Reform of Irish legal professional services long overdue

• Using language reminiscent of a contrite bishop, Bernard Allen TD, Chairman of the Public Accounts Committee, described the progress of reform in the legal profession as ‘seriously inadequate’. It might have been more honest to state that the absence of reform is a truly searing indictment of the Department of Justice, Equality & Law Reform, the Law Society and the Bar Council.
  A robust and comprehensive case for root and branch reform was made in November 2005 by the Legal Costs Working Group and in December 2006 by the Competition Authority. These reflect prior recommendation made by the Restrictive Practices Commission, the Fair Trade Commission and the OECD between 1982 and 2001. The Competition Authority made 29 recommendations designed to overcome unnecessary and disproportionate restrictions on competition, of which 15 were to have been implemented directly by the Department of Justice Equality & Law Reform by June 2008. Only one of the 29 recommendations has been introduced. It is no longer necessary to pass an exam in the Irish language.
  
  The average gross income of an Irish lawyer in 2002, before the emergence of the property bubble, was €164,000. The total number of practicing lawyers in Ireland then, relative to our population size, was lower than in other common-law countries. Research also indicates that there is a very large variation in fees charged and that legal fees had risen faster than incomes in other sectors.
  
  The collapse of the construction sector has diminished legal earnings potential from property transactions and places the State as a more strategically important source of their fee income. There is still an appalling lack of transparency and predictability with respect to legal costs.
  
  The 2008 Annual Report of Dublin Docklands Development Authority, for example, indicates that this disgraced entity spent over €5.4 million on legal costs that year. But there is not a scintilla of explanation as to whom this money was paid, or what value, if any, was achieved by taxpayers'.
  
  While NAMA is intended to bring about a rehabilitated banking sector is it also to become an boundless, easily exploited, gold mine for lawyers, as various tribunals have been for fifteen years, because there was no competent adult supervision to control costs?
  
  The Comptroller & Auditor General indicated in Special Report 63, published in December 2008, indicated that the total cost of the Mahon, Morris and Moriarty Tribunals were difficult to precisely forecast but this Report states:
  
  Administration costs will amount to between €50 million and €52 million
  Tribunal legal teams will cost between €84 million and €87 million
  Litigation will cost approximately €4 million
  Third party costs could range from €157 million to €182 million based on the pattern of awards observed in the Morris and Mahon Tribunals
  The overall likely cost to the State of these three tribunals based on the pattern of costs experienced prior to December 2008 is estimated to be in the range of €336 million to €366 million
  
  The Solicitors Judicial Tribunal reported a 28% increase in the number of applications reporting professional misconduct in 2008 when the recommended reforms of the Competition Authority were to have been an accomplished fact. They cautioned how this spiralling trend in the number and nature of complaints is eroding trust, integrity and public confidence in how the profession is regulated. There is no pattern to the gender, geographic location, age or mental stability of those solicitors who are the subject of complaint. Their victims' can be alive or deceased. Subsequent media reports show no abatement in the trend of professional delinquency among solicitors. Therefore, when one looks into the wing mirror of one's car, it is important to realise that a rogue solicitor maybe closer than you realise.
  
  A case has been made that the Church can be successfully and transparently led by ‘wounded healers’ who could recover trust and esteem. Do the legal professional bodies also expect society to tolerate a possé of ‘wounded advocates’ whose charges are so excessive that they are regarded as the highest in the world? Is the leadership of these bodies so smug, weak and taciturn that they are content and sufficiently complacent to preside over a profession diminished by an epidemic of professional misconduct and unconcerned that their members are anything but consumer focused and competitive, in stark contrast to their counterparts in other common-law jurisdictions?
  
  Perhaps the Taoiseach should have also changed the title of the department that deals with law and order issues in the State to better reflect its actual scope. Should it be known as the Department of Policing and Prisons? It no longer has the equality mandate. There is no justice if consumers cannot access legal services on a transparent, genuinely competitive basis. A new title would reflect its flaccid, impotent approach to the delivery and embedding of reform in the legal profession and a failure to empower consumers with core information they need to deal with lawyers and make informed decisions.

The Wounded Healer salutes McGee’s resignation

It is interesting to compare the statements  of Cardinal Brady, the self-styled Wounded Healer,  on the subject of his colleague Bishop John McGee, former Bishop of Cloyne who resigned yesterday while a State inquiry into his handling of child sex abuse issues in his diocese continues.

When calls were made for McGee’s resignation in January 2009 Brady stated “I have known John Magee for almost 50 years and I have always found him a reliable and dependable person. I know trust has been damaged, but trust can be restored and built up and even earned by genuine steps being taken to address the issues and the concerns of victims.”

When McGee’s resignation was announced yesterday The Wounded Healer stated “I wish to acknowledge the long and varied ministry of Bishop John Magee in the Church.  I thank him for his contribution to the work of the Irish Bishops’ Conference over the past twenty years, particularly in the area of liturgy.  I assure him of my prayers at this time and wish him good health in his retirement.  However, foremost in my thoughts in these days are those who have suffered abuse by clergy and those who feel angry and let down by the often inadequate response of leaders in the Church.”

There’s nothing to beat a leader who is consistent, lucid and whose priorities are transparent and easily identifiable from the issue of personal self-interest and survival.  Where do we stand now on the issue of trust and the recovery of trust now that another wounded healer has been lost?

More gloom emerging from Anglo Irish Bank

Recent  media reports suggest that Anglo Irish Bank is set to announce the highest losses in Irish corporate history a whopping €14 billion as the former financial director of the Bank, William McAteer, FCA is detained at 6.30 AM at his home this morning, March 24th,  for Garda interrogation under S4 of the Criminal Justice Act. 

Today’s papers advise that 70 of the Bank’s employees are to receive pay increases because they took on extra responsibilities. 

The 2009 Interim Report for the six months to 31 March 2009 reported a loss of €4.1 billion arising from specific lending impairment charges of €3.7 billion and collective lending impairment charges of €400 million.  The Government provided Anglo with €4 billion as a consequence.

The Bank retained the services of Drury Communications to explain the 2009 Interim Report which were announced by former chairman, Donal O’Connor.

Was it really necessary to retain external high cost publicists to announce these results to the sole shareholder, The Minister for Finance? 

Will external publicists be employed to explain the pending results, or will some of the 1,800 employees have the necessary fluency to deal with this?  Anglo Irish Bank employed an average of 1,864 persons on 30 September 2008 at a total cost of €206 million.  That is an average cost of over €110,000 per person. 

Threatened strike at Passport Office, CPSU set to blockade foreign travel

The Civil and Public Service Union, in issuing protective strike notice, better prepare for a long, bitter, costly and intransigent strike if that is where they are headed. No democracy would tolerate a government caving into the anarchy and subversion perpetrated by their members at the Passport Office in recent times. The notion of paying people, who enjoy secure State-guaranteed employment, in full, while their disruption continues is irresponsible and tantamount to the larceny of taxpayers’ money.

The CPSU and their fellow travellers in fantasy-world believe they can, with impunity, inflict gross and intolerable inconvenience and disruption on fellow citizens to avoid pay cuts the cost of which would be paid for by the same people that are waiting in line for hours on end to obtain a passport and through the very great sacrifices of many others who are as brutally squeezed economically as these people.

There is not a segment in our society whose economic wellbeing has not been mutilated by the consequences of appalling economic mismanagement, incompetence and, possibly, criminal behaviour. Is the response of the great proponents of social solidarity now based on the principle that those with the greatest capacity to blackmail and blackguard are to achieve the greatest comparative advantage?

It is high time that the Government realise that they have been elected to govern. That obligation takes precedence over the pillow talk in Government Buildings carried on under the auspices of the social partnership process, an obsolete initiative, that is now simply intended to make unions leaders appear to be effective.

The achievement of a smart, innovative economy requires the enhancement of labour cost competitiveness and improving the ranking of Ireland higher than its current 26^th place in the EU-27. That is not achievable on a foundation of workplace chaos, outmoded practices and dysfunctional stunts which are most assuredly the express route to Third World living standards from which it maybe extremely difficult to recover.

In the meantime – the unions’ will decide which Irish citizens can freely travel outside the country and who cannot.  Some of you thought that the 1994 ‘X Case’ which denied a 14-year old the right to travel to Britain to have an abortion and which brought down the Albert Reynolds Government was restrictive.  We are now about to experience the same level of individual freedom as the citizens of North Korea.  To hell with the impact on international trade, employment opportunities outside Ireland, and, of course leisure pursuits.  You will now defer to some dandruff-infested CPSU member who will determine if and when you travel.

The Pope’s Letter is a starting point

Greetings from Istanbul!  I reflected on the Pope’s letter on the 4-hour flight to here today.  The Irish newspapers were filled with comment about it.

I welcome the Pope’s candid apology and the empathy reflected in his letter. His language is straightforward and direct.  It would have been impossible for a single letter to have dealt conclusively with the complexity connected to clerical child sex abuse in Ireland.  His letter has the potential to open a new relationship with Ireland - if words are followed by actions that chart a new direction which inspires confidence and recovery.  But much hard work is required to achieve this and it may not be possible for change to come quickly enough to satisfy many people.

The Pope criticises the Irish bishops for having failed - at times grievously.  Their errors of judgement and failure of leadership, to which he refers, will require a radical response from the Holy See in terms of who leads the Church in Ireland and what the nature, style and tenure of the desired leadership is.  One characteristic of bishops in Ireland is the extraordinary length of their tenure which extends up to 40 years in some instances.  Longevity of service does not equate with a disposition to change and an absence of accountability leaves them in a most undesirable position when things go wrong with devastating consequences.  There is no obvious method for those in difficulty to validate an impaired mandate.

The first response to systemic failure in an organisation, or institution,  are new faces at the helm, even if those effected by such change believe that they are not directly culpable for adversity uncovered.  The consequences of such change is to achieve effective accountability, inspire trust and a revitalise the institutional culture.

Ireland has had to deal with a plethora of such instances in the recent past and many of the new incumbents have arrived from outside the country to take over pivotal positions in various fields, such as financial services, the State funding of research, the investigation of venality and incompetence in banks, running a loss-making airline and the inspection of policing. 

Will the Pope need to nominate an archbishop of Armagh with the patience, eminence and stature of Senator George Mitchell to achieve what is necessary?  Does such an individual exist within the global Church hierarchy?  How would the incumbent bishops react to the imposition of a new broom from far away, untutored in their native habits and preferences?  Should they be innovative and demand a time limit to their tenure of, say, five to seven years, and be free to deploy their experience constructively in another role?

My contribution to The Irish Times on ‘Renewing the Republic’

I would imagine that a fundamental and crucial priority of the founding fathers of a newly independent nation is to demonstrate the viability of that long-sought for independence and that its national institutions are sufficiently robust and agile to take care of the basic needs and legitimate aspirations of all its citizens. But perhaps the Irish experience has more in common with the evolution of a family business than with the typical development pattern of an independent nation, if there is such a thing as a typical development pattern.  

The survival rate of family businesses in Britain, past the third generation of the founding family, is only 24% while just 5% of Irish businesses exist as separate entities five years after the departure of the founder. The figure for the United States is 10-15% surviving after the third generation with 3-5% making it to the fourth generation. 

This would imply that there is a single-minded focus on the progress and welfare of a family business while under the control of the first two generations that wanes with the arrival of the third generation.  
If this analogy were to be applied to Irish nationhood would that explain how a State organisation's resources were looted to flatter the vanity of a chief executive who aspired to the lifestyle and acclaim of a medieval aristocrat? Could it account for planning decisions that allowed residential accommodation to be built on flood plains across Ireland that were to become virtually derelict or worthless as a consequence of severe flooding? Would it explain a religious leadership that indulged itself with a veil of secrecy to maintain an existence independent of the nation's laws? Could it account for financial regulators who would tolerate 100% residential mortgages in quantum's that were up to 8 times the income of borrowers? Borrowers in what Donald Rumsfeld calls 'old Europe' can only borrow between 60 and 80% of a home value, as is the case in Germany. 

While we recover from the delinquency of a generation of diabolical leadership across a wide spectrum of national power bases, it is also important to realise that the Irish nation has renewed itself many times in its 91 years of independence and will continue to do so - just like a forest scorched by a widespread fire, or when our country was ravaged by famine. 

Most of the old rogues in leadership are being disgraced and replaced, some by strangers from another land. Some will hopefully be brought to account and punished in a court of law for their malfeasance. The great imponderable, as we advance towards the centenary of our independence, is whether that renewal can meet the needs and expectations of its citizens. We must never lose sight of the slogan that 'asset values can go down, as well as up' especially when a nation is borrowed to the hilt. There is no preordained certainty that progress is always in a desired positive direction - ask any white Zimbabwean.

Cardinal Brady dances on the head of a pin

The 1975 oath of secrecy extracted from two child sex abuse victims to which Cardinal Brady was a witness is simply another vivid and catastrophic illustration of the consequences that arise when there is no accountability within an organisation and the vanity of leaders takes absolute precedence over the vitality and integrity of its mission.  What other organisation in the world facilitates the continued incumbency of a challenged leader merely on his own say-so with the echo of a few sychophants' audible in the background?  If there is no process of validation how is the calibre, acceptability and trust of a leader to be judged, tested and respected, especially when the mandate to lead is compromised or impaired?

This oath of secrecy was not time limited.  It does not seem to have been demanded to facilitate the expedited removal of Fr Smyth's priestly faculties. The basis of it was not attributable to a penitent making a Confession, which is legitimately guarded by secrecy. What purpose could this infinite oath possibly have had other than to enable Fr Smyth evade the process of criminal justice? 
This oath meant that one of the most heinous child sex abusers in Ireland enjoyed the freedom to rape and sodomise innocent children for a further 19 years without Cardinal Brady or Bishop MacKiernan, who resigned as Bishop of Kilmore in October 1998, over a year after Fr Smyth's sudden death, apparently not making the slightest intervention to have Smyth apprehended.  Fr Smyth might have abused for the rest of his life had it not been for the forensically researched 1994 UTV television documentary that exposed him - a programme the making of which was also impeded by self-serving bishops' protecting their interests and reputations.

The knowledge that is now in the public domain places immense constraints of credibility on Cardinal Brady to provide the calibre and agility of leadership that a Church dealing with crisis now urgently needs.  If he has been granted the gift of empathy and introspection with the same lavish abundance as he was granted the faculty of secrecy and the discipline of obedience, he will resign promptly and graciously, perhaps with deep personal regret.  He would recognise the limitations that this matter imposes on him and on the the role of Primate.  He would make way for another qualified candidate whose legacy is less burdened by history and the chains of secrecy.

Where does national competitiveness fit into Irish Government-trade union dialogue?

It will be interesting to observe how the issue of national competitiveness is dealt with in the current talks between the Irish Government and trade unions on public sector pay. Ireland's unemployment rate is broaching 13% but the minimum wage in Ireland is second highest in Europe. The following table indicates minimum monthly pay across the EU-27.

Turkey seeks to spread its web of influence

I listened with interest this week to a presentation made in Dublin by Ahmet Davutoglu, the Turkish Foreign Affairs Minister about Turkey’s ambition to spread its web of world influence, including the achievement of EU membership.  Davutoglu is a former professor, political scientist, academic and author.  He is not a member of parliament.

I made my first-ever visit to Turkey in mid February to speak at a conference on trade and investment.  It is difficult for one to have a clear opinion about a place that one has never been to.  But I was aware that Turkey, along with Croatia and Macedonia has applied to join the EU.  Opinion is divided about this and that and Turkey’s relationship with the US seemed benign in the context of Middle East affairs.

My February visit was restricted to the European side of Istanbul and I have to tell you that I was greatly impressed by what I observed.  Istanbul has a population of 12 million and the Bosphorus which flows through it to The Black Sea divides Europe from Asia.  Most of the landmass of Turkey is in Asia.  There are 8 nations bordering Turkey– Iraq, Syria, Greece, Bulgaria, Armenia, Azerbaijan, Georgia and Iran but the boundaries of all have changed over time, except those with Iran which have been intact for 150 years.  Turkey became a republic in October 1923 less than two years after we achieved our independence.

The Justice and Development Party (AKP) has been in government since 2002 and since my visit several of the top honchos in the army have been arrested for apparently threatening to overthrow the government and the country has been inflicted with an earthquake that killed almost 60 people.  The strain with the army is concerns the neo-Islamist perspective of the AKP and the secularist perspective of the army and is a clash between rival establishments each of whom is seeking to prevail.  The secular side see themselves as the guardian of the heritage of Mustafa Kemel Ataturk (1881-1938), the founder of the republic.  The AKP speak for conservatives and the religious constituency who are heavily represented among the middle class.  The political opposition, the Kemalists, have performed poorly in recent elections.  The AKP won 47% of the vote in the 2007 general election when there was an 84% turnout.

The genesis of Turkey’s interest in the EU can be traced to the Ataturk era because he considered Turkey’s fate to be aligned to Europe and the preparations for membership have been a uniting influence.  But opinion in Germany and France consider that Turkey is too big, too poor, and too Muslim to integrate fully with the EU.

Davutoglu’s case is that Turkey’s membership of the EU would expand the influence of the EU.  The EU would be open to large areas adjacent to The Black Sea, The Middle East and the Caucasus and that Turkey would embody European norms and values.  He advised that from 1989 to 2001 endemic problems in many regions of the world were ‘frozen’ in terms of resolution.  Long cease fires are no substitute for stable, representative, inclusive political systems

Turkey’s economic performance has strengthened and now ranks 16th largest economy in the world among the G-20 industrial nations, an improvement from 26th position seven years ago.   Turkey is also a non-voting member of the UN Security Council.

Turkey’s foreign policy is based on six core principles:

1. A balance between security and freedom
   
2. Good relations with neighbouring countries based on mutual interests
   
3. Proactive diplomacy that is visionary rather then crisis-driven, that takes account of a desire for prosperity, interdependency, multi-cultural coexistence but the avoidance of ethnically cleansed regions.
   
4. Balance and systemic relations with all global powers, including membership of NATO, EU, UN
   
5. Active role throughout all parts of the world
   
6. Changing image of Turkey and fostering this as a nation of rising economic power.

Istanbul is a truly fabulous city.  I have learned to distinguish between those cities that have derived from empires – Paris, St Petersburg, Rome, Vienna and Istanbul from others.  Apart from their architecture their legacy is evident in everything from their scale to their food.  I will be returning there next week.

Transparency, cross-border cooperation, and stronger macro and micro prudential supervision key to financial recovery.

The President of the Deutshe Bundesbank, Professor Dr Axel Weber, spoke to a distinguished audience at the Institute of International and European Affairs in Dublin this week about the reform of financial supervision and regulation in Europe in what is now the third year of the current crisis.

While the background to the crisis is largely attributable to regulatory failure and, in the case of Ireland, the utter fecklessness on the part of banks operating here, the genesis of the crisis internationally can be traced to a myriad of complex causes – although the vast majority of these relate to commercial and residential property. 

These include regulatory gaps, incentives that focused on short-term goals, the shortcomings of supervision in a transnational context and ignorance of systemic risk. 

There are, for example, no 100% residential mortgages in Germany as was the case in Ireland.  The maximum loan-to-value ration tolerated is 60-80% with only the more affluent mortgage holders qualifying for the higher figure.  Off balance sheet transactions, through special purpose vehicles, reduced levels of regulatory capital.  A mindset that tolerated a ‘too big to fail’ or ‘too interconnected to fail’ mentality led to a lack of awareness of systemic risk.  The system of financial supervision did not keep pace with the internationalisation and globalisation of the financial sector causing a severe weakness in resilience.  Structural problems of this scale cannot be simply outgrown, or ignored. 

The process of credit transfer that arises when an asset is securitised means that the connection between the originator of risk and the ultimate bearer of risk is ruptured giving rise to moral hazard because there is no incentive for the originator to monitor the debtor and a lack of transparency arises in the marketplace.  The consequence is the erosion of credit standards, as occurred in the US sub-prime market.  If transparency is compromised so is market discipline and  there is less scope to adjust investment decisions.

Weber’s recipe for rehabilitation includes improved regulation and prudential supervision at both the macro and micro level; closer attention to the threat of systemic risk at the macroeconomic level.  An example of an improvement at the micro level would be that those elements of banks deemed systemically important would be required to maintain a higher level of regulatory capital.  Mortgage holders might, for example, be granted a five to ten year period of fixed interest.

There needs to be stronger interplay between the prudential supervision at both levels and the implications of this on price stability, or inflation.  All the new initiatives require a greater level of international cooperation.

Initiatives at an EU level is pursuing two goals – stronger macro prudential supervision and greater cooperation between Member States in prudential supervision. 

The goal of the European Systemic Risk Board is to avert and mitigate systemic risks to financial stability. An early earning system is intended to identify threats and warnings and recommendations will be issued.  The link between macro and micro prudential supervision will be strengthened through the European System of Financial Supervision and cooperation between national supervisory authorities.  A network of three new authorities will be inaugurated.  The European Banking Authority will be responsible for the supervision of the banking sector.  The European Securities and Markets Authority will supervise financial markets.  The European Insurance and Occupational Pensions Authority will be mainly responsible for the supervision of the insurance industry.

The role of central banks in these new arrangements will be to safeguarding financial stability – guarding against inflation.  Their expertise in monitoring macroeconomic developments that could impact financial stability will also be crucial.  When a crisis occurs central banks have a vital role in restoring financial stability. 

The instruments of monetary policy and those of financial regulation are discrete but they relate to each other.  Initiatives to deal with macro prudential supervision at both the national and EU level can impact the goal of price stability.  Safeguarding price stability in the medium terms remains the primary goal of monetary policy.

A stronger process of macro prudential supervision integrated with micro prudential supervision that takes account of the cross-border implications of modern financial services will be the bedrock of recovery and reform.  Economic growth, post recovery, will be significantly less than before the crisis.  Not all banks are systemically important.  Components of the business of some banks maybe systemically important and the minimum capital levels of these must increase to reflect this position.  While some see evidence of some recovery there could be a brake on this caused by the challenge of repairing the financial system and credit flow issues.

DDDA spend €600,000 on junkets

Today’s edition of the Irish Independent blew the gasket on executive expenses at the chronically loss making Dublin Docklands Development Authority (DDDA) with vivid accounts of self-indulgent expenditure of over €600,000, some of which is apparently not receipted.  The purpose of these excursions, some involving up to 13 participants, was to look at port developments in various locations.  But the ‘looking’ didn’t enable these delusionary eunuchs avoid losses accruing at DDDA of €213 million.

It was interesting that this culture of excess and extravagance by the Dublin Docklands Development Authority described in the Irish Independent on 8 March was materially mitigated by the perk of free flights available to Seán FitzPatrick when he was the senior independent director of Aer Lingus from March 2004, when he was appointed by the Government,  until his abrupt departure from that board in December 2008. 

This culture of excess and extravagance was also abundantly evident when DDDA became a party to the acquisition of the site of the former Dublin city dump at Ringsend for €412 million in August 2006.  Professional valuations of this property, prior to this transaction, were apparently in the €250 - €375 million range .  Sixty per cent of the 25-acre site was to have been developed for residential units, a substantial proportion of which were to have been 1-bedroom apartments seemingly intended to sell for €500,000 each.  An income of €150,000 per annum would have been necessary to afford an apartment at this price, but less than 15,000 of the 483,636 taxpayers who claimed mortgage interest tax relief in 2006 earned €150,000, or more.

The median income of Irish mortgage holders in 2006 was less than €50,000 per annum .  The recognised indicator of housing affordability is that median property prices should not exceed 3-4 times the median income level of the owner - occupier, or that mortgage repayments should not be greater than 30% of family income.  This would imply that the maximum price that typical buyers' could afford, and sustain, in 2006 would have been be closer to €200,000, notwithstanding that the vacant housing stock in Dublin city that year was over 26,000 units, according to the 2006 Census.  Who benefited from the extortionate price paid for this site and what advice did the Minister obtain from the board to warrant the DDDA being a party to such an outrageously over-priced transaction?

The sooner the Minister for the Environment, Heritage and Local Government publishes the two reports into the governance of the DDDA the better.  The public have a right to understand why the State became a party to a transaction to provide homes for the super-rich; why this culture of self-indulgent excess and wanton, imperious extravagance was tolerated and if the ethical standards of their political appointees' to this board were met to the satisfaction of the Government.

The consequences of these feckless decisions is the waging of economic terrorism for many years to come on every citizen who must bear the huge additional costs relating to NAMA, higher mortgage interest rates to compensate for the cost of banks' borrowing huge sums on international money markets greatly in excess of their customer deposits', as well additional banking costs, fees and other onerous burdens.

Hare-brained proposal from Fine Gael

The party that sought out a genius to stand in a by-election but couldn’t keep him on the pitch until game time has come up with a hare-brained proposal to meddle with the office of president.

The proposals include reducing the minimum age of candidates from 35 years to 18 years; to limit the span of a presidential term from 7 years to 5 years and to conduct presidential elections contemporaneously with local and European elections.

The age reduction suggestion is absurd.  The presidency requires an incumbent who is mature, eminent, erudite, experienced in life and capable of epitomising both the legacy and aspirations of the nation.  Those qualities are unlikely to be found in a super-star that has graduated from a crèche but whose formation as an adult is incomplete.  A vision of a president bearing tattoos, facial studs and wearing a shell suit is unlikely to enhance the stature of the nation.

The ‘massive cost-saving’ achievable by holding presidential elections on the same day as local and European Parliament elections is illusory.  There have been 12 occasions when Ireland had to decide on a candidate for president but on 6 of these there was no contest.

The presidency is perhaps the only elected office of State in this country that operates to a standard sufficiently high that incumbents for several decades have enjoyed high public approval ratings.  The moral for Fine Gael is therefore ‘if it isn’t broken, don’t fix it’!  Political capital is a scarce and valuable resource that must be used wisely.  Fine Gael would be better off advocating the speedier arraignment of criminal bankers and ensuring that those bankers tainted with failure and incompetence are no longer venerated with political patronage as a social rehabilitation exercise.

Green shoots of economic recovery tentatively anticipated to materialise by late 2010

The first of the 2010 expenditure cut announcements have been made by Brian Lenihan, Minister for Finance when he indicated that a combination of €3 billion in expenditure cuts and tax increases will be necessary in 2011.  Savings of €2 billion are to be derived from reducing the cost of public services and the reform of income taxation.  Up to €1 billion has been saved on capital expenditure adjustments.

The Government also propose to spend €5.5 billion in 2011 on additional productive capacity. 

Taxation Adjustments

There is little scope for adjustments in marginal income tax rates.  Nearly half of all income earners in Ireland will pay no income tax in 2010.

The PRSI funded social insurance fund is believed to be insolvent.  The Government now intend to a universal social contribution to be paid at a low rate on a wide base.  This will effectively replace PRSI, the Health Levy and the Income Levy.  Water charges are likely to be introduced.

Seeding a return to growth

The Irish Government is anticipating a return to economic growth in the second half of this year with a stronger trend becoming apparent next year, led by exports. Job creation of 25,000 next year and 45,000 annually in later years are projected to meet the job requirements of a society that currently has in the region of 450,000 unemployed persons.

Labour Costs

The Government is quick to point out that Ireland is the only member state of the EU where labour costs are falling (-5.25%) but are more reluctant to mentioned that Ireland ranks 26th among the EU-27 in labour cost competitiveness.  Negative inflation may take some of the sting out of this goal.

Balance of Payments

The Irish Balance of Payments is projected to move into surplus this year following an adverse trend in 8 of the last 9 years.

Unique character of Irish downturn

The collapse of the Irish economy is a consequence of the wholly undisciplined provision of excessive credit.  The Irish population increased overall by 19% in the decade to 2008; the stock of residential units increased by 60% but the credit available to pay for this excess increased by over 500% – all having taken place without effective regulatory supervision by a combination of devious, duplicitous, incompetent retarded morons and dysfunctional imbeciles in charge of banks, all generously indulged with political patronage.  The level of Irish taxation derived from the property sector doubled to over 12% in the seven years to 2006.  Tax incentives for developers, both of houses and commercial properties, such as hotels, led to huge overcapacity as economically illiterate buffoons built more and more shacks without any marketing rationale.

Much of this credit was sourced on the international money markets rather than being derived from customer deposits.  The tax take on these property transactions was very high but it was used to spur an utterly unsustainable level of public spending, especially on welfare – some attributable to unemployment increased but a great deal of it attributable to politicians playing Santa Claus without adequate vetting of welfare spending.  Welfare fraud alone is estimated to cost the Irish Exchequer €1.5 billion in 2010.

A right Papal cop-out

The summit between the entire cohort of Irish bishops, Pope Benedict and the members’ Roman Curia seems to have been little more than a self-serving display of pious political theatre based on a disjointed script played before an increasingly sceptical and despairing Irish public. While the summit acknowledged that the failure of Church authorities has resulted in a breakdown of trust, this same dialogue has resulted in no consequences, no sense of urgency, no concrete initiatives or imaginative departures intended to nurture a positive sentiment from which to progress towards recovery. Best practice, it seems, is to be bolted on to the remnants of a culpable administration.  The Pope's comment that the current painful situation will not be resolved quickly is a cop-out that will facilitate more empty excuses and buck-passing and breed nothing but inertia and resentment.

No new resignations were apparently demanded. No resignations already offered were confirmed. The sentiment underlying the discourtesy shown by The Vatican authorities to The Murphy Commission continues to prevail as The Papal Nuncio declines an invitation to a dialogue with an Oireachtas Commission.  There is no evident engagement between the Vatican authorities and victims. Three months after the publication of The Murphy Report the fundamental issue of the accountability of bishops remains as ambivalent as ever. Their unique practice of self-validation is clearly a case of ‘my way or the highway’ as far as the attitude of the Church authorities and the victims of clerical sex abuse are concerned.  How can best practice in any field be achieved if public sentiment towards to those charged with its implementation is negative, especially when the issue in question concerns pain, anger, betrayal, scandal and shame?

The unilateral declaration following the summit by the Bishop of Galway, whose resignation was sought to demonstrate that the cobwebs of the administration in the Dublin Archdiocese that presided over the abuse would be totally removed, is not an appropriate response by him to either stimulate the renewal of the faith of the Catholics of Dublin or to heal the victims.  Why is it therefore tolerated by the authorities?

Is the final prolonged act of this dreadful tragedy to be based on a dysfunctional Hierarchy who cling to office whatever the consequences as they pander obsequiously towards their counterparts in The Vatican but squabble in public among themselves like characters in Macbeth?

The final vestige of validation ~ the shaving mirror

I have spent the past few days beyond the boundaries of the European Union ensconced in a Muslim nation.  But I tuned into news broadcasts from a diversity of sources around the world over the past few days to gauge the progress, consequences and response to the love-in that the Irish bishops conducted in The Vatican with the Pope over the past few days.

The laying of hands, the kissing of rings and the observations that reiterated the blindingly obvious (that paedophilia is a ‘heinous’ crime) were widely reported.

Today I read that the Bishop of Galway, having not been booted from his See, is ‘determined’ to remain in office despite widespread calls for him to move his ecclesiastical ass swiftly in another direction.

When the report into child sex abuse by priests in the Dublin archdiocese was published on 26 November a letter from me was published in the Irish national newspapers.  I argued that a major impediment to restoring the credibility of bishops is the absence of adequate structures of accountability.  I suggested that the prompt resignation of all bishops and those monsignors whose tenure in Dublin coincided with the era this abuse took place ought to promptly resign.  This need not have precluded the reappointment of some of them provided that they had been properly revalidated

The resignation of the current Bishop of Galway, formerly an auxiliary bishop in Dublin, had been demanded by many victims and others who want the cobwebs of influence from the era this abuse occurred to be removed from office.  He may not have been the spider that was responsible for the web but he an apparatchik connected to it.

Following his tete-a-tete in Rome this incumbent has advised the nation that he will not resign from office; that he did not want to offend the victims; that he was determined to continue his work in Galway; that it would be a betrayal of the people of Galway if he were to resign and that he had the courage to stay in office and that he believed that was the right thing for him to do.  What other position of consequence in the world today would tolerate an incumbent having the absolute right to determine whether, or not, he continues to hold a particular office.  The answer is found when one is only accountable to the foggy image one sees each morning in the shaving mirror

Fiat training dealers to capture and captivate the elusive consumer!

There was an interesting article in today’s edition of the Financial Times (Mon 15 Feb) concerning an initiative by Fiat to provide training for its network of 5,000 European dealers.  Like many car manufacturers Fiat depends on independent, frequently family-operated dealerships and only owns 1.5% of the total.

Marketing accounts for 30% of the cost of a car and the training and many of its dealers while good at selling are not so good an managing their businesses, developing new ideas and in service offerings around new and used cars.  The training, the cost of which is shared, teaches managers to be more like entrepreneurs and entrepreneurs to be more like managers.   All car manufacturers face the issues associated with not directly controlling dealerships and distributors.  But the impact of this on Fiat has been especially pronounced in Ireland

Sales of Fiat cars in Ireland have collapsed in the past decade.

 

Year	New Private Cars	Used Private Cars	Total Fiat Car sales in IE
1998	10,563	617	11,180
1999	12,311	566	12,877
2000	16,821	396	17,217
2001	10,558	279	10,837
2002	8,899	223	9,122
2003	5,632	211	5,843
2004	3,793	248	4,041
2005	2,623	339	2,962
2006	2,995	364	3,359
2007	2,451	383	2,834
2008	1,800	314	2,114
2009	841	233	1,074

 

Fiat’s overall sales of cars and light commercial vehicles increased from 1,857,000 units in 2004 to 2,229,000 in 2008 with increases recorded in France, Germany, Italy and Brazil but declines recorded in the UK, Spain, and Poland.

A new logo was launched on 26 October 2006.  Group Revenue increased from €51.8 billion that year to €59.3 billion in 2008.  Fiat automobiles account for €26.9 billion of total revenue Trading profit recovered from €1.9 billion in 2006 to €3.3 billion in 2008. Fiat automobiles account for just €601 million of trading profit, a decline of €112 million since 2007.  This decline was mainly attributable to Western Europe, where group automobile (Fiat, Abarth, Alfa Romeo, Lancia and Fiat Professional) deliveries fell to 1,237,900 units, but weak performance in Latin America also had an impact.  The passenger vehicle market in Western Europe declined by 8.4% in 2008 over 2007.  The most severe contraction in 2008 was in the Spanish market (-28.1%) but the British market dropped by 13.4% and the German market by 11.3%.

Ferrari won its 16th constructors world championship in 2008 and this success was rewarded with a 2% increase in unit sales to 6,587 vehicles.  North America accounted for 1,700 (26% of total) of these sales and new Ferrari stores were opened in Miami, Honolulu and San Francisco.

Sales in Europe, at 714 units reflected an 8.9% increase with pronounced growth in Eastern Europe.  Customers in The Middle East bought 366 Ferraris’ while customers in Japan bought 433 and in China 212.

Various versions of the F430 models, including the 430 Scuderia and the 599 GTB Fiorana were the most sought after Ferrrari’s in 2008.

Political life-cycle of media folk in Irish politics can be fickle!

The political life cycle in national Irish politics of individuals who formerly worked in media is relatively short, although the 9 months that George Lee spent in Leinster House was acutely short.

 

Name	Formerly	Served	Exit
Thornley, David (Lab)	RTE current affairs presenter	1969-77 Dublin NW	Defeated 1977
Cruise O’Brien, Conor (Lab)	Television script writer, commentator and subsequently Editor, The Observer	1969-77 Dublin NE	Defeated 1977 Senator (Ind) 1977-81
Nealon, Ted (FG)	RTE current affairs presenter; Editor Sunday Review	1981-97 Sligo-Leitrim
Kennedy, Geraldine (PD)	Reporter, The Irish Times and subsequently Editor, The Irish Times	1987-89	Defeated 1989
Ross, Shane	Business reporter, Sunday Independent	1981 - University of Dublin
Keating, Justin (Lab)	Presenter RTE agriculture television programmes	1969-77 Dublin County North	Defeated 1977
Cox, Pat (PD)	RTE current affairs presenter	1992-94	Resigned 15 July 1994 to become MEP
FitzGerald, Garret (FG)	Columnist and commentator – currently at The Irish Times	1965-69 (Senator) 1969 – 1992 Dublin South East

January Live Register symptom of ongoing turmoil

The Live Register at the end of January 2010 contained a record 436,936 persons, an increase of over 175% in the four years since January 2007.

The Exchequer Statement for January 2010 indicates that tax revenue was 21.4% lower than in January 2009. Social Welfare voted expenditure was almost 16% higher and accounted for 22.9% of total voted Departmental expenditure (current and capital) in January 2010 compared to 17.2% in January 2009.

The Social Insurance Fund which is funded by PRSI deductions was anticipated last October to be insolvent by now. It incurred a deficit of €244.7 million in 2008 and was projected to rise to €4.4 billion by the end of this year.

One of these days the penny will drop that it is not possible to sustain galloping social welfare expenditure that completely ignores economic adversity and the consequential capacity to fund same.

For many the combined spend on social insurance and social assistance was of the order of 31% of Government revenue. Last year it was equivalent to 63% of Government revenue.

While the Consumer Price Index increased by 42.4 percentage points between 1998 and 2008 the Index of social insurance related spending increased by 278.1 percentage points and the Index of exchequer spending on social assistance increased by 248.4 percentage points. The number of social welfare recipients increased by over 53% from 436,703 to 669,603 at a time when the general population increased by 19%.

The insured population also increased from 2,310,525 persons in 1998 to 3,091,555 in 2008 but the number in employment as a percentage of the insured population has declined from a high of 73% in 2001 to 69% in 2008. This is significant as employers PRSI contributions are the major funding component.

To summarise ~ between 2007 and 2009:

· Government revenue has declined by 29%

· Social welfare expenditure has increased by 37%

· The Irish population has increased by 8%

· Per capital expenditure on social welfare has increased by 33%

Irish exchequer revenue down 19% but audits, assurance checks, special investigations and seizures yield solid results

The Revenue Commissioners collected 19% less tax in 2009 than in 2008 but they were activity level in other areas was consistently frenetic – as one might expect of a public sector agency that is second-to-none when it comes to high standards of efficiency and effectiveness.

The impact of the downturn on taxes in 2009 varied by tax heading.

 

Category	€	% Change v 2008
Customs	208,598,000	-15.9%
Excise	4,702,552,000	-13.6%
Capital  Acquisition Tax	254,258,000	-23.2%
Capital Gains Tax	541,849,000	-62.1%
Stamps	929,510	-43.7%
Income Tax (+ levy)	11,835,235,000	-10.2%
Corporation Tax	3,900,306,000	-23.0%
VAT	10,669,652,000	-20.6%
Other levies	1,213,000
TOTAL	€33,043,173,000	-19.0%

 

Tax Audits and Compliance Checks

Some 12,404 taxpayer audits in 2009 yielded €598.6 million.  The comparable figures for 2008 were 13,406  taxpayer audits that yielded €570 million

There were 361,299 assurance checks, 15,877 more than in 2008, that yielded tax revenue of €68.5 million (+€5.5 million)

Special Revenue Investigations

The tax yield from special investigations, €114.35 million was 109% higher than in 2008.  Special investigations embrace the evasion of Deposit Interest Retention Tax, Bogus non-resident deposit accounts, offshore assets, certain life assurance products, offshore Ansbacher accounts, Tribunals, National Irish Bank, Interest Reporting and certain trust and offshore structures used to conceal tax obligations.

There were 1,490 Special Investigations in 2009.  The cash cow in 2009, from a Revenue Commissioner perspective, was Interest Reporting when 1,214 taxpayers paid €55.3 million to the Revenue Commissioners, a liability they presumably would have preferred not to have arisen.

The cumulative yield from Special Investigations is €2,603.5 million from a total of 34,335 cases, including €41 million derived as a consequence of tribunals from 23 individuals.

 

Convictions

There were 453 convictions arising from Revenue matters in 2008 but this figure rose to 2,144 convictions in 2009, mainly attributable to persons convicted for the non-filing of returns.  There were 20 convictions for serious tax evasion in Ireland in 2008 and 10 such convictions in 2009.

 

Revenue Seizures

The Revenue Commissioners have been particularly successful in the seizure of illicit drugs, tobacco and other products.

Drug Seizures

 

	2008	2009	% Change
Cannabis
Number of seizures	2,441	2,166	-11.3%
Volume seized, KG	3,655	3,443.1	-5.8%
Value seized	€27,900,000	€30,200,000	8.2%
Cocaine and heroin
Number of seizures	76	39	-48.7%
Volume seized, KG	1,615	33.1	-98.0%
Value seized	€517,200,000	€2,300,000	-99.6%
Amphetamines, Ecstasy and other
Number of seizures	4,118	5,983	45.3%
Volume seized, KG	115	405.8	252.9%
Value seized	€2,300,000	€6,300,000	173.9%

The 2008 figures include a €500 million cocaine seizure off the coast of West Cork.

Tobacco Seizures

Last year was hectic as far as tobacco seizures are concerned!

	2008	2009	% Change
Cigarettes
Number of seizures	10,143	10,600	4.5%
Volume seized	134,800,000	218,500,000	62.1%
Value seized	€54,300,000	€92,100,000	69.6%
Tobacco
Number of seizures	1,094	1,171	7.0%
Volume seized – KG	2,965.0	10,451.0	252.5%
Value seized	€1,000,000	€3,700,000	270.0%

 

The Revenue Commissioners also made 34 seizures in 2009 of suspected criminal cash amounting to €1.35 million.

14% of Irish population were at risk of poverty in 2008

An estimated 14% of Ireland’s population was at risk of poverty in 2008 – a mid ranking performance in EU terms.  Risk of poverty is defined as 60% of their income, after welfare transfers being below the poverty threshold.  The poverty threshold is set at 60% of the national median income per equivalent adult.  Comparison between countries is expressed in Purchasing Power Standards (PPS) – an artificial reference currency that eliminates price level differences between countries.

The highest risk of poverty in 2008 was found in Latvia (26%), Romania (23%), Bulgaria (21%), Greece, Spain and Lithuania (all 20%).  The lowest risk of poverty was in Czech Republic (9%), Holland and Slovakia (both 11%), Denmark, Hungary, Austria, Slovenia and Sweden (all 12%).

The following table highlights the percentage of the population who cannot afford particular items of relatively routine expenditure:

 

	IRELAND	EU 27 average	EU 27 Ranking
To pay for a 1-week annual holiday away from home	30%	37%	17th Poorer: Romania Hungary Malta Portugal Poland Lithuania Bulgaria Slovakia Latvia Greece Cyprus Estonia Italy Czech Rep Spain France
To keep their home adequately warm	15%	10%	9th Poorer: Portugal Bulgaria Cyprus Romania Lithuania Poland Latvia Greece
Afford a meal with meat, chicken, fish or vegetarian equivalent every second day	7%	9%	13th Poorer: Bulgaria Slovakia Latvia Poland Romania Lithuania Austria Czech Rep Slovenia Germany Hungary Malta Italy France Greece
A personal car	9%	9%	11th Poorer: Romania Bulgaria Latvia Slovakia Estonia Poland Lithuania Czech Rep Portugal Greece

 

The corresponding data for 2009 is likely to show a marked deterioration in Ireland’s performance.