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Archive for November 8th, 2012

The regular audience on here will know that one of the few targets for unrelenting criticism is the National Consumer Agency (NCA), which was until October 2012 headed by CEO, Ann FitzGerald. The reason for the animus is simple – our economy has collapsed with a 10% contraction in GDP/GNP, unemployment has rocketed to 15%, households have been hit with tax hikes, levies and stealth taxes and of course we’re in an IMF programme. Remember the vast price inflation in the 2000s, particularly after the introduction of the Euro and excesses of the property-led latter phase of the Celtic Tiger? Well, you would expect this price rises to be reversed with the economy collapsing. But as you know only too well, prices haven’t really dropped very much at all. So the budget adjustment which will necessarily involve some degree of austerity hasn’t been very much cushioned by reductions in prices.

And I blame Ann FitzGerald.

The NCA will tell you it has no major role in pushing down prices, and its standard response if you complain about high prices is “shop around” – we really don’t need a quango to tell us that. The NCA has failed this country and failed it badly. This is evidenced by the Eurostat monitoring of prices for consumer goods and services, the latest annual report on which is for 2011 and shows that for the selected basket of goods and services, Irish consumers are paying 17% more than the EU27 average whilst in the UK, they are paying just 2% more. Here are the latest figures from Eurostat for 2011.

In 2010, our prices were 18% greater than the EU27 average so there has been some very modest movement. At the same time in 2010, our per capita GNP in Ireland was just 2.7% above the EU27 average. In 2007 by contrast, it was 27% above the EU27 average. So our incomes have declined but prices have stayed high.

Again I blame Ann FitzGerald.

So in June 2011 when Minister for Jobs Enterprise and Innovation Richard Burton announced that he was merging the NCA with the Competition Authority, there was a ray of hope that at last Ireland was going to do something about our high prices. Over a year later, the NCA still hasn’t been merged with the Competition Authority – it’s “imminent” apparently – but in October 2012, Ann FitzGerald’s contract expired at the NCA and she notified the board of the NCA that she was stepping down.

Grand, I wish her well with her future endeavours.

But did she get a payment from the public purse to ease her exit? Given that her contract had expired and her organisation is merging with the Competition Authority, you wouldn’t have expected there to have been any reward for not renewing her contract. But Minister Bruton has refused to confirm if any reward was paid. In a response to the Sinn Fein finance spokesperson, Pearse Doherty, Minister Bruton said it’s a matter for that Agency, he says. But the NCA is 100% owned and funded by us, so surely we have an interest in how its decisions, particularly if those decisions cost us money and particularly if ex-gratia and unnecessary payments were made.

Passing the buck for agencies under their control is becoming a hallmark of this administration. “That would be an operational matter” is fast becoming as mainstream as “that would be an ecumenical matter” for stymieing attempts to hold this administration to account.

The full parliamentary question and response is here:

Deputy Pearse Doherty: To ask the Minister for Jobs, Enterprise and Innovation further to reports that the Chief Executive Office of the National Consumer Agency Ms Ann Fitzgerald was stepping down in October 2012 at the expiry of her contract, if he will confirm that Ms Fitzgerald no longer works for the NCA and to confirm if any termination payments were made to Ms Fitzgerald or if enhancements were made to future benefits payable to Ms Fitzgerald; and if so, if he will quantify such arrangements..

Minister for Jobs, Enterprise and Innovation, Richard Bruton: Ms Fitzgerald advised the Board of the National Consumer Agency of her intention to step down as Chief Executive on the expiry of her contract on the 17th October 2012. Therefore, Ms Fitzgerald is no longer employed by the Agency. Issues in relation to the terms and conditions of Ms Fitzgerald’s employment as Chief Executive are matters for the Agency.

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This year, An Taoiseach’s commonsense was questioned when he presented a “Certificate of Irishness” to US president Barack Obama on St Patrick’s Day or a few days afterwards, when Barack’s diary permitted. And Barack is 1/32 Irish. And of course Barack’s birthplace is a matter of some controversy in the US where birth outside the US is a disqualification for becoming president. And the Certificates of Irishness cost €40. And just 1,042 have been issued to date. And now, you can get these Certificates without even providing documentary evidence of your Irishness – a verbal assurance will do. Enda Kenny’s heart was probably in the right place, but has the man no sense of occasion, particularly on the international stage?

This evening, Enda is in Berlin where he is due to be presented with the annual “Golden Victoria European of the Year” award for 2012 presented by a German media association. When announcing the award the Verband Deutscher Zeitschriftenverleger said

“This award acknowledges the achievements not only of Enda Kenny but Ireland and the Irish people. Ireland’s determined response to the current economic and financial crisis has been widely respected, particularly in view of the genuine hardship being experienced by many Irish people.

This award, however, also acknowledges the unique contribution which Ireland has made to the European project since its accession in 1973. Despite being located at the Western edge of continent, the green island has always been at the heart of Europe”

Today is coincidentally the day when the former Anglo Irish Bank, now merged into IBRC, pays €23,580,000* to unsecured unguaranteed senior bondholders. “Unsecured” means the bondholders have no specific claim over the assets of Anglo. “Unguaranteed” means the bonds are not covered by the ill-fated blanket guarantee given in September 2008. Anglo has so far cost this society €29.3bn though the questionable recent claim by the IBRC management is that it will ultimately “only” cost €25bn. In December 2010, on the eve of the last general election and after the Greens had signalled their withdrawal of support from their coalition with Fianna Fail, RTE reported “Mr Kenny said there is no question of defaulting on sovereign debt or on senior bank bonds that are covered by the Guarantee but he believes that the taxpayer can save between €12-17bn by negotiating a sharing of losses with the unguaranteed senior bondholders” Enda never subsequently disabused us of the expectation of these savings during the election campaign.

And once in office, aside for a solo-run by Minister for Finance Michael Noonan on a trip to the US in the summer of 2011, this Government has shown its mettle in not just abandoning the promise of its election campaign but it has tested our patience with the farcical claim that Anglo pays these bonds out of its own resources! Since March 2011, nearly €4bn has been paid to senior unsecured unguaranteed bondholders at IBRC. The beneficiaries of the bond payments have never been comprehensively identified but it is believed that German and French banks feature heavily amongst their number.

So this evening, as Enda accepts his gong, I hope he will pause to contemplate the €23.6m bill picked up by this society today, a sum believed to have been remitted to bondholders, including German bondholders who lent heavily to this country during the early/mid-2000s. It is one heck of a price to pay. And as with the episode of the Certificate of Irishness presentation to President Obama, it’s likely Enda just won’t get the inappropriateness of his actions.

*The Bloomberg ID for the bond is COEG3377082. It was issued on 8th November 2007 and is for 600,000,000 Czech Republic Koruna which today equates to €23,580,000 at CZK 1 = EUR 0.0393.

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This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for October 2012. The monthly headline Consumer Price Index (CPI) fell by 0.1% compared to September 2012, and is up 1.2% year-on-year. October’s results mirror those of September and continue a subdued trend seen in recent months compared with the 2%+ that pertained before January 2011. If this low rate of annual inflation continues and if our real GDP does in fact grow by 0.4% as forecast by the European Commission yesterday, and if the €14bn year-to-date deficit recorded in the October 2012 Exchequer Statement worsens, then Ireland may miss the 8.6% deficit:GDP target as set out in the Memorandum of Understanding with the so-called bailout Troika, which may herald intensified austerity with bigger budget adjustments.

Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 18.1% in the past year, as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for nearly 6% of the basket which measures inflation, the impact on inflation was substantial.

Energy costs in homes on the other hand, which account for 5% of the total basket examined by the CSO, have risen by 9.1% in the past 12 months, mostly driven by the 9% price hikes at the ESB, and in October 2012 at Bord Gais.

Elsewhere, private rents rose by 0.7% in the month of October 2012 – this after a 0.9% increase in September 2012, a flat month in August and three months of declines in April-June followed by a small increase in July – and over the past year, such rents are up by 1.5% according to the CSO – there is some small rounding in the figures above which show 1.7%.

It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 5.5% increase (mostly recorded in February and October 2011 and February and September/October 2012).

At the start of January 2012, the Department of Social Protection reduced its rent assistance payments by up to 29% (an average of 13%) and the Department says that some 40% of the rented market in the State is affected by rent assistance payments, which at the end of 2011, was paid to 98,603 households.  The Department’s 40% is derived from information provided to it by the Private Residential Tenancies Board, but the Department seems to have conceded recently that the figure may be lower in the order of 30%.

The Department is projecting it will save €55m in 2012 from its €500m budget for rent assistance, the saving comprising €33m to changes to the minimum contribution and €22m in relation to the new maximum limits. The prospect of further cuts to rent assistance in the forthcoming Budget 2013 to be announced in December 2012, is very real, this despite the report by Focus Ireland this week which highlighted the accommodation difficulties caused by the reductions in rent limits and increases in contribution.

In the past, private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants. The September and October 2012 increases are surprising against pressures from socially assisted reductions. Property commentators including those in NAMA have pointed to a buoyant rental market as one of the bright spots in an otherwise dismal property market, but that buoyancy may deflate in coming months as the artificial supports of State-aided rent assistance dissipates. The results from the CSO this morning echo those of DAFT.ie which yesterday published a quarterly report showing 0.7% increases nationally but near 3% per annum increases in Dublin.

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