Saturday, February 19, 2011

Campaign Diary Day 17 - Vested Interests

The term vested interest has been flung around over the last few days by all parties in the election. From Labour we get attacks on landlords big business as they seem to move to Fine Gael from Fianna Fáil. From the right we get the attacks on the Trade Unions as vested interests hanging around Labour's neck like an albatross. And everyone is attacking RTE about their biased coverage of the election.

What I don't get is why people are so caught up on the term. There is no other type of interest except a vested one. If you don't have skin in the game then you wouldn't give a hoot about the outcome. The Unions are there to represent their members' interests, IBEC is there to represent the views of business owners. Whether or not they have succeeded in this goal over the last few years is neither here nor there. That is their goal and they should not be attacked for doing what they are designed to do.

I had an interesting conversation with a surveyor the other day in Ranelagh. He was very put off by Labour's policy on outlawing upward only rent reviews and claimed that it would be a distortion in the market. Now to my mind the current setup already massively distorts the market. In the commercial world rents are generally a proportion of the cost price of the premises. In a world of falling property prices, the rents have to come down. Otherwise I will just relocate my business to an adjacent building offering lower rents. The alternative is that with all other costs and prices falling, rent will become too much of a burden and I shut up shop.

If the choice has to be made between protecting property owners' investments and protecting viable businesses providing employment to staff and generating tax revenues I certainly know which side I come down on. The removal of upward only rent reviews is the right thing to do.

Of course the gentleman in Ranelagh saw no irony in then attacking various vested interests of public sector workers and unions after blatantly pushing his own vested interest for the previous five minutes. Maybe I should send him an Alannis Morissette CD before polling day.


  1. Outlawing upward only rent reviews definitely is a distortion of the market. However we are talking about a market that is the prime example of a natural monopoly - only 1 building can be built on a given plot of land and only limited plots of land are zoned for each kind of use. So it was not a anything close to a free market to begin with.

    Presumably you cannot relocate because you also signef up for a minimum duration and would either have to keep paying rent, pay some hideous penalty or be sued for breach of contract.

    That said, if you sign an upward only lease, you are a tool. Seriously, why would you do that and who put you in charge of anything?

  2. But if the choice is going out of business, letting people go and not paying any rent to the landlord or reducing the rent to keep the business going then why would a landlord not agree to the reduction? Seems like UORRs are the ultimate in biting your nose off to spite your face.

    The point I was trying to make, rather than focus on UORRs, was that people tend to only see other people as vested interests and that their own interests just happily coincide with what is obviously the best of action for everyone.

  3. Yeah sometimes I cannot understand why the landlord insists on sticking. However if the lease is tight enough and the company is profitable enough in other locations, it won't go bust and can't simply breach the contract so ends up paying. In other cases though it appears to be completely counter productive. Perhaps the tenants just don't do enough to convince the landlord that they're not bluffing before it's too late.

    As for vested interests. I can't think of a good definition but although I very much have an interest, I am not a vested interest. I guess to me it means something along the lines of having more influence or control than just your interest would imply. Or an ability to make your interest take precedence at the expense of others whose interest is legitimate as yours. So patients have arguably more interstate in health care than doctors. They could die whereas doctors can only lose their jobs or money. Yet doctors have far more control, so are considered a vested interest. I can't reconcile this with any meanings I know for "vested" though.

  4. Ah the joys of posting from a smart phone, "interstate" above should of course be "interest".