Tuesday, July 10, 2012

Ireland broken governance system

In early 2009, I compared the broken governance systems in Japan and Ireland even though both countries have got new governments after long-dominant crony parties were turfed out of office, little has changed.

There is little appetite for change in Ireland despite the crash.
University College Dublin has published research on governance systems and the content below is my contribution to a thread on the issue in the Irish Economy blog:

A culture changes very slowly and issues such as reform are not a priority in a conservative society.
Process is boring and cannot match the level of interest when there are perceived nefarious foreign forces to blame. We love to talk but the record of running things is poor.

The level of transparency is also very poor; the available useful data on  public spending is primitive and conflict of interest remains a strange concept in Ireland.

RTÉ, Ireland's State broadcaster, sees no problem in board members pitching for work to former colleagues: "It would not be in the interest of any public broadcaster, nor the public, for independent producers of experience and skill . . . to be either barred from board service or, if appointed to a board, to be barred from seeking to maintain their business and livelihood by being disallowed from competing for programme commissions."

When it was disclosed in 2010 by The Irish Independent that  the wife of Eamonn Gilmore, Labour Party leader, had sold a two-and-a-half acre site in Galway for €525,000 to the Department of Education, a LP spokesperson said: "She is a private citizen and it is her money, not his."

The planning tribunal wound up after 15 years, lawyers became multimillionaires and the corrupt land-rezoning system remains untouched.

Changing the power balance in the Oireachtas would help over coming decades but the main interest of members will remain at the parish-pump level for the foreseeable future.

Research resources have been improved in recent years, TDs have been given additional staff (more opportunities for family jobs) but there is no evidence of improvement in teh standard of output.  37,397 Parliamentary Questions (PQs) were tabled in 2011 and Dáil Éireann registered second highest out of 18 Parliaments. The Irish figure is approximately three times the average number of questions tabled of 12,515.

As for civil servants standing up to ministers, again unlikely to happen and there are specialists in the area of science in enterprise agencies and in the Enterprise Department, but it doesn't seem to matter.

The enterprise agency heads when they speak in public, it's usually babble supporting the official line.

To borrow from 'The Irish Mind' fairytale, it permeates the 'eco-system.'

How likely is it in UCD that an insider would even question a pet project of a professor that is wasting public funds?

Look no further than the public science budget over 10 years of €23bn to wonder about governance: Oireachtas (houses of parliament) committee members not interested because it's over their heads; university presidents vying for funds but showing no interest in value for money issues; State agencies supporting ministerial delusion that Ireland could clone a Silicon Valley where so many others have failed; tech companies and IBEC welcoming lavish funds and captured journalists dazzled by stories of Facebook, Apple etc.

Monday, July 02, 2012

Irish Economy 2012: Are house prices bouncing back or just an illusion for delsuionists?

Irish Economy 2012: Daft.ie reports today that while the average asking price in the capital did fall in Q2 (by 1.2%), taking the first half of the year as a whole, list prices in Dublin fell by less than 1%, compared with a fall of 10% in the second half of 2011.

The following are 2 posts to a thread on Irish house prices on the Irish economy blog.

2) During the bubble, Irish land became the most expensive in Europe partly because of the very low supply.

Farmers on CAP welfare were able to supplement their income by working in construction etc. while via the IFA, the farmers were also able to arrange a shakedown of the State in respect of land for roadbuilding, grabbing almost 25% of the national roadbuilding budget.

In the current market, mortgages approvals were at about a 1968 year low in the first quarter of 2012 while the evidence from auctions shows that cash buyers can get discounts of 25% or more from what are regarded as current official price levels.

What was typical of our ’slightly constitutional’ governance system was a tribunal sitting all through the bubble period, investigating planning corruption, while local poltroons continued to create an artificial scarcity of land for development, in a country that was 4% urbanised.

Has anything really changed? — a corrupt system eventually becomes endemic and every development spawned Sunday morning craw-thumpers, whited sepulchres and many more, seeking to squeeze what they could from the system.

This is from the Irish Independent in May 2000:

The strategic planning guidelines constitute a mandate for continuing urban sprawl which will create an ever expanding metropolis around Dublin at lower density than any comparable urban area in Europe, DKM Economic Consultants warns in its report.

According to Colm McCarthy, of Davy Kelleher McCarthy, the predicted number of new dwellings will require that development occurs over an area more than twice the size contained within the M25 around London, which has a population of eight million.

He maintains that suburban development at six units to the acre would accommodate the required 165,000 dwellings in an area of 118 sq kilometers, or seven miles square.

“The process of urban sprawl around Dublin has already spread throughout north and mid Leinster, beyond even the large area envisaged by the Strategic Planning Guidelines”, he warns. Due to speak at the Irish Homes Builders’ Association convention in Edinburgh this morning, Mr. McCarthy suggests an alternative policy by aggressively zoning and servicing all undeveloped land within ten miles of the city centre for housing and mixed-use development.

Irish Economy 2012: Home mortgage approvals in first quarter 2012 sink to levels not seen since 1960s

Irish house price fall from 2007 peak maybe as high as 68%; Prices back to fair value

2) In 2001, the Irish State agency, the National Roads Authority (NRA), said in relation to a campaign for an increase in compensation for land acquired by Compulsory Purchase Order, which was led by Tom Parlon, then president of the Irish Farmers Association (IFA) that pronouncements by senior IFA officials, including Parlon, had claimed that:

1) the State, through the actions of local authorities, has no right to appropriate farmland;
2) the compulsory acquisition of farmland for the national roads building programme is unjust, inequitable and seriously damages the livelihood and viability of 8,000 farm families;
3) CPO legislation is outdated and compensation paid to farmers is inadequate;
4) compensation should be paid at development land prices given the intended use of land for road schemes and not at market value for agriculture land

The demands of the farmers were met  - - nothing strange in that.

The amount the State was forced to pay out for land compensation was described as "disturbing" by the head of the National Roads Authority in 2006.

It accounted for 23% of the cost of roads projects in Ireland, but just 12% in England, 10% in Denmark, 9.4% in Greece and 1% in Iceland. A further 2% of the €18.5bn provided in the Government's Transport 21 for road building over the decade was go to archaeologists.

RTÉ’s Prime Time programme in November 2007 disclosed statistics about the involvement of elected representatives in the land development and property business.

A total of 22% of councillors dealt in or developed land through their day jobs as estate agents, landowners and builders. In Mayo, that figure rose as high as 45%, in Offaly it was 44% and in eight other counties it was 33% or more.

Prime Time found that in Clare, declarations of interest showed that 97% of elected members have no beneficial interest even in their family home. In ten counties, two-thirds or more of the councillors have not declared an interest in the family home.

Economist Jerome Casey, who was editor of the 'Building Industry Bulletin' in a report in 2003, said that site costs accounted for 42.5% of the cost of a house nationwide. Casey said that typically in the mid 1990s, Durkan Brothers sold apartments off O'Connell Street for £35,000 to £40,000 (€44,440 to €50,790) for which the site cost was £5,000. A decade later, both the Irish Council for Social Housing and private house builders were reporting city house site costs at up to 50% of the house price. Outside the cities, site costs amounted to up to 40% of the house price. For the country as a whole, site costs in 2003 were about 42.5% of the house price, an increase of almost 30 percentage points on the pre-boom position. In Dublin that increased to 50%.

In the US land accounted for 20% of the total cost of a house. In Denmark the figure is similar while in Portugal the land factor drops to 15%.

The Irish Times reported in March 2012 that the State spent €30m  goodwill payments to landowners for not obstructing agricultural land sales for road projects between 2007 and 2011.

Payments for not obstructing - - shakedown is surely an apt term.

A so-called goodwill payment of €5,000 for every acre of agricultural land sold for road projects was made as part of a deal to ensure farmers co-operated with compulsory land purchases under the second National Development Plan (NDP).

An estimated €30m was added to the €1.4bn cost to the State for land purchase under the second NDP because of the goodwill payment. The fee applied to the purchase of approximately 6,000 acres of land.