paid by the State. Former Taoisigh will not longer qualify official cars on a full-time basis.

The Garda Office Holders Fleet cost €7.5 million to operate in 2010. The average cost of a Garda-driven official vehicle at almost €280,000 per annum is high. The average cost to the State of a vehicle provided by an Office Holder but driven by a professional driver paid by the State is €120,200. The estimated savings would therefore be €4 million per annum to this budget but the cost of the drivers will remain with the Garda Siochaná.

That maybe the case with respect to direct cost of operating the Office Holders fleet. But the 44 Gardaí who are being transferred from official driving duties will, naturally, remain on the State payroll. They will presumably lose the additional allowance of €17,936 payable to this category of driver – a total saving of €394,592.

The cost of fuel for these vehicles was €183,493; the cost of maintenance was €147,339 and the cost of depreciation was €541,045 in 2009. The salary costs associated with this fleet was €4.2 million in 2009, or average annual earnings per driver was well north of €77,778. The top rate for a Garda in 2009 was €48,695 and those on the ministerial pool qualified for an additional allowance of 40% of basic pay (€17,936) per annum making a grand personal total of €66,631.

This ia an awful lot of money, especially considering that 17 of the 27 users of these vehicles in 2009 were domiciled in Dublin. That cost can also be seen in the context of the Garda Training College in Templemore being effectively mothballed to save the cost of paying recruits. The number of retired members has, incidentally, increased from under 6,000 in 2007 to an estimated 9,750 retirees in 2011.

No vehicles have been added to the Office Holders fleet since 2008 when €509,765 was spent on new cars. 14 of the 27 cars have travelled over 200,000 kilometres and two of them have broke the 300,000 kilometre barrier.

Ministerial Air Transport

Apart from ground transport the cost to the Aer Corps of providing air transport to Office Holder in 2009 was €24.44 million (€17.39 M for the Gulfstream IV and €7.05 M for the Learjet 45). The average direct cost of the Gulfstream IV – maintenance, fuel, support, catering, cleaning and airport handling costs is €4,050 while the remaining costs – mainly depreciation and personnel bring the average total hourly cost of this aircraft per hour to €7,890. The comparable hourly costs for the Learjet 45 are €1,270 and €2,950.

There are also four helicopters available for ministers’ use at a total cost per hour ranging from €1,590 to €3,130 – depending on model.

Comparison with British Government Car Fleet

The British Government operated 78 vehicles in the year ended 31 March 2010 at a total cost of €7,744,889, or slightly less than an average cost of €100,000 per vehicle. The four vehicles used by the Cabinet Office, for example cost a total of €417,000, or €104,250 per vehicle and that particular fleet includes several Jaguar and Land Rover models. The Northern Ireland Office operates two official vehicles at a total cost in 2009/10 of €329,000, or an average of €164,480 per vehicle – that is €120,000 less than the Irish counterpart.

Britain’s Government Car & Despatch Agency employs 177 persons on the official government fleet. The Director of the Government fleet is paid an annual salary of €62,849 - €15,000 less than the typical salary of a Garda driver assigned to an Irish Office Holder. The average staffing cost of individuals assigned to the Government fleet is €59,275.

Conclusion

The foregoing illustrates how much Irish costs are out of line with comparators elsewhere.

The EU and IMF are ‘deeply unimpressed’ with Irish public sector pay levels

The EU and the IMF are reported to be ‘deeply unimpressed’ at the disparity with counterparts elsewhere.

The salary structures at NTMA remained a deep and profound secret since it was established 21 years ago until details were disclosed to the Public Accounts Committee on 7 January 2011 - after exhaustive probing. No less than six secretaries-general of the Department of Finance tolerated this secrecy despite it conflicting with their own Code of Practice for the Governance of State Bodies.

These revealed that:

1. The chief executive of NTMA is paid a basic salary €490,000, with provision for a bonus of up to 80% of salary, bringing potential annual remuneration to €882,000 (51 times the Irish minimum wage). The incumbent and his predecessor is the beneficiary of non-standard enhanced pension arrangements.
   
2. The chief executive of NAMA is paid €430,000 with provision for a bonus of up to 60% of salary bringing potential annual remuneration to €688,000 – (40 times the Irish minimum wage).
   
3. The chief executive of NDFA is paid €330,000 with provision for a bonus of up to 60% of salary bringing potential annual remuneration to €528,000 (30 times the Irish minimum wage).
   
4. No less than 16 individuals are being paid more than the Taoiseach now earns - €200,000+
   
5. 103 of the 305 staff in NTMA and its offshoots are paid salaries over €100,000 so, from the perspective of the economically disadvantaged, NTMA is a goldmine that can function with clandestine opacity, immune to overall Government policy on public sector remuneration and completely insulated from trends endured by the majority of citizens.

The grading and pay rates of the  Civil Service Regulations Act 1956 may not apply to NTMA but the National Treasury Management Act 1990 does not confer any privileges with respect to secrecy or derogations from the norms of public accountability.

The salaries of chief executives of counterpart major national debt agencies in 2009, who were trawling for funding from the same sources as Ireland when our authorities raised €35 billion, were as follows:

• The Chief Executive of the Australian Office of Financial Management was paid €250,000 and no bonus to raise debt amounting to €39 billion in 2009 – (remuneration 11 times the minimum wage in Canberra).
• The Commissioner of Public Debt in the United States Bureau of Debt oversees of staff of almost 2,000 people and a departmental budget of €125 million. He was paid less than €120,000 in 2009.
  The Commissioner’s remuneration was 9 times the annualised minimum wage in Washington DC. No US Federal employee earns more than President Obama - €290,000 per annum.
• The Chief Executive of the UK Debt Management Office raised debt of €267 billion in 2009 – over 7 times the debt level raised for Ireland that year. He was paid €188,000, equivalent to 38% of the basic salary of his Irish counterpart. He did not receive a bonus. The Chief Executives remuneration was 14 times the British minimum wage.

The salaries of the chief officers of those institutions providing the resources to bailout Ireland are: President of the IMF €320,275; President of the EU Commission €293,064; President of the ECB €367,863; Permanent Secretary of HM Treasury €207,000.

Is it any wonder they are ‘deeply unimpressed’?

Irish financial regulation–two contrasting perspectives

Two contrasting perspectives have been offered on Irish banking regulation in the past week. A Blueprint for Ireland’s Recovery was the culmination of several months dialogue among 17 ‘Influential Persons’ that included several former board members of AIB and Bank of Ireland prior to the onset of the September 2008 financial crisis and the massive commitment of resources to bailout these banks. They argue that what Ireland needs is ‘an appropriate and proportionate regulatory environment’ but ‘we’ must ensure that ‘over regulation is not a deterrent to foreign direct investment’.

The Moriarty Tribunal Report published on 22 March makes recommendations with respect to banking regulation. It states that most of the information upon which the Central Bank, as regulator, should have acted was available to the Bank, or ought, on reasonable enquiry, to have been available to it when it supervised Guinness & Mahon.

The Moriarty Tribunal investigated  Guinness & Mahon in connection with off-shore subsidiaries in the Cayman Islands and the Channel Islands from 1976 to 1982. It was concerned with Central Bank’s concern that Guinness & Mahon was operating a tax avoidance scheme that was tantamount to facilitating tax evasion. Following special investigation by the Revenue Commissioners, prompted by the Tribunal investigation, the Ansbacher scandal subsequently yielded a cumulative €107.3 million in tax and penalty payments from 139 taxpayers by the end of 2009.

Moriarty states that the reason the Central Bank did not act was a culture ‘characterised by a marked degree of unwarranted institutional and regulatory timidity on its part and by a high degree of unacceptable commercial defiance’, on the part of those subject to regulation. Allied to these considerations and underlying these attitudes and approaches was the conviction and culture of all concerned that the attachment of publicity to improper banking behaviour , or the generation of controversy in respect of banking practices and banking standards in Ireland, might lead to the undermining of the Irish banking system. It was not that the Central Bank at the time lacked any requisite power to enable it to suppress the shamelessly improper operation of the Ansbacher accounts, but rather that it failed to use its ample regulatory powers.

The function of the regulator is the ‘regulate’ and the balance had swung toward under rather than over regulation. Strong action, not amounting to over regulation, on the part of the regulators, should be valued as a key element rather than a retardant, in the promotion of a healthy financial sector. It is extremely difficult to frame recommendations where what is proposed is a change of attitudes on the part of the relevant authorities and indeed in the overall commercial culture in which those authorities are bound to act. As recent events have shown, regulation if the key to the survival of the banking sector, so vital to the national economy

A culture where forthright regulation is valued, not merely at a time of financial stringency, but at a time when it might be thought to be an unnecessary brake on commercial activity.  Such a change can of attitude can best be encouraged by increased vigilance on the part of elected representatives.  These issues were addressed in the Tribunals first report published in December 2006 – but without apparent consequence, according to Moriarty.

The Messiah’s Message from the political orphans

So 17 self-righteous messiahs, many of whom clung with a vice-like grip to the skirt hems of the Haughey, Ahern and Cowen administrations, have formed themselves into a rump to ‘advise’ the new Government on creating jobs, reforming the public sector, rebuilding international confidence and re-engineering the banking system. Economic salvation can be achieved, they argue in A Blueprint for Ireland’s Recovery, through manufacturing, tourism, agriculture, life sciences and ICT.

No vested interest, apart from their own, is ignored to flatter their dreams and aspirations. Is it not inspiring to observe individuals’, some of quite moderate ability, but who were cute and wily enough in taking care of their personal interests, to earn humongous sums, from the public purse in many instances, to focus their ‘advice’ on the mutilation of the public sector and the ‘reform’ of the welfare system?  Does this blueprint also mean that tax exiles are now purporting to advise on economic recovery?

‘To restore confidence and Ireland’s reputation, an investor relations strategy should be developed to attract overseas investment. Among the targets suggested, is that 20% of FDI should be sourced in South East Asia by 2015’. Are they aware of Horizon 2020, of did they see no reference in it when they regularly read the The Beano, The Dandy and The Hotspur?

Personal banking trends in Ireland

The amount of consumer credit outstanding in Ireland at the end of January 2011 was €18,609 million which has declined from €23,711 million a year earlier. Of this €2,722 million (15%) is attributable to personal credit cards held by 2,068,000 personal credit card holders.

Among those with current credit card/store card debts the amount owed varies considerably. One-fifth of households with such debt owe less than €571, a further fifth owe between €571 and €1,400, while 10% of these households owe more than €5,700 on their credit card. Approximately 56% of Irish households had a credit card in 2008 compared to 26.1% in 1995.

According to a recently published by the ESRI study ‘Financial Exclusion and Over-indebtedness in Irish Households’, 20% of Irish households in 2008 did not have a bank current account – that is over 290,000 households. 31% of households do not have any form of credit so the €18,609 million is actually spread among 1,008,000 households the average debt burden with an average burden per household of €18,440 (excluding mortgage debt)

This number without a bank account includes 36% of those ‘at risk of poverty’ and 60% of those ‘living in consistently poor households’. The preference for dealing exclusively in cash is most prevalent among those in the older age group, those with no educational qualifications and those in the bottom income quartile.

The survey also found in the case of households did not have any form of credit. 63% of these did not need to borrow; 22% did not have credit because they could not repay debt; 7% borrowed from family or friends and did not need commercial debt and a further 7% believed that they would not be granted a loan.

Deposits held by Irish households in January 2011 amounted to €93,957 million representing 56% of total Irish private sector deposits.

Public Outrage at Bank of Ireland extravagant bonuses

Last Saturday I spent a pleasant few hours with fellow hill walkers strolling along the 14KM stretch along the banks of the River Dodder. The controversial topic of Bank of Ireland bonus payments got an airing. These men and women of the world walking with me were aghast at what emerged in a Department of Finance Report on the matter as this Bank gave the Irish public the V sign.

A parliamentary question sought information in November 2010 on bonus payments to staff made by banks since the commencement of the Irish Government guarantee in September 2008. The Bank of Ireland advised the Department of Finance that “no performance-related bonuses were paid with respect to the financial year to March 2009 and December 2009”.

The statement added “a small number of people at middle management level received payments which reflected either guarantees which were agreed on their joining the Group or deferred payments where the historic performance criteria had been achieved and the payment was deferred over several years. For commercial reasons Bank of Ireland do not disclose the amount of such payments. The Bank advises that it had not legal discretion in these matters”

The loss at Bank of Ireland for the 9 months ended 31 December 2009 had risen to €1,813 million compared to €23 million for the year ended 31 March 2008. Impairment charges in this period reached €4,055 million compared to €1,435 in the year ended 31 March 2009. The Irish Government was forced to invest €3.5 billion in preference stock so as to bolster its capital base.

It transpired that the information provided by Bank of Ireland was incorrect and that bonus and quasi bonus payments from September 2008 to December 2010 amounted to a staggering €66.37 million – all linked to performance.

A patina of legal legitimacy is not an indication that any transaction is ethical, moral or affordable.

The hill walkers are utterly mesmerised that Bank of Ireland could be so utterly undermined in the Bank by duplicity, betrayal, self-serving slovenliness and skulduggery. These characteristics are evident not just in grotesque scale of bonus payments, which the Bank (and the public) cannot afford and untruthful answers to parliamentary questions, but there is now also evidence of incomplete and misleading information in the due diligence process prior to the public subscription for shares, in the attempted enhancement of the Group Chief Executives pension terms last year and the tardiness by the Bank in relation to the subsequent impeded and delayed investigation into the November 2010 misrepresentations to Dáil Éireann.

1. These bonuses, especially in the prevailing circumstances, amount to the barefaced looting of society – on a scale commonly seen in Russia, Africa and Asia.
   
2. The explanation that bonuses are ‘open to different interpretations’ and the comment by Arthur Cox that Bank of Ireland “used a restrictive and uncommon interpretation of what constituted a performance bonus” describes a crazy mentality of a type not untypical of occupants of padded cells in a lunatic asylum, whose capacity to communicate in vernacular English is very limited; who have ‘no intention to mislead’ and are likely to recognise this in lucid moments to avoid personal embarrassment.
3. The implication that the Irish people, who have been fleeced of €3.5 billion by Bank of Ireland, can now be bought for €2 million paid by Bank of Ireland to the Exchequer ‘to recognise the difficulties cased by the way the Bank handled the matter’  will simply  create a veneer of indulgence and camouflage to enable them to be further fleeced of, not just €66.37 million, but an additional €21 million in respect of bonuses and commissions in 2011 and other amounts in 2012 is outrageous and abominable.
4. The suggestion that any future parliamentary questions in relation to personnel or other important matters be authorised by the Group Chief Executive beggars belief on grounds of credibility. The Report indicates that overall payments totalling €1.2 million were not disclosed in the due diligence process prior to the public bailout.
5. The Sunday Tribune on 30 January 2011 that the Group Chief Executive of Bank of Ireland directly intervened with the planning authorities in October 2007 in connection with the proposed Sean Dunne development that would have cloned Jurys/Berkeley Court Ballsbridge hotel sites with Calcutta, had it been heeded?

The text of the letter from Richie Boucher to Dublin City Council planning authorities read:

“Dear Sir

Re Jurys / Berkeley Court Site

I refer to the above and write to confirm my strong support for this landmark proposal which I believe will significantly benefit the City of Dublin and its citizens through helping enhance the concept of a living city and providing buildings of significant architectural merit befitting Ireland of the 21^st century. Yours faithfully, Richie Boucher, Chief Executive Retail Financial Services Ireland.”

Dublin City Council granted partial permission for the Ballsbridge development but it disallowed Dunne’s application to build a 37-floor skyscraper.

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.