10th Nov 2017 – A follow-up to ‘McWilliams Ireland’ show. My thoughts on the rising cost of living in Ireland.

Last night in Ireland on channel TV3 there was a TV show called ‘McWilliams Ireland’ driven by the Irish media personality, and occasional economist, David McWilliams (that was my Irish mate’s joke) which is a series looking at modern Ireland through the lens of an economist and the impact it has on everyday Irish folks.

If like me you spend a lot of time in Ireland for family, business and personal reasons you’ll be acutely aware of the rampant rise in prices over the last 2 years. House prices up by 60%, hotels up between 50 & 100% etc. The fall in GBP against the EURO has only made that pain more palpable for people coming from the UK. Because I travel so much between Ireland, the UK, and Europe I believe I’ve developed a good perspective on the situation.

David’s TV series has been focusing on the rising cost of living in Ireland and he’s to be congratulated in attempting to raise people’s awareness of the situation. It’s not always easy to garner the interest of the working man and woman – they’re usually to busy working hard to make ends meet. But overall David’s articles and TV shows do a good job of trying to educate the average man and woman on the situation – and he’s to be applauded for that.

I was in the audience for last nights show and found it fascinating that people had lots of complaints about costs, and lots of reasons why…..however no-one dared touch the one area I was hoping they would discuss / cover. Namely the staggering cost of public sector pay and pension liabilities. They didn’t touch upon it there, and I’m sure as an English guy there was no chance of them answering my points about it on the show (I can just see the response I’d have gotten trying to raise points on taxes and public sector liabilities – ‘who’s that fat English prick giving out to us? The cheek of him coming on here with his notions….’ )  So let me lay out my thoughts here. Read on McDuff. As Alan Partridge so ignorantly said “There’s more to Oireland…dan dis.”

Shall we start with a chart? I love a chart, me. (I am a primarily a technical trader after all).

Nov 2017 ISEQ Monthly

So you can see that the Irish stock exchange, the ISEQ, has been powering up since late 2012. In fact it’s more than doubled since late 2012 (the small blue line). What happened in late 2012 to turn around Ireland’s fortune? Simply put – that’s when I moved to Ireland. I like to tell people that it was my copious consumption of Irish carbohydrates, in the name of: Brennan’s Bread, Apple Pie, Guinness, and Potatoes (and that was just my standard breakfast) that singlehandedly dragged Ireland out of recession.

On a more serious note you can see that the Irish economy has done a grand job the last few years – which I have written about before – I always felt it was due to the recovery of the US and UK which lifted Ireland out of its post GFC gloom rather than anything that the Irish politician’s did.  There has been an influx of US, and global, tech companies that have located in Ireland. The official story is because of the quality of life and the availability of a well-educated workforce. The brutal reality is that the Irish government offered stunning tax deals, on an already attractive corporate tax rate – which has been good for Ireland, but has infuriated US and EU tax authorities. (The French in particular are disgusted that such companies are based in backwater Ireland when they should be based, and more importantly, paying taxes, in the glorious French republic.)

So with a healthy chart of the national exchange you’d be thinking that everything is rosy and there’s nothing wrong? Sadly that’s not the case. It is just under 10 years since the GFC of 2008 – and yet in Dublin at the moment you’d be mistaken for thinking it never happened – everyone is partying like its 2007! Prices are flying and the town has a buzz.

So let’s have a look at some of the numbers: My understanding is that the population of the Republic of Ireland is approximately 4.5 million people. Of that 4.5 million approximately 1.98 million people are tax-payers ( If anyone has more up-to-date / accurate figures I will happily amend.)

My own belief about the cost of living in Ireland is due to the high taxes pushed upon the people. Furthermore those high taxes, as I think most Irish folk would agree, do not always provide world-class services and infrastructure.

Well my belief is that most of those costs and taxes come about to fund the gravy-train that is the Irish Civil Service….or Irish Swindle Service as my Irish friends like to call it!

Once again numbers of Civil-Service employees are a spectrum with numbers ranging 40,000 to 300,00 mentioned to me. (These numbers are very broad and opaque, and may or may not cover all the Quango’s as well – of which there are numerous – i heard there was around 1000! Once again please feel free to help me tighten up the numbers.)

Take a look at some of these eye-watering numbers provided by the Central Statistics Office:

Irish Public Sector pay average: E921 p.w.

Irish Private Sector pay average E658 p.w.  (that’s a -40% differential!)

UK Public Sector pay: £594 p.w..

UK Private Sector pay £517 p.w. (that’s a -15% differential)

(Office of National Statistics)

But it gets worse:

Wages in the Irish education sector exceed Eurozone average by 54%

Wages in Irish healthcare and social work sector exceed the Eurozone average by 39%

(Eurostat figures)

Unemployment Benefit in Ireland: E193 per week

Unemployment Benefit in the UK approx £90 per week (My understanding is that Germanys is roughly similar – once again happy to update the numbers if someone has them.)

Furthermore if the public sector pay was not already a shocka they also receive a lovely golden pension of 150% of final salary, plus 50% for the rest of your life. Also you generally retire much earlier (age 60) on that handsome pension as opposed to private sector workers who have to toil on to age 66 to get the state minimum.

It used to be (certainly in the UK) in the old days that you received a good public sector pension because your average wage was much less than a private sector employee’s. But times have clearly changed, when a public sector employee is now taking home 40% more than the average private sector worker. Perhaps I can now see why friends call the Irish Swindle service the gravy-train!

You also have VAT at 23%, and business rates can be even higher. Along with that you have the most expensive energy charges in Europe. (If you can get a clear answer out of the ESB regarding charges, wages, pensions et al then you’re doing well.)

So you effectively have 80-90% of the people having to toil away till they’re 66, paying high taxes, in order to pay for the high wages/lifestyle/pensions of the 10-20% working in the civil service / quangos who get to retire at 60! Does it make my Irish friends feel good to hear and understand that?

Invariably as soon as someone like myself shines the torch of economic awareness on public sector greed you’re immediately labelled as a right-wing bigot who wants to take money away from Nurses, Firemen, and Gardaí (policemen). That is the usual tactic of those who wish the status-quo to resume.  Nothing could be further from the truth.  My mother was a nurse, I have friends and cousins who are nurses, Gardaí, firemen and teachers etc. Everyone knows that front-line staff do a good job under trying circumstances. It’s not them I am describing. I am talking about the huge swathe of faceless bureaucrats who sit in all those public offices working away without any form of accountability for their work ethic and performance.

So my aim with this piece was not to be disparaging – nor to have ” a crack at the Mick” as my good Irish friend Pearse and I often joke about. (It’s a line from one of our favourite films – Withnail & I. )

More so it was to make people aware of one of the contributing factors to why the cost of living is so high and there is such a high tax burden on the average working person. I’ve seen Irish friends working hard to build a life, and I’ve seen other people taking advantage of the system.  Maybe judging by this article the people are aware of the situation and all want a scoop of that gravy: 28,500 scramble for civil-service jobs

Now some people may say that they are happy with a) the tax levels and b) the public sector salaries and pensions. And that is fair enough. Each to their own.

At the TV show I was sat on a table with two other guys and when I pointed the public-sector pay and pension liabilities out the youngest one was quick to silence me with a monologue about how people should pay high taxes because it was a price worth paying for living in Ireland. I gently chided him that as he was a student he’d never actually paid any taxes, nor did he have a mortgage to pay, or kids to raise. Perhaps he should save his opinions until such time when he’s been paying exorbitant direct and indirect taxes for at least a decade or so and see how he feels then.

So why is this in any way a problem? Well I suppose it’s not – however Brexit is looming – and this will be either a threat or an opportunity for Ireland. Whilst the official Irish government departments are crowing about how much business and staff they will take from London the real story comes from listening to the relocation businesses. The questions they’re being asked are all how about house prices, location and availability, the cost of living, and the availability of good schools.  Is there a chance that Ireland is going to price itself out of the Brexit bonanza?

So why do people put up with this? Well I learnt from living there that you should never underestimate the power of ignorance. If you’re used to paying 4 euro for a shampoo, that is a pound in the UK, then why would you ever challenge the price? Is it any wonder that UK retailers call the country ‘Treasure Ireland’ because of their ability to charge higher prices?

I myself am an example of this. I left Ireland in 2016 for family responsibilities back in the UK. I was looking to move back this year – but the upsurge in costs (amongst other things) caused me to hesitate and reflect. I find these days that Dublin is more expensive than London. I can understand why so many digital nomads have shifted to Lisbon and Berlin instead of Dublin.

So will there be a change? Will Ireland curb its rampant tax take in order to help the average working guy and girl? Of course not!  The people who benefit most from the enhanced public sector pay and condition (namely the politicians) are never going to vote down giving themselves a pay cut! How absurd would that be? This comical skit from the show summed it all up beautifully in 70 seconds.

The Irish politicians already showed their true colours when the EU took Apple to court for not paying enough tax to Ireland – the Irish politicians response was to take Apple’s side(ostensibly turning down the 13bn tax for their own people) and in doing so found themselves sued by the EU for not complying.

Furthermore the French and Germans are keen to push through the EU the Common Consolidated Corporate Tax Base (CCCTB) in an effort to level the playing field and remove Ireland’s tax advantage.  (As an aside if I was Theresa May I’d be on the phone to all those US tech companies saying – you can sidestep the incoming CCCTB by moving here – lets just organise a flat fee of 10% and take it from there. Hey, for the UK it’s better to have 10% of something rather than 100% of nothing!)

Anyway this is turning into another one of Paul’s old-man rants! Apologies for the sprawling treatise – but I do get annoyed when I see people getting screwed over! So we’ll draw it to a close here by saying that yes David’s show was a step towards educating folks (but didn’t go far enough about one of the main contributors to prices – as this reviewer also agreed) and that people’s ignorance of the situation regarding public sector pay and pension liabilities needs to be changed. That’s the only way change will happen – by people realising the truth of the situation and then voting accordingly (though what the alternatives are is another quagmire, best left for another day.)

I know I have quite a few Irish readers of this blog so I’d love to hear your own views on the situation. Do you agree with me? Or are you happy with the present situation? How would you change it?

Have a great weekend, and trade well!

Paul

 

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About FXTraderPaul

A professional Trader and Coach, FXTraderPaul blogs about his adventures from the front-lines of FX Trading. A Trader and educator who can walk the walk as opposed to merely talk the talk!

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One Comment on “10th Nov 2017 – A follow-up to ‘McWilliams Ireland’ show. My thoughts on the rising cost of living in Ireland.”

  1. Dan Says:

    Though I read this from the other side of the globe, your article strikes a chord with me Paul, it is an ugly truth that no one wants to face nor tackle, thanks for another thought provoking article!

    Like

    Reply

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