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We Couldn't Understand the Peace

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More or less randomnly, and thanks to a conversation my wife had with a TD and a Monk, I made a radio documentary with Ian Kenneally and Ronan Kelly.

It's about a period in 1972 when 'refugees' came from Belfast to stay in Glenstal Abbey, a Benedictine Monastery near where I live. The story is fascinating and uncovered a different side of the history of the Troubles for me. It was also a privilege to listen to people's stories, record them, and write and record a script around their experiences for RTE's listeners.

You can learn a bit more about the documentary here.

First Broadcast Saturday 3rd September at 1pm.

Repeated Sunday 4th September at 7pm.

You can listen to it by clicking this link. (.mp3)

Households can give Dublin Bus no more

Tom Waits is always right. The large print giveth, and the small print taketh away. Let’s look at the small print of the Dublin Bus pay dispute by going through the company’s annual accounts from 2008 to 2015.

(You can learn a lot from annual accounts, including how they are presented. Every year since 2008, Dublin Bus has really, really wanted you to know that some of their bus drivers are women, for example. There are pictures of female bus drivers everywhere. But I digress.)

First, the large print: Dublin Bus workers are striking in search of higher wage increases than the 8.25 per cent offered to them over several years by Dublin Bus in previous pay talks. They want 15 per cent to 21 per cent wage increases over several years. The strikes are expected to replicate the recent Luas driver disputes, in that they seek maximum disruption for maximum negotiating leverage. This behaviour pisses off customers, of course, but that is the nature of strike actions everywhere, all the time.

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Why are we all taking a bath on our insurance?

Why are non-life insurance premiums rising so much faster than the cost of other services? Premiums have risen 60 per cent since autumn 2014, reducing the disposable incomes of many households in the state, at a time when rental costs have never been higher, and the cost of education and health services has risen markedly, too. The sheer scale of the price increases has provoked a public outcry. Oireachtas hearings are ongoing, and an investigation into the pricing behaviour of our insurance companies is now taking place.

But we don’t know why prices have risen so fast. The answer lies in how insurance companies make money, the structure of the Irish market, and regulation.

Naturally, it will be important to understand this pressing policy problem in the context of a bathtub.

A bathtub has three elements. A flow of water in, an amount of water in the tub, and a hole to let water out. An inflow, a stock of water and an outflow.

(We’re not getting into any Celtic Tiger jacuzzis and candles nonsense here folks. Let’s keep the metaphor simple).

You pay insurers to take the risk of crashing your car off you when you drive it. Insurance companies manage your individual risk by creating a pool of premium-payers. This is the inflow. When one person does crash, the pool reduces by the amount the insurance company pays out. That’s the outflow.

The ‘float’ insurance companies need to (A) make good on all their claims, (B) run their businesses, (C) satisfy regulatory requirements set by the Central Bank and (D) actually make money for their shareholders, is the stuff in the tub, the stock of water.

Premiums are calculated by actuaries, but sometimes in practice they are guided simply by rules of thumb. The ideal, actuarially-calculated risk-adjusted price of a premium can be much higher for a customer than the premium they actually pay. Insurance companies can get more customers if they charge lower premiums, and because having loads of small premiums makes the amount of water in the tub that bit bigger, the insurance company can make a lot of money doing this in a short space of time by charging a fee-for-service, but if too many of their customers need payouts, the company can become insolvent — meaning there’s no more water in the tub — very quickly indeed. With premiums not being risk-adjusted properly, the chances of taking bad risks is obviously higher too. So the insurance company, or the bathtub, both will run dry.

The long and the short of it? Premiums should have been higher in the past, but weren’t, because of poor business decisions by fee-hungry insurance companies trying to eat up market share which then went wallop.

A good indicator is to see how Irish transport insurance costs compare to those in the rest of the eurozone and to Britain. Irish transport insurance cost around 20 per cent less than in either the eurozone or Britain from 2012 to 2014, and now is about 20 per cent more expensive, three quarters of the way through 2016, compared to Britain and 30 per cent more expensive compared to the eurozone.

This has happened several times in Ireland. Each time the costs of the bailout are passed onto other insurance consumers and the taxpayer. Quinn Insurance cost us €1 billion. FBD made losses of €100 million. Setanta’s failure will cost someone, probably us, €90 million or so.

Each time one of these companies fails, a levy gets attached to new premiums, driving up the cost for each individual. The minimum ‘float’ of water in the tub is subject to changes by regulators, who since the 2007 crisis have demanded increased minimum levels to cover potential outflows as well as much stricter record-keeping and other compliance costs.

The need to keep more and more water in the tub, plus paying for the people within the business to deal with the regulators, plus taking on more lawyers and accountants to fight claims has forced the cost of doing business up.

Each time a new regulation comes in, the premium must rise to compensate for it. Payouts for claims have risen. Since February 2014 the Circuit Court has been able to award more damages at higher rates, meaning the outflow from the tub is higher.

Since the crisis, costs for accountancy have fallen 9 per cent as measured by the CSO’s producer price index. Legal costs have risen 6 per cent. We are feeling the effects of not introducing Alan Shatter’s legal services reform bill in its entirety. I am sure history will judge watering the Legal Services Reform Bill down as one of the largest own-goals of the troika period.

Each time a new, higher claim goes through the courts system, the insurer has to pay out more, both to the claimant and to our learned friends in the pin-striped suits.

Add to this the problem that many of the long-term investments large insurance firms make in the bond and equity markets are not delivering much of a return anymore thanks to the low growth, low inflation, low interest world we live in, and the only option left to them is to jack up prices.

What is interesting is how different the increase in transport insurance is from the increase in home or health insurance. Since 2015, health insurance costs are up around 6 per cent, house insurance costs are up around 11 per cent, and transport insurance costs are up 30 per cent. The sharp point of escalation in transport costs relative to the health or house insurance is July 2015. On a graph it looks like someone taking a sharp turn in a car. This tells you something very different is going on with transport insurance relative to the other two major non-life insurance categories. (Life insurance is effectively a separate business, so it’s not wise to consider it here.)

Looking at the books of the insurance companies for 2014 and 2015, none of them look to be hurting — their bathtubs are full.

Insurance companies in Ireland are in a strong position as, with fewer of them, there is less choice for the consumer. That little bit more market power, combined with increased regulatory and legal costs, and a return to prices they should have been charging were they not being so stupid in the past, means consumers can expect to pay more for their car insurance into the future.

Whether this small group of insurers is colluding to increase the prices we pay is a matter for those investigating it. The consequences for individual motorists are reduced disposable incomes, and increased risks of getting hit by uninsured people. The government will try very hard to stay as far away from this matter as it can. But it may not be possible.

Forget Apple – with investment funds, you ain’t seen nothing yet

Gabriel Fagan looks like the quintessential central bank economist. Grey-haired, serious, sober and well-informed. He’s the kind of guy you trust. You’d leave your money with him.

Fagan, the chief economist of the Irish Central Bank, appeared before the Oireachtas committee on budget oversight last week, and left parliamentarians’ jaws on tables when he mentioned a figure of €300 billion the Central Bank wasn’t quite sure about.

The bank is examining more than €300 billion in assets here owned by investment funds. What kinds of assets? Property.

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Apple: Is there a whole barrel of Apples?

Contrast the Irish government’s reaction to the Brexit announcement with its reaction to the ruling by the European Commission that Ireland helped Apple pay almost no tax on profits it made selling its devices and services across Europe.

The morning of the Brexit result, the Taoiseach appeared before the media with a plan, a set of actions drawn up by his officials, and a sense that the government had at least thought through some of its options with respect to this enormous problem.

The Irish reaction was far, far more professional than our cousins in Perfidious Albion, where the political system essentially imploded for a month. The Taoiseach was clear, concise, and it seemed like the civil servants – the people who actually do the doing when it comes to policymaking – had thought things through.

You might think there is a world of difference between the popular referendum to leave the European Union and a fairly abstract tax ruling, but you would be wrong.

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The true cost of scrapping an ‘almost perfect’ tax

The European Union is investigating Apple to see if it owes countries like Ireland billions in unpaid taxes. As of the second quarter of 2016, Apple has a cash balance of around $231 billion. To put that in its proper context, Ireland’s total national debt is around $226 billion.

Apple can obviously afford whatever the fine is. There’s a lot of money to play for. The pile of multinational cash parked overseas in places like Ireland is in the order of $1.2 trillion, according to credit ratings agency Moody’s.

A first digression: take everything ratings agencies like Moody’s say with a barrel, not a grain, of salt. This is the most recent estimate out there.

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The Leaving Cert may be slowly changing

Parents are crossing their fingers and their toes. Novenas are being said. Girls are outperforming boys. The scramble for places has begun. Accommodation problems abound. Guidance counsellors have expressed concerns. Parents think the Leaving Cert places too much pressure on their kids. Employers think third-level courses need reform to better match their needs. The Minister for Education is looking seriously at reforming the rote-learning exercise that is the Leaving Certificate. Students’ unions want more money. Parents are hard-pressed to meet the costs of college.

You might think those headlines are from 2016. They’re not. They are from 1996. Search the papers in 1996, and 2006, and you see exactly the same patterns, the same stories, the same issues.

They’ll be the same in 2026 and 2036. Ireland has really excellent education correspondents, but apart from changing some of the names, the stories are the same year in, year out. There always seems to be a picture of young people jumping. And, of course, there’s the obligatory profiles of the people who get nine As and the mature students completing their Leaving Certs.

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360 hours smartphone free

Like most of my generation, I live in, and on, my iPhone 6. This is not hyperbole. The fantastic (and rather scary) Moment app tells me I spend 8% of my waking life accessing my iPhone. I pick it up over 110 times a day, every day. Worryingly, I use my iPhone more on the weekends—when I’m most with my kids—than I do during work.

I’m 38. Imagine I live to be 85, which, statistically, I can expect, and imagine I sleep 50% of that time. I have 23.5 years left awake before I die. That’s 1.88 years of my remaining life I’ll spend on an iPhone.

1.88 years of my allotted time on planet Earth. Fuck that.

I don’t spend 8% of my waking life reading books, or working out, or walking with my family. I’d like to think I spend my time somewhat productively, and I’m a reasonably happy person, but I’m pretty sure I can think of better uses for 1.88 years of my life than staring at a smart phone.

Smart phone use is this generation’s smoking, and I’m a heavy smoker. I’ve been aware of this for some time.

Moment tells me I use Twitter the most, followed by RSS feed app Reeder, podcast app Overcast, and then everything else.

The thing is, I love my iPhone. I love everything about it. But I don’t think spending 2-3 hours a day accessing it is smart.

The Punkt phone challenge came at exactly the right time. It’s summer and as an academic I’ve fewer responsibilities, apart from writing. I also had a nice mixture over the weekend of free time, and travel.

I started the challenge on Thursday the 5th of August in the evening. I sent a tweet announcing it, and the fun began.

Unboxing the phone was a lovely experience.  The packaging is sleek and well considered, the setup instructions are very clear, and the phone itself is both pleasing hold and obviously, very simple.

Once I was up and running, I sent a few text messages to friends to tell them not to message me on WhatsApp or any of the other iPhone centric services I use, and then got stuck in to doing not much at all with my phone.

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The urge to tweet about how I didn’t have a phone anymore was somewhat overpowering.

The idea of disconnection is appealing, and a little frightening. I write to be read for a living, and I am a digital native. But have I ever really been disconnected?

There is a German word to describe the nostalgia for things you never knew, and the word is Sehnsucht. Nostalgia or longing for a distant place you’ve never actually been to, but which may inexplicably, be home. There’s nothing quite like   Sehnsucht in English.

The Punkt MP01 is a Sehnsucht phone. It is nostalgia for disconnection in a small, modern, well designed plastic shell.

The lack of music, of podcasts, of feeds, of twitter, was a little alarming. I didn’t get iMessages, or pictures of my kids. Because I couldn’t import contacts onto my sim, I didn’t know who any of the calls I received were from. This unnerved those on the other end of the call more than me after a while. We’re used to being pre-recognised these days. The predictive text messaging is deliberately rudimentary. Replying to text messages became a total pain, so I just started calling people back, which I could tell annoyed some of them a little bit, sometimes. Voice calls can be an intrusion in 2016.

On Sunday, I travelled from Limerick to London to give some lectures. I’ve flown this route dozens of times. It is, essentially, a bus ride for me. Printing out boarding passes felt very 20th Century. The Punkt phone was to be my alarm clock and my phone. My iPhone stayed in Limerick. I brought my laptop for work, and an old kindle.

I managed to read a few books on my kindle, which is itself a form of ‘calm’ technology, the kind of tech that demands the smallest amount of attention, be as informative as possible, and create calm when it can. I read books by Theodore Zeldin, Warren Ellis, and James C. Scott. Those were, I think, a better use of my time than reading tweets. I still allowed myself to tweet a bit from the computer when it suited, but I wasn’t running to it every 5 minutes. From Thursday 5th to Thursday 11th, I sent 15 tweets, 4 of which were retweets of the news paper I write for. More importantly, the hours I normally spent on twitter were now minutes.

Travel was a good bit harder for me. I got lost on trains, on streets. In fact, I got lost pretty much everywhere I went in London. With no map apps to guide me, I had to rely on the kindness of strangers. Strangers who mostly had earbuds in, foreheads down, and when stopped for directions, didn’t know how to get to where I was going either. They used their phones to show me, but we had a laugh as well. There was a human connection, however brief, brought on by the phone.

I became much more aware of street signs, and of just listening. No headphones and no notifications beyond the odd text message meant I had a lot of time to just listen on planes and trains. The average train carriage is quite a loud space. Everyone listening to an individual sound source but me, shuttling through London’s underground and overground services. I looked out the window a lot.

When I got home from London, I played with my kids and didn’t think to check my phone once. I only realised this when it beeped at me. I charged the phone fully on Thursday the 5th. I’m writing this on Wednesday the 10th, and it is has just demanded a bit of power with a little vibration. My iPhone 6 barely made it past 3pm on any day.

I then travelled to Belfast for another set of lectures. Again, no iPhone. No problem this time as I was driving, but without the turn by turn navigation, the trip into Belfast city became a little fraught. I'm also really missed podcasts, which were a staple of my driving experience up to now.

I've now been using it for 15 days. The iPhone has stayed in its box and hasn't been used once in 15 days. Thats 12,650 times I haven't picked it up. I've charged the phone twice in those 15 days.

I am going to keep using the Punkt phone for another 15 days. 48 hours wasn’t enough to really see where this can take me. 360 hours gave me a sense that phones like this, which represent a sort of pulling back from the notification nirvana that is the iPhone, have a real place in the lives of digital natives like me.

The conditions I'm using the phone in are, as economists say, out of sample. I’m going to extend this experiment into a new academic term and new responsibilities at work, to see how much I really need the iPhone in my professional life.

Life Cycle Inequality and Welfare: Two thoughts and a gedankenexperiment

Here's my lecture on life cycle inequality (.pdf) for the Queens University Summer School on social welfare and social policy (.pdf). This was a really interesting engagement with public and civil servants who work in this area, at the coal face, as it were. Incredibly thoughtful and engaged people, willing to be challenged and to debate the issues of the day.

King Trump could hit Ireland hard

Donald Trump may be a sham, but his tax plans could expose the sham that makes us one of the world’s richest nations

I place the crown on your head. Your Majesty, what tax policy would you like for your subjects? Perhaps more importantly, what tax policy would you like for yourself, given that you’re now the head of state? Given all this power, wow could you resist the temptation to tax yourself, and people like yourself, less?

Nobody likes paying taxes. The wealthiest enjoy it even less than the poor, especially in the world of progressive income and capital taxes where they more they have, the more they pay.

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How low can sterling go?

The decision last week by the Bank of England to cut interest rates to 0.25 per cent to offset some of the effects of Brexit caused a large change in currency markets. The Brexit result has caused British purchasing managers’ indices to slide, permanent job placements to fall at their sharpest rate in over seven years, and profit warnings by companies to increase.

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British Leave-ing is getting Pythonesque

We are just starting to see the effects of Brexit on the British and Irish economies, and guess what? It’s not pretty.

In fact, saying ‘it’s not pretty’ is an understatement. An understatement reminiscent of the very British dinner guests visited by the Grim Reaper in Monty Python’s film The Meaning of Life. The guests, you’ll remember, were murdered by a salmon mousse. Once they realised they were bound for the lakes of fire, they said: “Well, that’s cast rather a gloom over the evening, hasn’t it?”

Things are becoming Monty Python-level ludicrous.

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Charity status for vulture funds – someone shout stop!

Can you trust charities any more? In an inefficient and poorly regulated sector with huge overlap in terms of service provision, not only do we contend with a string of scandals, we now learn charitable status is being used by vulture funds to shield incomes earned in Ireland from the Irish tax system.

That is, to put it mildly, not a good thing. Facilitated by legal firms, somehow special purpose investment vehicles are being given charitable status, which allows them to pay almost no tax. Irish tax legislation, via Section 110 of the Taxes Consolidation Act 1997, provides for special treatment for qualifying SPVs (special purpose vehicles). Essentially this allows a tax deduction for interest payments.

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