Ireland is having difficulty with official statistics

The concept literally no one likes rolls around every year. We’re stuck with the fiscal space forever. The reason for the hated concept’s longevity is simple: the fiscal space is a part of our system of laws now. President Michael D Higgins signed the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union into law in 2012 after 60 per cent of us voted to introduce it into the Irish Constitution.

Love or hate the fiscal space, figuring out what the space is and arguing over how to apportion it are now a part of the budgetary calculus of the Irish state.

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Ireland’s property timebomb

Housing is the fundamental public policy problem. Everyone needs a roof over their head, preferably for a long time so they can become part of a community, surrounded by high quality services they can access if they like. This is the dream of urban planners, economists and the political system, not to mention just about every taxpayer and citizen. The reality is far different.

Housing is something you consume and something you invest in. The social use of housing is typically what we talk about when we use words like ‘home’. When we use words such as ‘property’, we are often talking about investment. When we use words like ‘stunning cosy property close to transport links’, we are most likely trying to sell a wheelie bin between train tracks.

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Bus Éireann’s three remaining routes

Bus Éireann can’t continue in its current form without one of three things happening.

First, the unions could accept pay cuts and productivity increases, which in this context are also pay cuts, somewhere in the region of 30 per cent at their most extreme. Who reading this could take a 30 per cent pay cut and not feel it?

The unions could capitulate to this but, in my view, they shouldn’t. To do so would undermine the very concept of a trade union.

Either the union fights for its members in solidarity, or it doesn’t. The fundamental responsibility for letting things get so bad is with the management of the company, who should resign en masse if they believe the situation they have found themselves in is that dire.

A look at the company’s books over the last 16 years convinces me that during the good times, when revenues were rising, management allowed the payroll to increase far in advance of revenues and when the crisis hit, payroll didn’t fall as revenues fell.

The result was a financial black hole once austerity ended and competition began again in earnest.

Unions and management can, of course, come to an understanding – a week is a long time in industrial relations, as UCD Smurfit School professor Bill Roche reminds us.

But a unilateral imposition just can’t be countenanced without seeing the management on the dole queue first.

Second, the government could inject money to compensate Bus Éireann for losing some of its revenues to private bus companies and bring its subvention levels to the European average, or above it. The current level of subvention of about €40 million is far below the European average.

It is about 35 to 40 per cent of revenue in Ireland, where in France it can be as high as 80 per cent.

It is hard to compare like with like internationally because the service models are quite different, so take these comparisons with a grain of salt. But across countries like Belgium, Netherlands, Sweden and Switzerland, the subvention from the public to its bus service varies between around 35 per cent and around 70 per cent.

To bring Bus Éireann to the European average would cost roughly €30 million more per year, every year.

Let’s not forget the company also gets paid for the free travel scheme, gets rebates from the Taxsaver scheme, and enjoyed state funding for the purchase of new buses.

There’s no doubt more taxpayer’s money would solve the immediate funding problem for the company, if not its long-term productivity issues.

Third, the company could enter examinership and perhaps have pieces of itself restructured, broken off and sold. This third option is looking more and more likely. Bus Éireann is really three businesses.

The commercial routes are there to make a profit; think the Dublin to Galway route, or the Cork to Dublin route.

The company runs a school bus service, and finally the company runs loss-making pubic service obligation routes for which it is compensated by the state.

Bus Éireann about breaks even on the school bus and PSO routes. The company is losing money on routes where it competes with private sector companies who pay their drivers less, who drive buses that cost less, and who have far fewer support staff. Last year, it lost an estimated €9 million, mostly on these commercial routes.

Thinking about Bus Éireann as three businesses makes it clear what needs to happen.

The parts of the company that are effectively the state, its school bus service and the routes it runs at a loss to help connect rural Ireland, need to be absorbed into the departments of transport and education, respectively.

These services break even and can even be expanded should the government decide it is in the strategic interests of the country to do so. It will also remove this state-level aspect of the service.

Private companies can negotiate with the government to run different services, and taking free travel passes should be part of any licensing for buses of any kind into the future, perhaps at off-peak times.

The school bus service that transports over 110,000 children a day is actually contracted out to around 1,300 private, local operators already and just administered by Bus Éireann, so here the transition back to the state would be comparatively easy.

The PSO routes can be serviced by a mixture of private buses and Bus Éireann buses. It is vital rural Ireland maintains its transport links.

As someone who lives in rural Ireland, I’m more than aware of how tenuous those links are. Post-Brexit, rural Ireland will need connectivity to thrive and public transport is one important element of this.

People need buses to connect rural Ireland. They needn’t be Bus Éireann buses.

The commercial part of the business is where things will get hairy, because this part, with relatively expensive drivers driving relatively expensive buses with large administrative overheads, is the part in trouble.

Apply the following test, route by route. Where the private sector maintains a service at a quality and frequency acceptable to the regulator, remove the loss-making Bus Éireann service. The ‘market failure’ Bus Éireann is designed to correct no longer applies by definition.

Apply the Competition Authority to ensure private companies don’t price gouge if no one is left to compete with.

Where the test is inconclusive, scale back the Bus Éireann service route by route until it breaks even. This will unfortunately result in redundancies and in the sale of some of the rolling stock, perhaps to Irish private operators, perhaps abroad.

Either way, the state will lose money paying for redundancies and writing down losses on capital in the short term. It will also result in hardship for many families. However, the economy is growing and so other work can be found, and more importantly the state will not have to continue to pay for a service the market seems happy to provide at a lower price.

Where the test is positive – probably because Bus Éireann is the only game in town – keep the service, obviously. Reapply the test every five years. If the population remains the same size, the result should be a progressively smaller Bus Éireann, but a larger private sector bus service. If the population is growing, then the service may well need to expand.

Bus Éireann is a good example of Ireland trying to answer the question of whether the state should intervene, and it partially provides the answer.

The state should intervene to bring our kids to school, because access to school is vital. The state should intervene to safeguard our connections to rural Ireland.

The state should pay for our pensioners to travel the country they helped build for free. The state shouldn’t intervene to save a company that can’t survive competition.

Careful what you wish for in battle over FDI

Part of Ireland’s prosperity rests on its attractiveness as a foreign direct investment hub. Ireland’s big idea since the 1950s has been to get other people’s money here and turn that money into good jobs for Irish people. The two vehicles for the money-getting (at which we are honestly world-class) are the IDA and our multinational-friendly tax and regulation system.

It’s not a hard sell. We save companies a fortune while giving them access to one of the world’s largest markets and giving their executives a nice place to live.

Our competitor countries complain constantly that our success (which implies their failure) is because of our lax attitude to the activities of some of the multinationals located here. While this is changing rapidly, the perception remains, and our colleagues in Europe do seem somewhat bitter about it.

One of Enda Kenny’s first foreign engagements as Taoiseach saw him get stuck into French president Nicolas Sarkozy defending Ireland’s 12.5 per cent corporation tax rate. When they came, the troika wanted the totem of Irish industrial policy taken away. Kenny was having none of it.

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Ireland must focus on mitigating the external risks to our economy

I’m writing this from Groningen, a beautiful city in the Netherlands with one of the world’s oldest universities. Groningen’s buildings still bear the scars of World War II, and it is a place where learning and culture combine easily.

The contrast between what people are saying on the ground in Groningen and what you can read in the international press is, frankly, astounding. For the international press, the Dutch elections are the latest in a line of anti-establishment dominoes started by last June’s Brexit result.

The dominoes next to fall are France and Germany, and then the European Union is toast. The international election coverage hinges on the personality of far-right hair-enthusiast Geert Wilders. It’s easy to see why Wilders is news. He is anti-migrant, anti-Islam and Eurosceptic. He is more Trump than Trump and he sells papers and gets clicks.

Wilders wants to leave the European Union, bar asylum-seekers, cease funding development aid, increase defence spending, ban the Koran and Islamic schools and, of course, decrease income taxes. Stop me if you’ve heard some of this before.

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Bus Éireann should be let go to the wall. An Post should not.

In this column two weeks ago I argued Bus Éireann should be shut down. Sixteen years of data convinced me the organisation did not deserve the taxpayer’s largesse. Bus Éireann did not pass a simple test: should the state intervene to save it? Competition, not austerity, had sunk its fortunes. Its highly-paid management should be fired, and its staff reassigned or made redundant.

Take the public service obligation routes and school bus businesses into the state proper, or put them out to more than 8,000 privately contracted buses, and let the workers find alternative employment. A harsh call, to be sure, but neither blithe, nor driven by ideology.

Another semi-state faces exactly the same problem this week. The public policy disaster du jour is An Post. The question - should the state intervene - is the same as it was two weeks ago. And here the facts are entirely different.

Not only should An Post see the government reaffirm its commitment to a public mail and financial services network, that commitment should be expanded, and regulations holding An Post back should be removed. Why do I have two different opinions? Well, I examined the facts.

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How Ireland can survive the flight from Britain’s shadow

The Taoiseach needs to give his speech writer a high five, or maybe a fist bump. Because in the last few weeks, we have had two dingers from Enda Kenny.

The first was his Brexit speech, which was understandably overshadowed by the McCabe controversy, but is well worth reading, because Brexit will affect every person on this island, North and South. In that speech, the Taoiseach rightly said: “History has rarely been idle in Ireland.”

In another speech, recognising the distinct ethnic status of the Traveller community, Kenny ended with: “May all the people of our nation live in the shelter and never in the shadow of each other.”

This second phrase, perhaps deliberately, echoes a banquet speech given by President Michael D Higgins on his historic state visit to Britain. There the President said: “Ireland and Britain live in both the shadow and in the shelter of one another, and so it has been since the dawn of history.”

Higgins was himself quoting from an old Irish proverb: “Is ar scáth a chéile a mhaireann na daoine.” This translates roughly as: “It is in each other’s shadow that we flourish.”

Ireland in the shadow and the shelter of Britain. Travellers in the shadow and the shelter of the settled people.

And history never idle. Remarkable parallels.

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Ireland is the Lionel Messi of getting other people’s money. Trump might end that.

The stock market is reaching new highs. People are talking about inflation again. Goldman Sachs has never had it so good. Corporate mergers and takeovers are happening. Everyone is looking to US president Donald Trump and his policies as the engine of world economic growth. Despite the volatility he personally injects, things seem to be going well.

Though you’d never know it listening to Trump, unemployment is at a historic low, as is crime, bankruptcies and debt delinquencies. Four US stock markets, the Nasdaq Composite, the Dow Jones Industrial Average, the S&P 500 and the Russell 2000 of small capitalisation stocks each closed at a record level for four consecutive days last week. Last time that happened was in 1995.

The bet is that Trump - a lying, racist, misogynist who has never held a public policy job before - will deliver on his campaign promises to cut taxes for everyone, spend borrowed money on infrastructure, slash regulations across the board and spur economic growth. Despite his own lack of credibility in delivering any of these barely sketched-out policies, market participants are gambling that the smart people behind Trump can craft a policy package to get through the Republican Congress in time for the mid-term elections, which may well see the Congress swing Democratic, and thus block Trump as it blocked former president Barack Obama. So right now, it’s risk-on for equities and, crudely, stock markets go boom. If Trump’s team fulfils his campaign promises, the result will be large windfalls for the corporate sector, and the corporate classes in the US. It is telling that Goldman Sachs has never traded at higher levels, a reflection that the swamp-draining is not going well.

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'Tiny open economies like Ireland are more vulnerable than most to negative technology shocks'

Last week, Hewlett Packard announced it was removing 500 jobs from one of its Irish facilities. The move reminded many of Dell’s decision to move its production facility from Limerick to Poland in 2009, and threw Ireland’s relationship with the many multinationals who use us as an export hub to the European Union into sharp relief.

Multinationals are good for the Irish economy. They bring many benefits, not the least of which are hundreds of thousands of high-value jobs and billions in tax revenue for the state. They promote good management practices and provide at least some knowledge spillovers to domestic firms.

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‘Trump’s not draining the swamp. He’s filling it up, and stoking another banking crisis'

Like many people, I wake up every morning and ask myself: what has Donald Trump done overnight? It’s hard to keep up with everything he’s done.

Everyone is asking: what does Trump mean for me, my family and my business? Should I buy a house if I work for a multinational? Should I travel to the US if I’ve read an anti-Trump tweet? Should I invest if he pulls up tariffs and increases the price my customers will pay for my goods? Should I buy bonds or equities for my retirement? What will the economic consequences of Trump be?

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US economic model not best for Irish workers

Here’s where we are at the end of the first month of 2017. Theresa May is in London, trying to take Britain out of the European Union. Donald Trump is in Washington DC, trying to build walls and erect tariffs. Angela Merkel is in Berlin, veering to the right to stay in power. In France, Marine Le Pen, a hard-right candidate, is likely to clash with two other right-wing candidates to see who can be president of France.

At the annual mutual love-in of Davos, the Chinese premier promised to lead the world in terms of openness. This is code for: lead the world by stepping into the space left behind by a retreating US. Global power is pivoting to Asia. South American economies are sliding into their familiar commodity-based cycles of debt-induced recession, while the Middle East tears itself apart in two wars — the one in Syria, and the one in Yemen. You’re not even safe in the Arctic, because that is melting at an unprecedented rate, paying no heed to what the climate denier in the White House says.

(I am available for children’s parties, by the way.)

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Brexit has thrown up the question that we, as a group of peoples, must answer

Like a train coming toward us through thick fog, the shape of Britain’s exit from the European Union is becoming clearer. The impact is, as yet, uncertain. Whatever happens, the chances are it isn’t going to be good. The worst of all worlds for Ireland is a situation where Britain imposes a hard Brexit.

A hard Brexit means tariffs and levies on the goods and services our businesses sell. The heart of the European Union is its customs union – the definition of a customs union is a common external tariff we have to share as part of the EU.

A hard Brexit means potential quotas on the movement of our workers, and even caps on the movement of our capital. A hard Brexit means throwing our relationship with Northern Ireland into sharp relief.

Where exactly do we draw the line between North and South?

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Ireland’s Brexit blues

Time to adapt or die in the post-Brexit world order

Ireland’s response to Brexit will define our economic landscape for decades to come. Our much-maligned civil servants gave Ireland the best possible start the day after the referendum result, when Taoiseach Enda Kenny, at his most statesmanlike, reassured his people that his government had this under control and had a plan for Brexit.

Kenny even showed us the plan, and it looked like a good plan to me. Our civil servants get a lot of stick. It’s only right we praise them when they do a good job. Again, in fairness to them, Britain had not settled on its mode of exit before last week, but the range of possible negotiating endpoints was becoming obvious some weeks ago.

Despite such a good start, Ireland’s policy makers have yet to articulate their approach to a post-Brexit world beyond grabbing jobs from the City of London.

Those jobs don’t seem to be coming our way, though. That may be no bad thing.

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