Category Archives: Journalism

Irish Budget Theatre and the Ghost of 1977

Tuesday sees the budget, a by now largely meaningless piece of set piece theatre.  The old days when ministers were afraid to speak a word for fear of leaking have, thankfully, gone. Yet the setpiece remains, and it is a high point of the political year for the minister for finance to deliver the plans for the coming years.

Our political system favours strokes.  The death of Liam Cosgrave should remind us of the events of 40 years ago. Fianna Fail swept into power on the basis of a massive plan of tax cuts.  Domestic rates were abolished.  Admittedly domestic rates were a very crude mechanism for taxing property values, but they at least existed, and provided the basis for the funding of local council provided services.  40 years on we are still paying the price, politically socially and economically, for that decision.  First-time buyers grant or in economic terms a subsidy to property construction was introduced.  Across a wide range of other taxes, from personal to transport, rates were cut and bases were abolished. Fianna Fail swept into power.  Their successful appeal to the population set the template for Irish political life ever since.  While economically disastrous the 1977 program was politically triumphant, changing the landscape forevermore.

We persist in this country in believing our own myth that we are a uniquely highly taxed nation.  This is not the case.  In comparison with the countries in the northern tier of Europe  the Irish state takes a small percentage of the national wealth, individuals pay a small percentage of earnings, and corporations pay a small percentage of their earnings. We have no effective wealth tax.  Ireland is possibly unique in the western world in that it has hard-left Socialists, the solidarity party, who are against taxing the major form of wealth possessed by most people mainly residential property. Council after Council has reduced the residential property tax, rendering it a bit player in the extreme.  Solidarity, proclaiming to be socialists, have allied with the local populists (whether they are Fianna Fail or Fine Gael or Labour is irrelevant)  in cutting local property taxes and then demanding increased local services. It is entirely politically rational for them to do so.

Nobody likes paying taxes. But we have a political system which is absolutely incapable of telling the people that if they want the kind of services which they consistently demand, they have to pay to provide.  They can either pay at the point of use, a private provision; they can pay through deferred consumption in the form of loans, or they can pay through deferred consumption via taxation. There is no magic money tree.

The budget on Tuesday would be pretty predictable.There is an ambitious  and praiseworthy capital program, and this will be continued. There is an ongoing need to fund the activities of the state. We are earning enough and taxes to pay our way. But the legacy of crisis, and the legacy of the 1977 political earthquake, means that it is extremely unlikely that we will see anything bold or exciting.  We should not expect political vision from the government which was quite happy to yield up hundreds of millions of Euro through not collecting the taxes that are owed to us from multinationals. Whatever the ultimate outcome of the Apple tax case right now apple have a tax bill of €13 billion.  A large chunk of that no doubt will eventually be paid to other countries, if it is ever collected. Before that happens however we’re engaging in reverse Father Tedonomics –  money is not resting in  our account.  1% of €13 billion is €130 million.  That’s a good chunk of the available ”fiscal space”  which the government has to play with. As of its latest quarterly accounts Apple had in excess of 65 billion Euro in cash and short-term securities. They can quite easily pay this bill, Without blinking. There Is no question about them leaving Ireland should they eventually be forced to pay this money. The Irish government has gone to extraordinary lengths, even let us recall not collecting tax legally due to it, to stay on the side of apple.  €130 million, which the government has foregone, is approximately the same amount as is spent by local authorities on social housing. Fitting into a further year of homelessness as a crisis it’s good to know that the government can afford to forego this money.

The government almost certainly won’t announce on Tuesday that is going to collect this money due to it. That will instead spend an equivalent amount of money in ensuring that the optics of tax reduction are maintained.  There will be ritualistic denouncements of the government from the opposition, ritualistic muttering from the silent partners of Fianna Fail, and all sides will compete to demand more services but simultaneously demanding that the government is taking less resources to pay for it.  Continuing to feed the myth of Ireland as a high tax Society, commentator after commentator will breathlessly pore over the entrails of  of minor adjustments, The media will provide infographics showing how three euros here or €4 later will be added and subtracted to various hypothetical taxpayers, and the system will sludge on.  


Published as a column in Irish Examiner, 9/10/17

Advertisements

Greenways bring huge benefits so why don’t we have more?

As summer 2017 draws to a close it is useful to consider the impact of tourism on the Irish economy. More particularly we can sometimes draw lessons and analogies from the the tourism sector to the wider economy. 

The proposed South Kerry Greenway, a cycle track along the bed of the old great southern and western railway from Killarney to Cahersiveen provides an excellent example of the good and bad of Irish economic planning

 

Despite importance of tourism in Ireland there are relatively few published academic studies of its impact. Typically this is done by estimatin of a multiplier. This shows the impact of a marginal euro on the economy when that euro is spent in a sector. Two types are calculated – direct and indirect, the indirect also accounting for the increase in demand and consumption from the injection generated by the first.

 

Department of tourism estimates that upwards of €8 billion in revenue is generated from the tourism sector, and that something of the order of 200,000 jobs are dependent upon it. Such a large sector should really have a large amounts of research pertaining to its impact. Such research is has been produced tends to, at least in recent years focus on issues around sustainability, or on willingness to pay for more environmentally friendly products. Part of the difficulty as the tourism sector is diffuse; the high-end golfers who common jetting in played links courses of the West Coast are very distinctly different market from the European hiking and bicycling tourists. We do have some estimates of the impact : a 2014 comparative study put the direct multiplier for hotels and restaurants at 1.4, which would suggest a total impact of perhaps 2 or 3: a 2014 studysuggests that walking tourism generates approx. 12 jobs and €500 extra per 1000 walkers

 

For considerable number of the existing, or planned, greenways there does economic impact analysis. However, while not implying that these are in anyway suspect in their  methodology, these are not peer reviewed. They are not independent. Independent external analysis should always be preferred to analysis from within a project.  That said, these economic impact analysis to suggest a very considerable return from greenways. This mirror is evidence from other countries, where in general slow tourism has a higher economic impact in the longer run then alternative forms. Irish local authorities are at best moderate to poor in their analysis of the economic impact of tourism.

 The Kerry Greenway has been planned for sometime but has been blocked for yet another year by a small number of objectors. I may perhaps be biased, coming from the southern end of this proposed we make, that is little doubt in my mind last a walking and cycle track along Dingle Bay into the heart of iveragh would rank with one of the most spectacular tourist experiences anywhere in the world. People will pay good money to engage in slow tourism. Unfashionable though it may be I would suggest that is is far more beneficia to the environment, To the people, and to the tourists themselves, to slowly take in the sights than to hurtle around the Ring of Kerry in an air-conditioned bus.  

 

Meanwhile even existing greenways having difficulty. The great Southern Trail, which runs from Rathkeal to Abeyfeal has a long-standing plan for extension both northwards towards Limerick and Southport towards Tralee. The northward extension has however been veryrecently stalled, with three way lack of joined up planning between Irish rail, national roads authority and the proposed Greenway extension.  Little work appears to have progressed on in The subsequent extension, nor on the extension to Fenit. There are great plans for greenways around the country but these do not link up.

 What would an ambitious national greenway plan look like? Recognizing that such slow sustainable tourism has a strong impact, it is one we should seek. It would base itself around the remains of the once extremely extensive railway sector in Ireland. This will require CPO of land and property, to either renew the railbeds or where that is impossible to circumvent blockages; it would have a plan to place a cycle/walking only path the entire length of the Wild Atlantic Way; It would be nationally delivered as the evidence is that local authorities are ill prepared for such initiatives and local micro objections can stall plans for years;  it would ensure that gravel or asphalt are laid on the banks of all canals; it would ensure that there are regular, 10k spaced, facilities for families; it would link with thePilgrim Paths initiative and with local food groups. This is all very low key stuff and not terribly exciting but has far greater potential to ensure a vibrant rural year round tourist industry and thus rural development than some of the present initiatives.

An Irish Examiner column

Ireland – Not yet out of the economic woods

10 years on from the onset of the crisis we could take some time to take stock. The government is keen, as are many, to wipe it from memory – keep the recovery going. The recent undoubted recovery has softened memories for the most part. But if we forget the past we will sure as eggs forget the lessons of the past.

Continue reading

Broadband Panaceas

 

The recent release of new economic growth measures has prompted once again again a debate on regional, from which we can generally read urban versus rural, development in Ireland. To listen to some commentators you would imagine that beyond the M50 ring-road or beyond Blarney there is an economic wasteland, with those few people remaining in their 90s and an infrastructure barely out of the 18th-century.

Continue reading

Dark forces and Brexit.

With each day that passes and the ramifications of Brexit  become evermore entwined.  leaving aside the damage that is being done to the UK’s economic and political reputation, we now see the stirrings, deliberate and calculated, of a pot of debate on a putative Irexit, an Irish exit from the European union. Like it or not this debate will continue, and to ignore it is neither politic nor possible. That it is ridiculous and risible is obvious to even a casual analysis, but we have seen with Trump and Brexit that mere foolishness does not deter a polity from a course of action.

Continue reading

How to strangle an export industry 

Brexit , now that is is really happening, is going to cause a major strain on this country. In that context, and accepting that we don’t want to steal their boots while the body is still warm, it beehooves Ireland to take every opportunity presented to take business from the UK.

Much of the discussion on gains to be made has concentrated on the financial services area. There is a natural synergy here – a lot of back and middle office activity in London needs to move, to keep within the Eurozone, and Dublin has a fair amount of attractions to these activities. In addition,  there should be some potential for agribusiness to take up now UK based activities exporting to the EU. Much of the existing cross border trade comes from the agrifoods area. While nobody wants to destabilise the North, the reality is that the days of exporting material for further processing in the north then reimporting for another stage, these are gone. Agribusiness to the UK will also take a hit – upwards of a billion euro is at stake here. However, the UK also exports a lot of agrifood to the EU – 73% of its exports go to the EU. With even the softest barriers these will decline, and that represents an an opportunity for Irish agribusiness.

To its credit the Government and the state are aware of these issues and work is ongoing to mitigate the effects.

Behind all this however we have a sector which has evidenced potential for significant post Brexit export growth where the state, far from encouraging it is in fact strangling it.  This is the higher education sector.  Every non –Irish student who comes to study is an export. Exports of  educational services from Ireland represent a potentially enormous market. In the UK some 400k students per annum enter to study, many in the area of English language but as many for longerterm degree and diploma studies. Ireland has approximately 12,500 students from outside the EEA in its institutes of technology and universities.  Some 32,500 are in areas such as English language or private colleges.  This is a large body of exports.  It is responsible for approx. 1.75b in value added per annum

Two strangulations exist. First, we have a dreadful reputation in the English language school area.  Despite this the department of education and skills has yet to fully implement its own recommendations and to put in place a statutory framework around quality in the area. It remains essentially self regulating, and we know that that is a system which ultimately fails.  Until these schools are regulated we cannot grow them in confidence.

Taking the state related bodies an even more bizzare issue hobbles these. In the financial crisis a regulation known as the Employment Control Framework was put in place on all universities and Institutes of technology.  This in effect had a dual effect – it controlled overall numbers of staff and also controlled the distribution of staff (academic and professional) as between grades.  The ECF, as it was known, was implemented for the 2011-2014 period. Yet, as we come towards the middle of 2017, it is still being implemented.  It is being implemented due to the lack of the Department of Educatin and Skills , again, agreeing a new framework with the universities. As a consequence, universities and institutes of technology cannot grow other than by non exchequer funds. Willy nilly, in the absence of a serious commitment by the Department of Education and Skills (perhaps it should be renamed the Department of Primary and some Secondary Education) as to a stable financial system for higher education, the sector has moved decisively from state to non state funding.  This is most evident in the university sector. Thus my own institution, TCD, in 2015-6 , obtained 138m from the state ( HEA block grant, free fees waivers and state research funds awarded) , 38% of total income . TCD is probably on track to have 25-30% of its income from the state in the medium term, based on the trajectory of the last number of years.  UCD in 2015 obtained just over 30% of its income from the state.  Over the last decade state funding has declined by 25% while numbes of students have gone up by 25%. But the state remains , via the HEA, which provides less then 15% of income, the arbiter of not just staff numbers but staff deployment. 

This strangles any opportunity post Brexit to grow. More students need more resources, and dismay some as it might, higher education is a environment where staff, costly staff, are needed. But if staff cannot be hired, then the system cannot grow.  Exports are choked off.   This makes no sense. 

Published as a column in the Irish examiner

With Brexit looming Ireland needs to beef up transport links

Ireland, even without resorting to the leprechaun economics jibes, relies very heavily on exports to contribute to economic growth.  Since the 1990s net exports have typically accounted for  10-20% of GDP.  With Brexit, all of this now needs to be evaluated. Continue reading