Sunday, January 29, 2012

It's the economy, stupid!

One of Bill Clinton's greatest contributions to language, apart from defining what sexual relations may or may not mean, was the phrase "it's the economy, stupid!". So as a stupid person, I spent last Friday in the conference centre in Croke Park being educated on all things economic and fiscal. The conference was organized by Stephen Kinsella, Liam Delaney and Colm Harmon and had in excess of 200 people attending over the course of the day. What follows is a rundown on the sessions I attended and what nuggets of information I picked up from them. I understand that videos of the day will be posted on the Irish Economy blog.

Property Market

After a very welcome cup of tea and having my name ticked off on the attendance list, I plumped for the Property Market session as I felt I might at least understand the topic compared to the meta-debate on how to make good policy that went on in the parallel session. First up was Ronan Lyons who presented his proposal for a site-valuation tax to replace the current property taxes and, perhaps eventually rates. In principle it seems like a good idea to encourage productive, high density use of land zoned for residential use. However, based on his plan I still don't see how the tax would work and provide a sustainable base of taxation for local government spending without large financial transfers from urban to rural dwellers. I tackled him on this in the Q&A session and at lunchtime and we agreed that the plan could do with some refinement.
Next up was Michelle Norris from UCD who presented a paper on the realities of mortgage arrears in Ireland. Despite the low number of repossessions, the stresses that many mortgage holders are put under by both prime and sub-prime lenders is huge. Her presentation really put a human face on the current mortgage crisis. The session finished with Rob Kitchen from NUIM outlining his thoughts on the future of the property market. A lot of his material has already been posted on his Ireland After NAMA blog but it was good to put it all in the one place. He doesn't see a recovery to peak prices for a long time to come yet.


Following a brief coffee-break, and the arrival of Minister Joan Burton with RTE in tow, I headed in to the session that she was chairing on unemployment. Not surprisingly, this was very well attended with standing room only at the back of the hall for a time during the session. First up was unemployment expert David Bell, from Scotland, who outlined the nature of our unemployment problem and compared out situation to that of other European countries. Next to speak was Aedin Doris from NUIM who gave one of the two best presentations of the day. Her mantra was that unemployment was a demand side problem and that no amount of badgering the unemployed can make them get jobs that don't exist. Finally Philip O'Connell from the ERSI examined all the data on state training and concluded that most of the budget was being targeted in the wrong areas. Just as well FAS is being restructured/closed! Due to the interest in the subject this session ran over by about half an hour, and so a much shortened lunch-break followed.

Banking and the Euro

On reading the conference programme, this session immediately jumped out as the headline acts. Brian Lucey, Karl Whelan and Frank Barry speaking with Constantin Gurdgiev chairing was just like an episode of Vincent Browne but without the haranguing and pointless government spokesperson (Coveney and Donohue I'm looking at you!). And it did not disappoint.
After a brief introduction from Constantin where he outlined the topics and the ground rules, the floor was yielded to Brian. During his half hour presentation he discussed the implications of the impending duopoly in the Irish banking system and touched on the likelyhood of co-operative or mutual banks (just like the old building societies) setting up and the possibility of a foreign bank entering the market. From what I took from the talk, we are unlikely to see much in the way of innovation in Irish banking for the foreseeable future with BOI and AIB continuing to dominated the market.
Following Brian was Karl who gave the best talk of the day. He explained in words of one syllable the funding mechanism for the rump of Anglo, why burning bondholders is now old hat, why the interest rate on the Prommissory Notes is a red herring and how the Central Bank could just write off the notes if it could convince 2/3 of the other central banks in the Eurozone that doing so is a good idea. This is a talk that should be watched by every back-bencher who comes out with the "there is no other way" mantra.
After Karl's magnum opus, Frank was always going to have a tough act to follow but he coped admirably and gave a very interesting talk on the problems with the Euro. His premise that unless there is some sort of federal funding mechanism to buffer the impact, the peripheral Euro countries will be at risk of external shock to their economy. Ireland due to it's reliance on the US and UK is particularly susceptible. Another talk that I look forward to watching again once posted online.

Fiscal Policy

I will have to admit that either due to the subject matter or my lack of mental stamina, both Philip Lane's and John McHale's papers went over my head. They seemed to be suggesting that in the new Euro deal that may or may not require a referendum there will be stricter controls over deficit spending and overall debt to GDP ratios than are currently in place. I'm not sure how the Eurozone countries will get to the target 60% in any reasonably time-frame but the plan seems like a reasonable one.
The final two talks by Seamus Coffey (UCC) and Colm McCarthy (UCD) tackled the issue of capital vs recurrent spending. The first presentation was right up my street with a relentless series of graphs outlining the collapse in capital spending through the recession. The implication was that we are now underspending on capital and that future cuts should come from the recurrent side of the budget. The pertinent question is this: Is the 94th euro spent on recurrent providing a better return on investment than a potential 7th euro spent on capital.
The master of Bord Snip then promptly stood up and demolished all of what had gone before. He suggested that we had splurged on capital during the boom, often driving up prices on ourselves, and that having built one motorway to Cork there was no need to build another. Of course this neatly sidestepped the fact that we still have schools housed in prefabs, Dickensian conditions in hospitals and even in a huge recession, gridlock in Dublin on a daily basis. However, his presentation brought the conference to an end in a lighthearted manner and was just what was required after a heavy day's thinking.

General Thoughts

Overall the day was very enjoyable and very enlightening. From an organizational perspective some of the major positives were the free entry cost, working wifi, good chat on the conference hashtag (#ieconf), roughly sticking to schedule and a large turnout. The downsides include some issues with microphones, spam overload on twitter during the afternoon, running out of sandwiches at lunchtime and the lack of attendance by politicians and senior policy makers with a few notable exceptions. If, as has been suggested, these conferences become a regular event I will certainly try to attend. Congratulations to all involved in the event as I would deem it a great success.

Thursday, January 26, 2012

Back in bonds!

Not quite as catchy as an AC/DC song with a similar name, the Irish Times reports that Ireland was back in bonds yesterday.The NTMA managed to swap about €3.5B of bonds that were due for repayment in 2014 into new bonds that are due in 2015. This is a good thing, as it reduced the amount of refinancing that will need to be done by NTMA in 2014, the first year of Ireland's post Troika existence.
However, to call it a massive success and claim that it shows an "appetite for Irish Government paper" is stretching things a bit. As opposed to you or I getting a term extension on our mortgage which reduces our monthly repayment, we have actually increased the cost of this borrowing from a 4% coupon to a 4.5% coupon. So this postponement of a year will cost us an additional €35M in 2012 and 2013. That crafty bond market doesn't give stuff away for nothing.
I am sure that it is just coincidence that the NTMA carried out this bond swap on the exact same day as yet another huge, un-guaranteed Anglo bond was repaid. Likewise I'm sure that the arrest of Ivor Callely yesterday was also just another coincidence, just like the arrests of Sean Fitzpatrick were in the past. I wonder what poor unfortunate will be perpwalked the next time the Rothschilds come looking for their cash back.

Tuesday, January 24, 2012

Gender Quotas

Last Friday there was an all-day conference held in Dublin Castle on the topic of how to get more women elected in Ireland. Unfortunately I wasn't able to attend due to work commitments but from what I heard it was extremely well attended with good contributions from all participants. Of course, we won't mention the fact that less than 10% of those at the conference were male - so much for equality!
Anyway, the main strategy being pursued by this government is the introduction of gender quotas at candidate selection for political parties. The target is currently set to 30% at the next general election and this figure rises to 40% after a further seven years. The stick which which the parties will be hit is a 50% cut in funding from the public purse.
I am all for improving the representative nature of politics, not just women, but across income, education, age and ethnic divides, so I am generally in favour of the proposals. I certainly wouldn't go as far as Dan Sullivan's article in Friday's paper calling them boneheaded. However, there are a few items that I want to comment on.
No sunset clause
The use of gender quotas was sold during the last general election as a temporary measure to increase women's participation. Once a critical mass of women were elected there would be no further need for quotas as the number would be self-sustaining. Therefore rather than increase the target after seven years the measures should be rescinded.
Effect on small parties
The large parties (namely FG, Labour, FF and SF) should have no difficulty in reaching the mandated target. However, for smaller groups like the Socialists or a brand new party, who only have resources to run a few candidates and only a few people willing to stand, a cut in half their state funding could be fatal. There should be a minimum threshold of candidates below which the quota does not apply.
Only applying at General Elections
The quotas, and resultant cut in public funding, will only apply at general elections. Local elections are the training ground for new politicians and there are few candidates for larger parties in generals who have not already fought, if not won, a local election. If we were serious about increasing the number of women elected to the Dáil then the locals should have been included in the quota.
Selection convention chaos
There is going to be all out war at selection conventions across the country as local organizations have their decisions overturned and/or additional candidates imposed from Head Office as the party machine tries to ensure meeting the quota to ensure continued funding. This is going to be especially difficult for FG as they only managed to field about 15% women last time and have a lot of incumbents to accommodate.
One report I did hear from the meeting last Friday was repeated tales of women "being asked" to stand for election and of women not standing because "they weren't asked". This I don't understand, especially coming from the group of intelligent and capable women that spoke at the conference. Surely in this day and age you should just choose to stand and then build a campaign and a team around you. Not everything can be delivered on a plate you know!

Thursday, January 12, 2012

Music Industry back in court

A bit over a year ago I wrote about the Charleton ruling in the Music Industry vs UPC case. In that, the judge said he'd like to allow the Music Industry run roughshod over our civil rights but that there just wasn't legislation to allow it. Ok I'm paraphrasing a bit, but basically that's what he said. So it is with some interest that I notice the merry-go-round is starting up again.

This time the industry is taking the state to court over the fact that the relevant statutory instrument hasn't been enacted yet to make three-strikes legal. This SI has been promised for this month so it does make you wonder what has brought on this fit of pique. Is it sabre-rattling to ensure that the SI is issued quickly or do they have a genuine case of lost revenue caused by the absence of the SI?

Of course this court case and the SI will yet again fail to take account of the fact that any technical method used to root out fileshares will be quickly worked around. Despite the huge investment in things like the Chinese and Iranian firewalls they are unable to successfully block access to the internet. I doubt EMI and their friends will make any similar investment and it would seem to be unfair to put the burden of cost on ISPs like UPC.

EMI's other great claim is that their profits halved in 2011 and blamed it mainly on piracy. How ludicrous is that? Don't they realize that there is a recession going on and that demand in the domestic economy has tanked by up to 30%. Recorded music is a luxury compared to essentials such as food, heating and clothing and so will obviously be further up the list for chopping in households. Personally I have gone from being a 100 CD/year person to purchasing about 20 in 2011 and I don't think I'm alone in this reduction.

I'll be keeping an eye on the case and the SI over the next few weeks.

Sunday, January 8, 2012

One tiny leap for Dublin

Integrated public transport ticketing, like the Oyster Card in London, has been on the agenda here for about a decade. I recall Mary O'Rourke announcing that it would be operational within a year, just after destroying the LUAS project by ordering the two lines to not join up. Then, as with all things in Ireland, time passed, nothing happened and we all just muddled along with multiple travel tickets and cards or just paid cash.

So it was with some surprise to me that the Leap Card was announced last year and came into operation a couple of weeks before Christmas. This new pre-pay card allows you to use bus, rail and LUAS services in Dublin using a single card. Seems like an awesome improvement over the current situation.

For LUAS and Dart users the smart cards are great. The existing LUAS and Rail smart cards will now be phased out and the existing savings available by using smart cards will continue. These work out at about 10% to 20% over single journey cash fares with greater savings on longer journeys. You tag on before boarding and tag off when you alight and the appropriate fare is taken off the card.

However, for Dublin Bus users the Leap Card isn't up to much. Unless you are going on a very long journey, you still have to queue up, tell the driver your destination and then present your card to the ticket machine. The driver will then deduct the relevant fare from your card. Sure the fare is a bit cheaper than the cash price, but there is no improvement in boarding times or reduced queuing. This seems to defeat the purpose of having the smart card in the first place.

There is so much wrong with this way of doing things I really don't know where to begin. But here's a few ideas that Dublin Bus could have implemented to improve the user experience and their bottom line.
  • Introduce flat fares for smart card users. This would hugely increase the uptake of Leap Card usage.
  • Ditch the crazy stage scheme that harks back to the days of conductors on trams and buses. Introduce zones as used in most other cities and currently used on the LUAS.
  • Tag on/tag off for bus users. Using the inbuilt GPS in the bus, the system can know exactly how far the card traveled.
  • With the roll-out of the RTPI system there is now electronics at each bus stop. The tag on/tag off could happen before boarding and after disembarking thereby further reducing boarding times.
With companies like IBM providing a lot of the technology for the Leap Card, it is hard to believe that such options were not provided to Dublin Bus. So the only conclusion that can be drawn is that Dublin Bus aren't really that interesting in working in the customers' interest. The Network Direct project certainly suggests that the customer is fairly far down the list of priorities.

One other annoying issue with the Leap Card is that it isn't a truly integrated ticket system. If I want to use a combination of transport modes I pay individual fares for each of them. In most other cities, if I transfer from train to bus or from tram to train I just pay a single fare for the end to end journey assuming it is completed within a reasonable time frame. I'm assuming that at some stage in the future the system will be enhanced to provide this functionality, but again it seems like a really basic idea that should have been required as part of the initial implementation plan.

As a user of the annual tax-saver ticket, the Leap Card won't massively impact me for the next few months. However, come June when my current ticket expires I'll have to do some sums to see if the annual ticket still comes out better. I'm assuming it will but you never know!