Why is Ireland still a rip-off country?

Roscommon Independent  TD, Luke “Ming” Flanagan was on Twitter bright-eyed-and-bushy-tailed this morning to say that he hoped to introduce a Competition Bill in 2013 and that he would raise competition and competition reforms with the bailout Troika when they pay us their next visit, which is understood to be next week. The regular audience on here will know that competition in Ireland is a bit of a bugbear on here – from consumer goods and services, food and mobile phones to, especially, professional services, law, medical, finance, receivers.

We’re a country with the worst deficit in the EuroZone, with 14.6% unemployment, with debt:GDP heading towards 125%, where commercial rents have declined 50% from peak, a flat economy in which living standards have dropped considerably and yet Dublin apparently still has the second most expensive lawyers in Europe after Moscow. The days of the €400-800 per hour accountant or receiver haven’t gone away, and for someone to cross the Border from Northern Ireland to the Republic, they are truly in for a shock with medical costs (Northern Ireland comparisons in brackets) – €100 if you turned up in Accident and Emergency (free), €50 for a visit to a public GP (free), and prescribed medicines can cost €100s (flat €8) and a suspiciously-high 80% (20%) of which just happen to be expensive non-generic drugs.

This blogpost examines the latest European survey of consumer price comparisons and contains exclusively obtained information from Eurostat on comparative European incomes – in summary, our household earnings are now 3.8% above the European average – compared with 6.6% above in 2009 – but our consumer prices are a whopping 18% ABOVE the European average – slightly down from 27% high recorded in 2008.

We all know the history : according to the CSO, the Consumer Price Index rose 37% in eight years from January 2000 to January 2008. Of course for many in the public and private sectors and on welfare, incomes kept pace over this period and for most, the increased prices weren’t a problem. Then , along came the crash in 2007/8 when property prices began to decline and problems in the banks revealed themselves.  Household incomes subsequently fell as unemployment, elimination of overtime, cuts in gross salaries and welfare, and on the other hand, increased taxes, levies and contributions all ate into our incomes.  Unfortunately prices have not declined in line with incomes, with the result of worse standards of living (for some).

It is notoriously difficult to fully compare price levels between countries – that’s probably why we ended up with the Big Mac Index – but despite the difficulties, the European statistics agency, Eurostat produces an annual snapshot of relative prices of consumer goods and services. This is the latest annual publication.

It shows that overall, for the particular basket of goods and services examined, Ireland’s prices are 17% above European Union – “EU27” to refer to the 27 members of the EU – average. That compares with our neighbours in the UK whose prices for the same basket are just 2% above the EU average. In 2010, our prices were 18% above the EU average and in 2008, the record-high year, they were 27% above.

When it comes to measuring income, we are by now familiar with the arguments in Ireland for ignoring GDP, it includes the profits of foreign companies which are frequently repatriated out of the country and consequently our GDP is artificially inflated. So we tend to prefer GNP but even that has issues and in any event, Eurostat don’t provide country comparison rankings by GNP, but Gross National Income or GNI is a close approximation to GNP, and on a household basis, we are now 3.8% above the EU27 Union average, down slightly from the 6.6%-above-average in 2009. But our nearest neighbours in the UK have healthier incomes, now 9.9% above the EU27 average.

So, compared with our neighbours, our incomes today are just 3.8% above average but our consumer costs are 17% above average; in the UK, their incomes are 9.9% above average and costs are just 2% above average. In a free market like Europe, why should this anomaly continue?

The answer is competition reform.

I’d love to know what the ranine Minister for Enterprise, Richard Bruton does all day – he gives the clear impression that his main pre-occupation  when he turns up for work is to see if today is finally the day An Taoiseach Enda Kenny has a fatal slip on a political banana skin and Richard gets to fulfil his ambition of leading the Fine Gael party. Because, if you examine developments in enterprise, jobs or innovation in the past 20 months, there has been very little achievement, save for a litany of delay and disappointment and the odd goal-hanging appearance at a jobs announcement but the universal absence at redundancy announcements.  And Minister Bruton is also the person most responsible for competitiveness issues and prices in the economy. So it is at his door that ultimately we can lay the blame for Ireland continuing to be a rip off economy which hasn’t adjusted to the painful reality following the property and banking collapse in 2007/8.

The Competition Authority is presently being merged with the National Consumer Agency, where our friend Ann FitzGerald was until recently the CEO. The Competition Authority is an agency for which Minister Bruton has responsibility. There is a desperate need for the Authority to aggressively tackle costs throughout the economy, and perhaps figuratively hang a few high profile bodies from lampposts to encourage an acceleration in reforms to competitiveness. Alas, Minister Bruton doesn’t seem very interested in such reforms.

So maybe some Opposition initiatives to promote competitiveness, like the Bill announced by Deputy Flanagan today, might spur this Government to tackle rip-off Ireland.